Freehold for Residential Condo Property

So aside to budget, generally this are the factors you have to consider for residential condominium property purchase of your preferred district:

  1. Freehold or Leasehold
  2. Near or far from MRT
  3. How near to good schools
  4. Near to Central Singapore

We will leave the discussion of freehold landed for future discussion. Generally freehold property has a price premium over leasehold as the land lease is forever though it come with lower ROI. But this is greatly offset by the price premium over leasehold property for longer years due to the limited freehold land available as there is no more freehold government land sales (GLS) in the future. On top of that, freehold properties has the advantage of passing to future generations unless it is acquired by government in the rare scenarios. If you are buying as strata title like condo, it may be enbloc but this usually resulted in higher profitability than selling as one strata unit so is generally preferred by property owner. Since there is no more freehold GLS, you can either buy from existing owner or during new launch by developer now.

Currently as of Apr 2021, freehold properties account for about 49% of total apartment and condominium stock in Singapore. The proportion of freehold properties is set to decline as future launches will comprise of mainly leasehold projects.

So are all freehold condo worth investing and will it definitely made better return that leasehold property? The answer is depend whether you are looking at short term or long term perspective. Freehold yield are likely lesser than the leasehold but as the land is indefinite, the capital appreciation will be better if you hold a long term stake of the property. So if freehold properties are more exclusive, what are those that are better buy and how do we choose one that made more return than other?

One way to gauge is to choose condo closer to MRT and good schools as they are more attractive to buyers/tenants in Singapore. Then what about those freehold in Core Central Region (CCR)?

Stock diminishing for Freehold Condo/Apartment

Fuji Xerox Redevelopment with Residential

Generally freehold condo near/walking distance to MRT and good schools will have a premium than those further away. Those freehold condo closer to CCR will command higher premium than those further away, eg Outside Central Region (OCR) areas. Freehold condo in RCR/OCR tend to have better appreciation values in the longer term than those in Central Singapore although the rental yield can be quite comparable for all. The appreciation of freehold is surely better than leasehold in the long term (esp after 10-20 years later) as the land are indefinite.

Above the medium transacted psf prices of some freehold condo (Nyon, The Line, The Lilium, Tedge, Noma and Casa Al Mare) in the East Singapore for comparison. The prices are generally stable past few years and those further away from CCR like Tedge, Noma and Casa Al Mare shows a bit of appreciation this year. Generally we expects the price to appreciate less than the leasehold condo for the first 10 years but will outperform after 10-20 years.

The price gap between freehold and leasehold in the same area is generally 20% to 30% as shown below. The price gap is determined by few factors and one of the key factor is demand and supply for the same location and age of condo. As the supply for new freehold condo is lesser in the foreseeable future, the price gap for the entry price will likely to increase .

Entry Price of a 3 Bedroom Condo between Freehold & Leasehold

The following are some of the freehold condos in Singapore that was compiled in early September 21 for consideration. You can see the price gap though there are other factors (not so critical) like developer reputation, design, amenities etc when purchasing a private property.

Prices of Freehold Condo outside Central Singapore

For those who have a higher budget and look for conveniences and other intangible values (near to town, office and prefer City Central) for life-style living, below are some of the transacted prices of Freehold condo in Year 2021 for consideration. Not surprisingly some of these premium units are now going for above $4000 psf now. So any new freehold condo near Central Singapore in the $3000 psf are snatching up fast this year. It may be quite true to some extend a number of the units below were purchased by foreign buyers .

Finally, purchasing a freehold condo is good for the long term due to better capital appreciation. Choosing those nearer to MRT and good schools will provide a better rental and capital support in good or bad economic time. You may note that there are still available units of the above condo from Developers for sales. But the stock is diminishing as months go by so if you have the budget, please do not wait too long.

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