Freehold VS Leasehold: Which Is the Better Choice?
When it comes to purchasing property in Singapore, one of the key considerations buyers often face is whether to invest in a freehold or leasehold property. This decision can significantly impact both short-term living satisfaction and long-term financial gains. Let's explore the differences between these two types of property tenures and analyze which might be the better choice for you.
Understanding Freehold and Leasehold
Freehold Properties:
In Singapore, a freehold property is one where the owner has perpetual ownership of the land and the building. This means that the property can be passed down through generations indefinitely, and the owner has full control over the land without the need to renew the lease.
Leasehold Properties:
On the other hand, leasehold properties come with a set tenure, typically 99 years, though some leases may extend to 999 years. At the end of the lease, ownership of the land reverts to the state unless the lease is extended or renewed.
Key Considerations
Price and Affordability
Freehold: Generally, freehold properties come with a higher price tag due to their perpetual ownership status. This makes them less affordable for many buyers, especially in prime locations.
Leasehold: Leasehold properties are typically more affordable, making them an attractive option for first-time buyers or those looking to enter the property market without a significant upfront investment.
Appreciation and Investment Potential
Freehold: Historically, freehold properties tend to appreciate better over the long term, especially in land-scarce Singapore. They are often seen as more desirable due to their perpetual ownership, making them easier to sell.
Leasehold: Leasehold properties, while more affordable, may face depreciation as the lease runs down. However, if the property is in a desirable location with strong rental demand, it can still offer good rental yields and capital appreciation in the medium term.
Liquidity and Market Demand
Freehold: Due to their scarcity and perpetual ownership, freehold properties generally have higher market demand, which can translate into easier resale opportunities.
Leasehold: While leasehold properties are more affordable, they can become harder to sell as the lease tenure decreases, particularly if the remaining lease is below 60 years, which could limit the pool of potential buyers.
Let’s take a look at the past price performance between freehold and leasehold resale properties
Freehold vs Leasehold (Whole Singapore)
99 Years Leasehold properties appreciated by 188.85% whereas Freehold properties appreciated by 173.71% from 1995 to 2024.
Freehold vs Leasehold (OCR)
99 Years Leasehold OCR properties appreciated by 400.8% whereas Freehold OCR properties appreciated by 219.79% from 1995 to 2024.
Freehold vs Leasehold (RCR)
99 Years Leasehold RCR properties appreciated by 274.9% whereas Freehold RCR properties appreciated by 206.3% from 1995 to 2024.
Freehold vs Leasehold (CCR)
99 Years Leasehold CCR properties appreciated by 266.49% whereas Freehold CCR properties appreciated by 183.02% from 1995 to 2024.
Which Is the Better Choice?
The decision between freehold and leasehold properties largely depends on your financial goals, timeline, and personal preferences.
For Long-Term Investment and Legacy Planning: Freehold properties are often the preferred choice due to their perpetual ownership, potential for better long-term appreciation, and ease of resale. They are ideal for those looking to hold onto the property for generations or seeking a stable investment.
For Affordability and Short-to-Medium Term Goals: Leasehold properties offer a more accessible entry point into the property market. If you plan to sell the property within a few decades or are focused on rental yields, a leasehold property in a good location can be a worthwhile investment.
Ultimately, the "better" choice depends on your unique situation. It’s important to weigh the pros and cons of each tenure type in relation to your financial standing, investment horizon, and lifestyle needs. Consulting with a real estate professional can also help clarify your options and guide you toward a decision that aligns with your property aspirations.
