Freehold Vs Leasehold Property | EP2 Real Estate Small Talk! | Singapore
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Freehold Vs Leasehold Property | EP2 Real Estate Small Talk! | Singapore


Hi everyone! I’m Clarence and I’m Joyce. And we are back together for another episode of property talk with Clarence and Joyce! We have been asked many many times what is the difference between a freehold and leasehold condo? Should you buy a freehold or leasehold? What is the price difference between these two? Can I afford to buy a freehold condo? So today, we will be sharing with you on our views and thoughts on these questions The very obvious difference between a freehold and leasehold is typical leasehold property which is 99 years lease, after the lease is up it will be reverted back to the government or the respective owner, while a freehold condo you get to keep it indefinitely Of course, there is another one which is the 999 years leasehold which technically is something like a freehold property as it has a very long lease There are buyers who prefer a 99 years lease condo or there are also buyers who prefer a freehold condo That’s right! People who buy freehold property usually have a mindset of leaving their property for their children or children’s children So for these group of people, buying a freehold condo is the preferred choice for them. Obviously, if price is not a factor, everyone, of course, would love to buy a freehold asset So, let us take on the question which is Is freehold and leasehold condo priced the same? Joyce, what do you think? If freehold and leasehold are the same prices everyone will go for freehold, no one will buy a leasehold but we all know, that a freehold condo actually cost more compared to a leasehold and the price range premium are usually from 10-20%. But if you can afford a freehold why not go for it? Clarence, is it true that freehold condo is definitely better than a leasehold? It all depends on your requirements. If owning a property for as long as you want is something that you actually want it then, obviously I would say freehold is the way to go but if you are talking about value buys value investment, it may or may not necessary be so right, Joyce? Yes.for investors, ROI which means return on investment is very important Investor, in general, would love to pay lesser for the same profit gain because it gives a higher ROI, so assuming you buy 2 properties a leasehold at $800k and a freehold at $1 million and you want to sell both properties at the same time, 3 years later and you need to get a $100k profit for each property so it means that the leasehold actually gives a higher ROI Yup, so it is a misconception that by paying a higher price for a freehold, there will be a chance that you get higher profits when you sell There are cases, as data shows profit gain from freehold, could be the same as leasehold sometimes more, sometimes less In addition, with regards to rental yield when renting out your property to the tenants tenants usually do not bother whether it is a freehold or leasehold condo So assuming, everything remains the same such as the level, the unit size, the facing and the age the rental will approximately be the same for both assets Lets take an assumption, you purchase a brand new 2 bedroom freehold condo at $1.5 million and you also purchase a neighbouring condo a brand new 2 bedroom leasehold at $1.3 million So, if rental for 2 bedroom in the vicinity is approximately $3,200 per month Your freehold asset will give you a gross yield of approximately 2.5% while your leasehold asset will give you an approximate yield of 2.95%! Hence, from the landlord’s perspective your yield will be higher for a leasehold property as the entry price is lower yes, that’s true! From an investment point of view Then we should look at % on return on investment/ Equity And knowing what and which condo to buy to maximise your ROI is important especially if you are an investor And of course, sometimes the amenities, the location the condo development itself, is a bigger factor for consideration than just leasehold and freehold There are a few common factors that affect the price of property As the property gets older a leasehold property value may depreciate faster due to expiring lease However, that being said, older condo may have a potential for enbloc as well. Agree with you Joyce! But you need to know your numbers and calculation to ensure that the development has the potential for enbloc So based on experience, some owners have to wait 3, 4 or even more times before a successful enbloc Well, ultimately, the decision lies in the buyers’ hands Do share with us your thoughts whether you prefer a leasehold or freehold condo If you would like to know more about freehold or leasehold condo do drop us a comment or PM us for more information!

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