Freehold Versus Leasehold – Which Tenure Type Yields More Profits?

When a land bid gets won and a promising developer comes in to secure a new project – it’s almost by default that this question gets asked “Is this a Freehold or 99-year Leasehold project?” Most of us, without battling an eyelid, become a kid in the candy store when the tenure is listed as Freehold – To the point that we’re willing to pay higher price psf for a unit or justifying the higher quantum prices.
So, is Freehold always better than Leasehold an undisputed myth? In short, it’s not necessarily true as this is two-pronged approach to address this. Firstly, it’s essential that the property displays proven profitable characteristics, and secondly, it also needs to have the right entry price.
From 2007 to 2013, there was a significant gap in Price PSF between Freehold versus Leasehold properties. Nevertheless, in recent years, the price gap is diminishing, with the gap now being around 15-20%. This would be a good yardstick and reference point to gauge when you’re deciding on a private property, especially when you’re taking into consideration the tenure length.
If capital appreciation is a consideration for you, both freehold and leasehold properties do have potential capital appreciation. Hence, if the difference in price is insignificant, certainly do buy a Freehold property! On the flip side, if the difference in price is sizeable, you aren’t losing out by buying a leasehold property.
The overarching intention of HDB is to ensure that all Singaporeans will have a roof over their heads. As mentioned in our previous post, the average holding period for a PLH BTO home is 15 years (i.e. average 5 years wait time & 10 years MOP). If you ask us, that’s a considerable chunk of one’s life!
During Property Bust and Boom periods such as the Dot Com Crash (2000-2002), SARS (2003-2004), and the Global Financial Crisis (2008-2009), the prices of both Freehold and Leasehold properties have been shown to move in tandem! Data has shown that prices of both freehold and leasehold properties fluctuated similarly during times of crisis. Taking everything else into consideration, choosing the property with the right entry price should trump tenure type, barring other factors such as location and property type (i.e. condo, semi-detached house, or terrace house, etc).
Hopefully the aforementioned pointers have served to be a guide in your decision making whilst shopping for your next private property. In the meantime, don’t hesitate to drop us a note if you have any queries!