Property

Freehold Condominiums in Singapore – Why Freehold is Not as Great as it Seems

freehold condominiums

MoneySmart

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Singaporeans get traditional when it comes to property. We want the land we pay for, and 99 years won’t cut it. We want our descendants holding on to it.

But freehold property is a monstrous cost; and are we being practical, or buying an overpriced security blanket? In this article, we examine how freehold property has conditional value. Depending on your situation, it may not be the best choice.

 

Freehold condominiums in Singapore

In Singapore, property can be leasehold (held for 99 years) or freehold (held in perpetuity). Here are some of the freehold properties in Singapore and how their prices look like.

Freehold condominium Address District Price (psf)
Watercove Wak Hassan Drive D27 $794.74
The Midas 20 Lorong 30 Geylang D14 $886.00
The Canopy 83 Yishun Avenue 11 D27 $926.30
Meadows @ Pierce 626 Upper Thomson Road D26 $1,091.78
Tivoli Grande 126 Koon Seng Road D15 $1,200.96
Alexis 356 Alexandra Rd D03 $1,384.32
The Navian 178 Jalan Eunos D14 $1,658.45
Bukit 828 828 Upper Bukit Timah Road D23 $1,680.00
The Addition 21 Meyappa Chettiar Road D13 $1,731.50
Arena Residences 20 Guillemard Crescent D14 $1,845.20
Amber Park 14 Amber Gardens D15 $2,107.98
Twentyone Angullia Park 21 Angullia Park D9 $3,176.99

Given the size of Singapore, it’s not surprising that these freehold condominiums are rarer than leasehold ones. Almost 80% of our land is leasehold, typically lasting for 99 years. Contrary to popular belief, the government isn’t obliged to pay compensation when the lease expires.

As such, leasehold doesn’t sit well with traditional Asian perspectives, since we’ve been raised to equate family with land. But coming from a more practical angle, there are some disadvantages to freehold properties. Let’s look at 5 of these.

 

1. Higher cost

It shouldn’t take a stroke of genius to figure out that freehold property costs more.

All things being equal (same location, same size, same annoying neighbours, etc.), freehold property will cost 10 – 15% more than its leasehold counterpart. When we’re talking about a million-dollar condo, and that’s an extra $100,000.

When monthly repayments start, your financial situation becomes riskier than a roller coaster in a Chinese theme park. You will have to upkeep this mortgage by possibly delaying your retirement age, or cutting back on other things you enjoy.

Essentially, a freehold condominium is in the same league as a luxury item. You shouldn’t go out on a limb for it, because when your day-to-day is a struggle, your home’s freehold status means little.

 

2. Freehold status can be changed

Many property buyers are attracted to the allure of a “forever” property, but freehold status isn’t permanent.

If the government decides to build a military base, or satellite dish, or run an MRT line right through the land where your house is sitting, it’s gone; freehold or no.

At best, you will receive compensation at market value. But don’t succumb to any notions of permanence; it’s all subject to Urban Redevelopment Authority’s (URA) masterplans.

Also, be aware that freehold property is prone to en-bloc sales; after 30 or 40 years, your neighbours might decide they’re sick of the scenery. Then your condo is sold off and you’re back to house hunting…

Well, this may great for the younger folks who will benefit from the cash in, but not too great if all you want is a stable home.

 

3. Location is probably more important than lease

When it comes to renting and resale, the emphasis is on the location, not on the lease.

A leasehold condo that’s near an MRT station, for example, probably beats its freehold counterpart in market value. Likewise, if someone wants a place near their children’s schools, they might be willing to pay more regardless of leasehold status. Hey, they can always move in 20 years.

Tenants, obviously, couldn’t care less about any of this. So when you’re out house hunting, don’t be distracted by freehold status. Stay focused on where the property is located, its possible rental income, amenities and other conveniences.

 

4. Freehold condominiums may risk becoming outdated

The Singaporean family unit has changed. It’s no longer assumed that children will live with their parents, and it has become the norm for married couples to find their own place. That removes the need to build the equivalent of a fantasy ancestral palace.

If your children or grandchildren move out anyway, the extra you paid for freehold becomes irrelevant. You could have just gotten a leasehold, and spared yourself years of excessive repayments.

For a first property, a leasehold is good enough. If you find that you have more cashflow later on, you can hunt for a freehold property then.

 

5. Little difference in depreciation

There’s a common worry that, as the 99-year lease runs out, leasehold property will depreciate faster than freehold.

In truth, a boom and bust market will affect both kinds of property the same way. During the 2002 – 2005 cycle, for example, freehold prices were just as depressed as leasehold prices. Likewise, during an upswing, your leasehold property will appreciate just as quickly as freehold counterparts.

Tenure isn’t always relevant to property prices; whether you buy leasehold or freehold, it doesn’t free you of the need to time your purchases. Don’t let tenure put your radar on the fuzz; if the market conditions are bad, don’t feel pressured to buy just because it’s freehold.

 

Getting the right home loan

Still can’t make up your mind? I’d advise you to consider the financing with care.

Visit MoneySmart and compare the available home loan packages. This website automatically picks the best home loan on the market, and you can use the home loan calculator to compare leasehold and freehold options. Once you’re prepared to buy, MoneySmart can even put you in touch with a mortgage specialist, who can advise you further.

What do you think of freehold properties? Comment and let us know!

 

Related articles

Buying Property Overseas? Property Laws For Foreigners in Countries Like Malaysia, Australia & Thailand

Downsizing in Singapore – A Guide to Right-sizing Your Home to a Smaller HDB or Condo

HDB BTO & Resale Eligibility – The Singles Singapore Citizen & Joint Singles Scheme (2019)

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Comments (4)

  1. i have a question, you said that the properties depreciate the same way. But what about in 40 years? In other words, does 40 year old property, with 60 years left of tenure, cost as much as equally old freehold? Wouldn’t it be harder to sell it? Thanks!

  2. No answer?

    1. Hi Michal, sorry for the really late response.

      There’s no straightforward answer to this question, simply because there are many factors to consider. Yes, you’re right that a property with a shorter lease would be harder to sell – but only if it has 30 years or less left. This is because potential buyers are not allowed to use their CPF and banks are less willing to finance them.

      But most of the time, properties never reach that stage. because of the high possibility of en-bloc sales for leasehold properties (particularly SERS for HDB blocks) . The purpose of the en-bloc is exactly to ensure the leasehold property gets sold off before depreciation starts to accelerate (when the remaining lease nears 30 years). Because of that, it’s fair to say that freehold and leasehold properties depreciate the same way.

      Hope this helps!

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