Buying leasehold property is fine, but freehold status has niche appeal

by Albert02

Buying leasehold property is fine, but freehold status has niche appeal

Buying leasehold property is fine, but freehold status has niche appeal. The government of Singapore typically provides 99-year leasehold land for residential and commercial use. Industrial land lots are often offered for shorter periods of time. For historical reasons, some land parcels have freehold or long leasehold tenures that begin at 929 or 999 years.

The number of years remaining on a property’s land lease indicates how many years the property can be used for owner occupation or rental income. After deducting the time it takes to finish a development, a new 99-year leasehold home has approximately 94 years to live in and/or collect rent, compared to an indefinite term for a freehold home.

New freehold private dwellings may be 10% more expensive than 99-year leasehold residences. According to a Singapore Land Authority figure that shows leasehold values as a percentage of freehold value, the premium for freehold vs 99-year leasehold land is approximately 4%. According to an analysis of URA Realis data by List Sotheby’s International Realty (List SIR), the median price of terrace houses on initial 99-year land leases reached a record S$1,214 per square foot (psf) on land area in the first nine months of 2022, up 15.3 percent from S$1,053 psf for the entire year of 2021.

Buying an older leasehold terrace home rather than a freehold one, on the other hand, saves a large amount of money. The price difference between 99-year and freehold/999-year terrace residences, according to List SIR, is around S$715 per square foot.

Market acceptance

Many individuals and businesses buy leasehold properties. New suburban 99-year condominiums were favorably appreciated, including AMO Residence in Ang Mo Kio, Lentor Modern near Lentor MRT, and Sky [email protected] in Bedok Central.

While leasehold property sales are the most common, families who focus on asset management across multiple generations may be interested in freehold properties and ready to pay premiums for such assets, which are becoming increasingly uncommon. The temptation of potentially owning an asset for the rest of one’s life may be attractive in turbulent times.

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