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. Singapore’s government normally grants 99-year leasehold land for residential and commercial usage. Industrial property lots are frequently available for a limited time. Some land parcels have freehold or long leasehold tenures that begin at 929 or 999 years for historical reasons.

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

New freehold private dwellings could cost 10% more than 99-year leasehold ones. The premium for freehold vs 99-year leasehold land is around 4%, according to a Singapore Land Authority data that indicates leasehold values as a proportion of freehold value. According to a List Sotheby’s International Realty (List SIR) analysis of URA Realis data, the median price of terrace houses on initial 99-year land leases reached a new high of 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.

Purchasing an older leasehold terrace home as opposed to a freehold home, on the other hand, saves a significant amount of money. According to List SIR, the price difference between 99-year and freehold/999-year terrace properties is approximately S$715 per square foot.

Market acceptance

Many people and businesses purchase leasehold properties. New suburban 99-year condominiums, such as AMO Residence in Ang Mo Kio, Lentor Modern near Lentor MRT, and Sky [email protected] in Bedok Central, were well received.

While leasehold property sales are the most prevalent, families who focus on asset management across multiple generations may be interested in freehold properties and willing to pay premiums for such assets, which are becoming increasingly rare. In tumultuous times, the prospect of potentially owning an asset for the remainder of one’s life may be appealing.

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