For decades, the allure of owning a freehold property, one that can be held indefinitely and passed down through generations, has made these properties highly desirable among investors and homeowners. Freehold condominium units, with their promise of long-term stability and financial security, have traditionally commanded a premium in the market. However, recent trends indicate a shifting preference towards leasehold properties, driven by factors such as convenience, connectivity, and accessibility to amenities.
Narrowing Price Gap
One of the most significant trends over the past decade has been the narrowing price gap between freehold and leasehold condominiums. According to data from the Urban Redevelopment Authority (URA), the islandwide median price of freehold condos (excluding executive condos) was S$1,495 per square foot (psf) in 2013, which was 20% higher than the median price of leasehold condos at S$1,246 psf. However, by 2023, this price gap had decreased to just 4.7%, with the median price of freehold condos at S$1,973 psf and leasehold condos at S$1,885 psf.
This significant surge in the value of leasehold condos—51.3% over the past decade compared to a 32% increase for freehold condos—reflects a growing buyer preference for convenience, lifestyle, and amenities over tenure.
The Value of Location and Amenities
Modern homebuyers prioritize connectivity and access to essential services. Many new leasehold properties are strategically located next to MRT stations, integrated with shopping malls, or in proximity to popular schools and recreational facilities. These attributes significantly enhance their appeal, often outweighing the perceived advantage of freehold tenure.
For instance, notable developments such as The Reserve Residences, One Pearl Bank, and Grand Dunman offer excellent amenities and prime locations, driving demand even though they are leasehold properties.
Profitability and Investment Returns
A recent profitability study has shown that leasehold condos generally have a higher chance of yielding profits, with 92.6% of leasehold properties being profitable compared to 69.1% of freehold properties. In absolute terms, leasehold condos in city fringe and suburban areas reported average gross profits of S$214,676 and S$192,882, respectively, compared to freehold condos which yielded S$123,348 and S$130,526.
In prime locations, while freehold condos in the Core Central Region (CCR) yield higher absolute profits (S$402,321 versus S$290,410 for leasehold), the profitability rate for leasehold condos remains robust at 73.1% compared to 57.7% for freehold properties.
Changing Buyer Preferences
Data from URA shows that in 2013, freehold condos were consistently more expensive than leasehold counterparts across all regions. However, by 2023, leasehold condos in the Rest of Central Region (RCR) and Outside Central Region (OCR) have surpassed freehold condos in median prices, reflecting a significant shift in buyer preferences.
The rising prices and demand for leasehold condos can be attributed to the growing importance placed on lifestyle and convenience over the tenure of the property. This is particularly evident in areas with strong amenities and connectivity.
Conclusion
The value of leasehold properties is expected to continue rising, especially as the Government releases more prime land through government land sales in the city fringes and suburbs. This trend is bolstered by the fact that about 80% of Singapore's population resides in leasehold public housing flats, making the transition to leasehold private properties more comfortable for many buyers.
However, despite the increasing demand for leasehold properties, freehold properties, particularly in prime locations, continue to hold their appeal. Wealthy buyers may still be willing to pay a premium for freehold condos due to their perceived long-term value and ownership benefits.
Summary of Key Points:
- Price Gap Narrowing: The price gap between freehold and leasehold condos has decreased from 20% in 2013 to 4.7% in 2023.
- Profitability: Leasehold condos have a higher profitability rate at 92.6% compared to 69.1% for freehold properties.
- Buyer Preferences: Convenience, lifestyle, and amenities are increasingly prioritized over property tenure.
- Location Advantage: Leasehold condos in RCR and OCR regions now command higher median prices than freehold condos.
- Long-term Value: Freehold properties in prime locations continue to attract premium prices due to their scarcity and long-term value.
As the market continues to evolve, staying informed is crucial. Whether you are a prospective buyer or an investor, understanding these trends can help you make better decisions. Contact our team of real estate experts to keep updated on the latest market insights and explore the best opportunities tailored to your needs.