FREEHOLD VS LEASEHOLD

[chrischocolates]

One of the cornerstones of society in Singapore is new property ownership. In fact, whether a Singapore condo or house dweller, 90 percent of Singapore residents own their own home. But when it comes time to sign a lease, Singaporeans are faced with two options: the Freehold lease and the 99-year lease.

This common lease decision can be based on any number of factors. While market considerations always play in for property investors, the typical homeowner may be more concerned with financial comfort and passing on their Singapore property to the next generation.

The typical attraction to a 99-year lease agreement is price. 99-year properties are often considerably cheaper than Freehold properties. According to AsiaOne Business, leasehold properties usually offer a higher rental yield for investors because of their lower capital cost. However, the higher yield merely compensates the owner for the decaying lease.

For quick-turn property investors, a 99-year lease could offer significant savings. If you plan to buy a property, do some repairs and immediately sell at a profit to other investors or homeowners, the savings you would incur on a 99-year lease can be hard to pass up. But depending on the market, this plan could backfire. A 99-year lease decays everyday, reducing property values. Depending on how long your buyers plan to stay in their new property, a decaying lease could be a deal-breaker.

A Freehold lease never expires, meaning the Singapore property you buy today could be in your family for generations. This is appealing to many Singapore residents as taking care of family in the home is one of the great joys of our nation. And with a Freehold lease, you can be sure your lease won’t count against your property value, regardless of how the market does. Not only will your lease terms not hurt you, your land value is likely to stay steady, as freehold land in Singapore is rare and usually holds its value very well. But for many homeowners, the significant cost difference is a deterrent.

In the end, this decision comes down to what you want out of your property. If you are looking strictly from an investment standpoint, a 99-year lease is better in the short term resale but a Freehold lease is better for long-term rental properties. For homeowners, if you are looking for a starter home or new condo, a 99-year lease may work better within your budget. If you are buying the home you will raise your children and grow old in, a Freehold lease may be the way to go.

[Ringo33]

One of the cornerstones of society in Singapore is new property ownership. In fact, whether a Singapore condo or house dweller, 90 percent of Singapore residents own their own home. But when it comes time to sign a lease, Singaporeans are faced with two options: the Freehold lease and the 99-year lease.

This common lease decision can be based on any number of factors. While market considerations always play in for property investors, the typical homeowner may be more concerned with financial comfort and passing on their Singapore property to the next generation.

The typical attraction to a 99-year lease agreement is price. 99-year properties are often considerably cheaper than Freehold properties. According to AsiaOne Business, leasehold properties usually offer a higher rental yield for investors because of their lower capital cost. However, the higher yield merely compensates the owner for the decaying lease.

For quick-turn property investors, a 99-year lease could offer significant savings. If you plan to buy a property, do some repairs and immediately sell at a profit to other investors or homeowners, the savings you would incur on a 99-year lease can be hard to pass up. But depending on the market, this plan could backfire. A 99-year lease decays everyday, reducing property values. Depending on how long your buyers plan to stay in their new property, a decaying lease could be a deal-breaker.

A Freehold lease never expires, meaning the Singapore property you buy today could be in your family for generations. This is appealing to many Singapore residents as taking care of family in the home is one of the great joys of our nation. And with a Freehold lease, you can be sure your lease won’t count against your property value, regardless of how the market does. Not only will your lease terms not hurt you, your land value is likely to stay steady, as freehold land in Singapore is rare and usually holds its value very well. But for many homeowners, the significant cost difference is a deterrent.

In the end, this decision comes down to what you want out of your property. If you are looking strictly from an investment standpoint, a 99-year lease is better in the short term resale but a Freehold lease is better for long-term rental properties. For homeowners, if you are looking for a starter home or new condo, a 99-year lease may work better within your budget. If you are buying the home you will raise your children and grow old in, a Freehold lease may be the way to go.

FH apartment can only last you around 40 to 50 years at max, after which it will have to be torn down and make way for newer apartment. And such decision is often no within your control.

The only property class which can actually pass down for generation is perhaps FH landed property, even then, such property will usually survive 1 or 2 generation because of circumstances.

If you are buying home to raise you children, make sure you buy somewhere that is close to MRT station, schools and amenities.

[vip]

By coincidence, I have written two posts on "Freehold or Leasehold?" Just to share my two cents here.

http://propertysoul.com/2011/07/09/f...sehold-part-i/

http://propertysoul.com/2011/07/10/f...ehold-part-ii/

[thomastansb]

My real life experiences tell me location matters more than LH/FH. Value go up more than FH and rental is superior. To me, FH means lesser yield and no guarantee the value will hold.

MRT within 5 mins walk is a better factor when I buy properties.

[august]

My real life experiences tell me location matters more than LH/FH. Value go up more than FH and rental is superior. To me, FH means lesser yield and no guarantee the value will hold.

MRT within 5 mins walk is a better factor when I buy properties.

Yup, agree.

[DKSG]

Both has got their qualities.

You just need to buy something that fits your investment horizon and risk appettite.

The FH/LH premium is mathematically calculated to be 16% thereabts.

What matters most in property investment is the price.
Not location.

If you are in a not so superior location with surrounding going for $1,000, and your found a comparative PC for $800, then grab.

If you are in a superior location with surrounding going to $2,000 and you found a comparative PC for $1,600, just grab!

Hope this shed some light in the theory of buying.

DKSG

[Ringo33]

Both has got their qualities.

You just need to buy something that fits your investment horizon and risk appettite.

The FH/LH premium is mathematically calculated to be 16% thereabts.

What matters most in property investment is the price.
Not location.

If you are in a not so superior location with surrounding going for $1,000, and your found a comparative PC for $800, then grab.

If you are in a superior location with surrounding going to $2,000 and you found a comparative PC for $1,600, just grab!

Hope this shed some light in the theory of buying.

DKSG

Prata man flip flopping again.

Cant believe agents ignoring the first BASIC rule of property investment ...

Location ... Location ... Location ... Location ... Location ...



DKSG

[visionary]

My real life experiences tell me location matters more than LH/FH. Value go up more than FH and rental is superior. To me, FH means lesser yield and no guarantee the value will hold.

MRT within 5 mins walk is a better factor when I buy properties.

Agree. Location, location, location.

My personal take is that 99 years is good enough within my life span.

Towards the halfway mark of the lease, it would be enbloc-ed, esp those near good amenities or MRT stations.

I don't remember my great-grandparents names, so no need to leave behind a 999 year legacy for my descendants - if I am reproducing. A friend's grandfather left a nice shophouse to be split among his 5 grandchildren. In the end still have to sell - cos all grandchildren need the money for their own agendas/purposes. Unless your property is a Tan Manor or something, 100 people under one roof.

If I am not reproducing, then the decision is even easier... no need to leave behind a highly valued freehold property to be split among relatives when I die.

Just my personal point of view to share...

[mermaid]

What matters most in property investment is the price.
Not location.

If you are in a not so superior location with surrounding going for $1,000, and your found a comparative PC for $800, then grab.

If you are in a superior location with surrounding going to $2,000 and you found a comparative PC for $1,600, just grab!

agree.
location is very impt but whether one's investment is worth it onot depends on the price tag.
it is pointless for one to secure a unit at a fantastic location if he hv to pay a high price for it.

worse still, some may even pay a high price at a lousy location

tis is a very basic rule when investing in ppty. If one is unable to see tis logic, I suppose it will be better for him to park his money somewhere else to reap a satisfactory return.

[mermaid]

Prata man flip flopping again.

no wonder u made such a bad investment decision. u cant even differentiate the difference between basic rule and most impt criteria

[Ringo33]

Agree. Location, location, location.

My personal take is that 99 years is good enough within my life span.

Towards the halfway mark of the lease, it would be enbloc-ed, esp those near good amenities or MRT stations.

I don't remember my great-grandparents names, so no need to leave behind a 999 year legacy for my descendants - if I am reproducing. A friend's grandfather left a nice shophouse to be split among his 5 grandchildren. In the end still have to sell - cos all grandchildren need the money for their own agendas/purposes. Unless your property is a Tan Manor or something, 100 people under one roof.

If I am not reproducing, then the decision is even easier... no need to leave behind a highly valued freehold property to be split among relatives when I die.

Just my personal point of view to share...

Have you guys noticed that ammeneties and transport connectivities of LH properties are usually better than fh. What does it tells you?

[Ringo33]

no wonder u made such a bad investment decision. u cant even differentiate the difference between basic rule and most impt criteria

Stop bootlicking. We have our own eyes to read what was written.

[mermaid]

Stop bootlicking. We have our own eyes to read what was written.

wat is the point of u having the eyes to read wat was written yet unable to comprehend a single thing out of it?
no wonder u made a costly purchase & now trying hard to promote yr expensive investment in the forum

[Ringo33]

wat is the point of u having the eyes to read wat was written yet unable to comprehend a single thing out of it?
no wonder u made a costly purchase & now trying hard to promote yr expensive investment in the forum

Bootlickers might have different interpretation, but this is how I read it.


What matters most in property investment is the price.
Not location.

[EBD]

Prata man flip flopping again.

DKSG,

Is there only one rule?
Is first rule always the most important?
Are they mutually exclusive?

someone think you are flip flopping but don't provide convincing evidence & facts to back it up

nevermind - virtual world, only real world observation matter...... apparently.

[Ilikeu]

Bootlickers might have different interpretation, but this is how I read it.


What matters most in property investment is the price.
Not location.

Frankly, it doesn't take a guru to know that both price and location must be considered in totality (and not in isolation) and in relative terms. Just quoting a part of his comments "What matters most in property investment is the price. Not location." is not a fair representation of his view. You need to read his example following that.

I believe you will not buy a ppty considering the price only nor considering the location only. You buy a ppty considering both price and location as the top consideratons.

[Ringo33]

Frankly, it doesn't take a guru to know that both price and location must be considered in totality (and not in isolation) and in relative terms. Just quoting a part of his comments "What matters most in property investment is the price. Not location." is not a fair representation of his view. You need to read his example following that.

I believe you will not buy a ppty considering the price only nor considering the location only. You buy a ppty considering both price and location as the top consideratons.

If you are giving $1m to buy a property, how would you search for property? Do you start with location, or do you search for the cheapest psf property island wide?

To say that the MOST important is price and NOT location is rubbish because it is the "value" of the property that one needs to look for, not price. And attributes like good location, good facing, high floors etc are what makes a property valuable and these are the type of property that is worth keeping to preserve wealth.

if you want price? Just buy bad fengshui, low floor unit with large PES or facing rubbish collection point, or perhaps condo next to temple loh.

[teddybear]

It tells me precisely that because LH is less desirable, so must have better amenities and transport connectivity in order to make up for for deficit and attract people to buy! Even then, LH still always transact less than FH, that tells us about the fact very well.

Have you guys noticed that ammeneties and transport connectivities of LH properties are usually better than fh. What does it tells you?

[DC33_2008]

It can happen to non-landed too.

FH apartment can only last you around 40 to 50 years at max, after which it will have to be torn down and make way for newer apartment. And such decision is often no within your control.

The only property class which can actually pass down for generation is perhaps FH landed property, even then, such property will usually survive 1 or 2 generation because of circumstances.

If you are buying home to raise you children, make sure you buy somewhere that is close to MRT station, schools and amenities.

[lajia]

First time I put my hands together...

If you are giving $1m to buy a property, how would you search for property? Do you start with location, or do you search for the cheapest psf property island wide?

To say that the MOST important is price and NOT location is rubbish because it is the "value" of the property that one needs to look for, not price. And attributes like good location, good facing, high floors etc are what makes a property valuable and these are the type of property that is worth keeping to preserve wealth.

if you want price? Just buy bad fengshui, low floor unit with large PES or facing rubbish collection point, or perhaps condo next to temple loh.

[Regulators]

That buffoon will pay $3000psf for jgateway even, he wont gv a shit about price so long as it is jurong n near jld.

Frankly, it doesn't take a guru to know that both price and location must be considered in totality (and not in isolation) and in relative terms. Just quoting a part of his comments "What matters most in property investment is the price. Not location." is not a fair representation of his view. You need to read his example following that.

I believe you will not buy a ppty considering the price only nor considering the location only. You buy a ppty considering both price and location as the top consideratons.

[Ringo33]

It can happen to non-landed too.

I already mentioned condo is not possible because after 40 to 50 years, FH apartment will still need to go en bloc.

[DKSG]

DKSG,

Is there only one rule?
Is first rule always the most important?
Are they mutually exclusive?

someone think you are flip flopping but don't provide convincing evidence & facts to back it up

nevermind - virtual world, only real world observation matter...... apparently.

Sometimes I dont feel like giving FOC education to undeserving people whom we are ALL trying to get the moderators kick the person out.

I am you are trying to incite others to response to undeserving people, though I have decided not to.

Location defines the category of investment.
Price defines the profitability of the investment.

Not everyone can afford to buy an Orchard Road PC no matter how under-priced it is. So they end up can only get Jurong MM.

The price you buy vis-a-vis your neighbours (you have to calculate the various premiums/discounts, eg LH99vs FH, new vs old, etc), determines the profitability right at the beginning of your investment. We call this the BUY leg of property investment.

The theory behind this is price equilibrium of a location. As I explained before, if the PC next door price up 10% in the last 1 year, you will not want to sell for anything less than the 10%.

Ok. Enough of FOC lessons.

DKSG

[DKSG]

It tells me precisely that because LH is less desirable, so must have better amenities and transport connectivity in order to make up for for deficit and attract people to buy! Even then, LH still always transact less than FH, that tells us about the fact very well.

If people cannot understand why Bishan/Thomson is superior than Jurong, not sure the same person can understand FH is higher value than LH.

Dont even need to mention the theoritical FH premium.

DKSG

[newbie11]

It's the price for the location.. Both are not mutually exclusive. Am sure everyone knows that.

[Ringo33]

Sometimes I dont feel like giving FOC education to undeserving people whom we are ALL trying to get the moderators kick the person out.

I am you are trying to incite others to response to undeserving people, though I have decided not to.

Location defines the category of investment.
Price defines the profitability of the investment.

Not everyone can afford to buy an Orchard Road PC no matter how under-priced it is. So they end up can only get Jurong MM.

The price you buy vis-a-vis your neighbours (you have to calculate the various premiums/discounts, eg LH99vs FH, new vs old, etc), determines the profitability right at the beginning of your investment. We call this the BUY leg of property investment.

The theory behind this is price equilibrium of a location. As I explained before, if the PC next door price up 10% in the last 1 year, you will not want to sell for anything less than the 10%.

Ok. Enough of FOC lessons.

DKSG

Location defines the category of investment.

Are you talking about COE or property here? LOL!! Cat A Cat B, Open Cat?

Did you just invented this nonsense in hope to cover your track of saying Property investment is about Price NOT Location.

Like I said before, please stop feeding and corrupting the minds of the trolls. I think in their head they already have too much nonsense to digest, please spare some thought.

[Sandiwara]

I see that two gentlemen always shooting each other in all Posting Category. My views is "any body can talk the good theory how to swim, but there are good swimmer and lousy swimmer". I consider my self one of the Lousy swimmer because so far only have one Condo in Singapore that I use it my self. No passive income in Singapore. That is way I keep visiting this website to learn more from others people.

[VS]

There is no guarantee that PC after 40 to 50 years will be enbloc for rebuild. For 99 LH, the owners will need to return the land to the State in its original condition (bare gound), correct?

[Ringo33]

There is no guarantee that PC after 40 to 50 years will be enbloc for rebuild. For 99 LH, the owners will need to return the land to the State in its original condition (bare gound), correct?

Sometime its not a choice. When a building age, the cost of maintenance rises and the ability of attract tenant also diminish.

The possibility of En Bloc depends very much on the location. IF it located right next to MRT station, en bloc is almost a certainty unless owners are still demand ridiculously high price.

[mermaid]

D

I see that two gentlemen always shooting each other in all Posting Category. My views is "any body can talk the good theory how to swim, but there are good swimmer and lousy swimmer". I consider my self one of the Lousy swimmer because so far only have one Condo in Singapore that I use it my self. No passive income in Singapore. That is way I keep visiting this website to learn more from others people.

Kinda disagree wif u.
the # of ppty one has got nothing to do wif whether he is a gd or bad investor. An investor may hv multiple ppty but he is still considered lousy if he kept making the wrong judgement.