Does it have to be Freehold?

What are the top 10 questions most people face when buying a private condo. We have transacted many private properties over the years and met many customers. We consolidated all their concerns into a Top 10 condo question list, and this is the No. 1 topic that is frequently discussed, “does it have to be freehold?”

In my opinion, whether or not a property has to be freehold depends on your purpose and objectives when buying the property. If the buying intention is purely for short term investment, it does not have to be freehold.

📌 Freehold versus Leasehold

There are three main types of tenure in Singapore. Freehold, 999 years leasehold and 99 years leasehold. For 999 years leasehold properties, most people will regard it as freehold equivalent. So the question here is really about freehold versus 99 years

Freehold will always be more expensive than leasehold because the owner will literally own the freehold property in perpetuity. An investor’s objective is to enter as low as possible and exit as high as possible. A freehold property may not fit into this objective because of its higher entry price.

When the prices differences between a freehold and a 99-years leasehold property get too big, you may have to re-think again.

📌 Freehold Property is More Expensive

Ideally the price gap between a Freehold and 99-years property, should be within a 20% range. Once the price difference exceeds 20% and beyond, it may be deemed expensive.

does it have to be freehold

Many first-time buyers hold the belief that they must own a freehold property. This may not be true. When buying your first private property, it does not need to be a freehold property. This is unlikely to be your last and final property. You can first invest in a 99-years leasehold property, profit from it and then move on to your next purchase. If you are bent on buying only freehold properties from the start, your choices will be limited

You can expect the price of a freehold property to be higher than that of a similar leasehold property nearby. When you enter high, you inevitably have to exit high. Your ideal exit price may not be achievable if you have a short investment horizon (e.g. sell within 3-5years)

From our experiences, we notice that buyers who do pursue freehold properties tend to be buying for their stay. They do not envision themselves moving anytime soon and see themselves living comfortably in their freehold property for the next 20 years or beyond.

These freehold property owners know that their properties will retain their value even after 20 to 30 years as freehold properties are rare. If the owners hold on to the property until a collective sale or en bloc comes along, there is a good chance that they will exit at a very high price.

freehold hold long term

In contrast, a 99 years leasehold property’s value will deteriorate faster over time, especially when it hits the 40-year mark.

bala-table

📌 Does it have to be Freehold?

When buying freehold properties, you may have to be prepared to hold this property for a extended period of time. Since the entry-level for a freehold property is higher, it will take a longer time for the value of this property to appreciate to a level that you will feel comfortable selling.

freehold versus leasehold 99

If you are buying the property mainly for investment and intend to sell it within 5 to 10 years, buying a 99 years leasehold property will be better than freehold property. Most resale property buyers would be comfortable with a 99 years leasehold property that is less than ten years old.

📌 Top 10 Condo Questions

  • Does it have to be Freehold?
  • Old Aging Condo has No Value?
  • New Condo Sizes are Shrinking! Secrets Revealed?
  • Why New Condo when Resale PSF is cheaper?
  • Should I avoid Low Floor & No Views Unit?
  • 1 BR vs 2BR –Which is Better for Investment?
  • Why “Near MRT” will Get Less Important?
  • Buying for Primary School Enrolment?
  • Does Developer reputation matter?
  • Does District Matter? (CCR vs OCR)

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Dennis Lim

Dennis has more than a decade of experience investing in real estate. Like many fellow Singaporeans, he grew up in a HDB flat with dreams to live in a condominium. Through careful financial planning & hardwork, this became a reality when he was 30. He now owns 3 private properties in Singapore and has helped hundreds of Singaporeans to achieve their goal of upgrading their homes in land-scarce Singapore.

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