Acerca de
Freehold vs Leasehold Properties
Foreword
When you are purchasing a property, apart from the many factors you consider, the tenure may be one of your key considerations. In Singapore, there are two types of land leases for property ownership, freehold or leasehold. In this article, we will break down the difference between the two for you.
Freehold Properties
The property owners have full ownership. They own it indefinitely and after they pass away, the ownership is passed on to their beneficiaries without restrictions.
Pros
-
Freehold properties generally have stable appreciation in price and they appreciate significantly more than older leasehold properties, making them good long-term investments.
-
You can hold your property for as long as you want and even pass it on to your future generations.
-
You have the freedom to redesign your home or carry out major home renovations according to your desires.
Cons
-
Though freehold properties can be owned indefinitely, the government still has the right to re-acquire the land for their own use via the Land Acquisition Act. They are also more likely to undergo an En Bloc. Despite this, owners of the property will be rightfully compensated.
-
In terms of the property price, freehold properties tend to have a higher price per square foot of 10% to 20% compared to leasehold properties.
-
Freehold properties are also rarer, so it would be harder for you to find a property with your ideal location, size, and price.
Leasehold Properties
These properties are owned by the Singapore government and they lease the property for a fee and a limited period of time, after which the property will be reclaimed. There are 30-year, 60 year, and 999-year lease periods, but 99-year is the most common.
Pros
-
Most leasehold properties are located in prime districts that are near amenities, schools, tourist attractions, and financial centres, making it more convenient for owners. Moreover, if the property has a good location, there is greater rental potential.
-
In terms of the property price, leasehold properties are 10% to 20% cheaper than freehold properties.
-
You have a wider range of options if you are buying a home, since about 80% of most condominiums and HDB flats are under the leasehold category.
-
In general, leasehold properties have greater capital appreciation than freehold properties over the past decade.
Cons
-
Leasehold properties will see more significant capital appreciation in the earlier stages of the property and see a decline in capital appreciation rate as they are nearing the end of the lease tenure. Furthermore, property values are more volatile depending on the real estate market.
-
Home renovation is more restricted with condominiums and HDB flats, therefore you do not have the freedom to design your home to your heart's desires.