Most buyers that come to me have a definite idea of what they prefer, especially those with parents or older relatives that have experience purchasing private properties. However for those who are genuinely torn between the two tenures, let's look at some real life comparison and statistics. Firstly, in land-scarce Singapore, freehold properties are less commonly found and tend to be found only in certain districts. The government as the ultimate land owner, simply does not release new land on a freehold basis anymore. Any new freehold residential development has to come about from an enbloc sale of an existing building. Does this scarcity leads to a freehold property being of higher value? Clearly not, because in most cases the location of a property weigh heavily in the price determination. For e.g a leasehold condominium such as the Marina One Residences in district 1 CBD area is currently transacting at between $2200 to $2600 psf versus a freehold property such as Pavilion 11 at Balestier area, currently transacting at between $1400 to $1600 psf. The question should then be rephrased as whether a leasehold or freehold property is better in sustaining value should two properties of different tenure fall into close proximity of each other. One example that I like to give is Southhaven 1 versus Southhaven 2 in the Upper Bukit Timah area. Southhaven 1 which is a 99-year leasehold was completed earlier in 1997 before Southhaven 2, a 999-year tenure sibling which came about two years later. Although a 999-year tenure is technically not freehold, but the length of the tenure is long enough to differentiate it from a 99-year leasehold project, and because both properties are just right next to each other, it served well for a comparison whether the land tenure affects resale prices and rent values. From the table, it shows that the 999-year Southhaven 2's minimum rent and maximum rent are all lower then the 99-year leasehold Southhaven 1 which is shocking considering the fact that the buyers of the newer Southhaven 2 would have paid more for their unit versus Southhaven 1's buyers. One possible cause could be that Southhaven 2's larger size of 293 units has more competition for tenants, over Southhaven 1's 157 units. Another reason could be due to Southhaven 2's facing of the main road, making it less attractive for tenants who prefer a quiet environment. Here, it is very clear that the tenure of the property has no bearing on rental rates because whether a property has longer tenure or not does not matter to tenants. Next, let's look at the sale prices over the years between the two developments. The blue line is the 99-year leasehold Southhaven 1 and the orange line is the 999-year Southhaven 2. Two points can be observed from the chart:
1) Both price lines moved in similar patterns, trending upwards and downwards at similar points in response to market conditions. 2) Since the longer tenure Southhaven 2 started off with a higher price, its price line trend higher consistently, however in certain years, it had dipped to the leasehold Southhaven 1's level. In this case, we can see that the tenure of a property does not necessary seems to make much difference to the capital gain, otherwise one of the price line would have been upwardly steeper. Thanks for reading.
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