06/06/2022
Should I Consider Buying a Leasehold Landed Property in Singapore?
This mini-article was inspired by a buyer for a leasehold landed property whom I have served recently.
Most people are aware that if you have the dough, buying a Freehold Landed Property in Singapore is a no-brainer. With the scarcity of land, and limited plots allocated to Landed Property in Singapore, owning an estate in perpetuity is a pretty safe bet. In this article, we will discuss whether sometimes, buying a Leasehold Landed Property should be within our scope of consideration.
1) Price Disparity
Looking at the chart below, the premium you pay for a Freehold Landed Property right now is a whopping 60%! Contrast this with the Freehold Premium in Condominiums, which is currently about 18.9%. One contributing factor is of course, En-Bloc Potential. Leasehold Condos have a chance to be selected for En-Bloc Sale, where the developer acquires the whole development, pays a Development Charge to the government to renew the lease to 99 years, and redevelops the property. For landed property, the land just goes back to the government.
The currently much more attractive price point make the leasehold units more enticing for homeowners.
2) Lease Decay
This is the number 1 reason buying a Leasehold Landed Property is more dangerous. Lease Decay is used to describe the depreciation of a property as its lease runs out. This is very noticeable in properties older than 50 years, and especially obvious in older properties with less then 30 years remaining, as this is the point where banks are not willing to finance the property.
However, there is still good appreciation potential for newer Leasehold Units.
3) Quality of Life
This is a pretty simple one. There is no Quality of Life difference between a Leasehold and Freehold Property. The lease has no effect on size of unit, facing, building condition etc. When your kids run around the grass in your huge yard, they do not care about the tenure of the grass.
The rising prices of Leasehold Condominiums also contribute to the price potential for Leasehold Landed Properties. Take for example in the west, a duplex 4 bedroom penthouse in Lakeville Condominium is going at $3 mil, whereas the Leasehold Landed transactions at Westville have barely crossed $2 mil. If a couple has 3 kids, a set of Grandparents, and a helper, the landed unit would be able to house the family much more comfortably, and at a much lower price point.
Homebuyers looking for a quality of life upgrade, and not looking at their property as a means of investment, should definitely give the Leasehold units some thought.
Summary
The above is a small, non-exhaustive list of points that we can think about. There are many other factors that affect a house's price potential, and whether or not you should purchase a Leasehold Landed Property. As always, the most important thing to consider when actually buying is the Entry Price.
Any questions on property? Need any charts to study a particular development you are keen on? Feel free to contact me anytime!
- Leroy Yew
97637262
