The Importance of Due Diligence in Property Investing in Singapore
Investing in property can be a lucrative venture, but it also comes with its own set of risks and challenges....
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TLDR
While freehold condos might seem like a solid investment, the rise of new developments and aging buildings cast doubt on their long-term value. Data shows that younger freehold condos under 10 years old have a higher average price per square foot compared to older ones. Leasehold condos, while initially cheaper, close the price gap over time. The prime profit window for freehold condos is between 30 and 40 years, but profitability declines past this due to financing constraints. District-specific trends suggest better gains in upscale areas like Districts 9 and 10. Ultimately, the freehold premium may require decades to justify itself, and property management quality remains crucial. Deciding whether to buy, sell, or wait depends on individual circumstances and market conditions.
While freehold condos may seem like a foolproof investment on paper, doubts have begun to surface in recent times. One popular belief suggests that their lack of lease extension fees gives them a competitive edge in the en-bloc market. However, with the rise of neighboring new developments and the uncertainty surrounding the sustainability of aging condos, the question remains: can a decades-old freehold condo still hold its value? Curious, we delved into the topic further.
Average Prices of Freehold Condos According to Age: Unveiling the Trend:
| Year/Age | Less Than 10 Years Old | Less Than 20 Years Old | Less Than 30 Years Old | Less Than 40 Years Old | 40 Years Or More | Grand Total |
| 2014 | $1,609 | $1,249 | $1,212 | $1,194 | $1,003 | $1,510 |
| 2015 | $1,588 | $1,222 | $1,124 | $1,148 | $1,029 | $1,441 |
| 2016 | $1,663 | $1,210 | $1,100 | $1,140 | $1,051 | $1,475 |
| 2017 | $1,705 | $1,235 | $1,167 | $1,180 | $1,172 | $1,505 |
| 2018 | $1,821 | $1,345 | $1,238 | $1,320 | $1,264 | $1,620 |
| 2019 | $2,118 | $1,444 | $1,308 | $1,342 | $1,279 | $1,804 |
| 2020 | $1,963 | $1,423 | $1,290 | $1,359 | $1,169 | $1,695 |
| 2021 | $2,057 | $1,621 | $1,384 | $1,445 | $1,364 | $1,816 |
| 2022 | $2,280 | $1,741 | $1,507 | $1,625 | $1,622 | $1,999 |
| 2023 | $2,459 | $1,846 | $1,617 | $1,671 | $1,567 | $2,117 |
| 2024 | $2,427 | $1,873 | $1,702 | $1,627 | $1,592 | $2,000 |
| Grand Total | $1,944 | $1,492 | $1,346 | $1,375 | $1,381 | $1,730 |
As the years pass, the average price per square foot of a freehold condo fluctuates, revealing its true worth with each passing decade. For those curious about how it stacks up against leasehold, the numbers tell a compelling story.
For the young and sprightly leasehold condos under 10 years old, the average price per square foot is a mere $1,410 – a significant 31.8% lower than their freehold counterparts. But as time wears on, the gap narrows; at 40+ years old, the average leasehold condo fetches around $997 psf, only 32.9% less than a freehold unit. Could it be that leasehold holds its value better than we give it credit for?
Interestingly, for those willing to overlook a few wrinkles and embrace a condo that’s 30+ years old, a spacious 1,000 sq. ft. (think three bedrooms) could be within reach for a quantum of $1.6 to $1.7 million. A mere fraction of what a similar freehold unit would cost.
So don’t let the numbers fool you – come 2024, a family-sized freehold condo may not be a distant dream for those looking to upgrade, even if it means venturing further from the city.
Exploring the Average Appreciation of Freehold Condos Based on Age
| Year/Age | Less Than 10 Years Old | Less Than 20 Years Old | Less Than 30 Years Old | Less Than 40 Years Old | 40 Years Or More |
| 2014 | |||||
| 2015 | -1.33% | -2.12% | -7.27% | -3.85% | 2.65% |
| 2016 | 4.75% | -1.02% | -2.20% | -0.69% | 2.17% |
| 2017 | 2.50% | 2.13% | 6.14% | 3.53% | 11.47% |
| 2018 | 6.84% | 8.91% | 6.11% | 11.83% | 7.83% |
| 2019 | 16.32% | 7.33% | 5.65% | 1.63% | 1.19% |
| 2020 | -7.35% | -1.47% | -1.37% | 1.29% | -8.61% |
| 2021 | 4.81% | 13.96% | 7.26% | 6.31% | 16.69% |
| 2022 | 10.84% | 7.38% | 8.89% | 12.52% | 18.89% |
| 2023 | 7.84% | 6.05% | 7.27% | 2.82% | -3.39% |
| 2024 | -1.31% | 1.46% | 5.28% | -2.66% | 1.64% |
| Grand Total | 4.39% | 4.26% | 3.58% | 3.27% | 5.05% |
| Total Volume | 33277 | 14368 | 7136 | 2195 | 569 |
During its early years, the condominiums thrive, thanks to its youthful age that keeps it out of the “old” category. However, as it nears the 40-year milestone, a testament to its longevity begins to unfold, revealing the fruits of a patient and enduring ownership.
Unveiling the Average Percentage Profits and Losses in Transactions
| Row Labels | Less Than 10 Years Old | Less Than 20 Years Old | Less Than 30 Years Old | Less Than 40 Years Old | More Than 40 Years Old | Grand Total |
| 2014 | 7.8% | 20.7% | 26.4% | 13.0% | 31.3% | 11.0% |
| 2015 | 11.9% | 24.6% | 29.1% | 31.7% | 46.0% | 16.4% |
| 2016 | 14.6% | 31.0% | 31.3% | 35.3% | 21.5% | 20.3% |
| 2017 | 15.6% | 29.1% | 31.8% | 34.4% | 24.4% | 21.0% |
| 2018 | 11.7% | 21.1% | 23.8% | 34.7% | 28.9% | 16.0% |
| 2019 | 13.7% | 26.4% | 33.3% | 33.1% | 24.7% | 19.5% |
| 2020 | 18.4% | 30.6% | 34.5% | 32.8% | 34.2% | 24.6% |
| 2021 | 13.7% | 24.0% | 24.4% | 7.5% | 32.1% | 18.9% |
| 2022 | 8.1% | 33.3% | 12.4% | 6.3% | 15.0% | |
| 2023 | 1.5% | 4.1% | 2.5% | |||
| Grand Total | 12.5% | 25.9% | 29.0% | 31.8% | 26.9% | 17.5% |
The prime window for optimal profit in the market appears to fall between the 30 and 40-year threshold, while surpassing it proves less lucrative. Just like their leasehold counterparts, returns tend to dwindle past the 40-year milestone, mainly due to constraints in financing. As banks scale back their maximum loan limits, buyers are forced to cough up more cash, consequently putting a damper on market prices.
Looking At Performance By District
Profitability
The unequal distribution of freehold properties is evident as they tend to congregate in certain districts while remaining scarce in others. In the upscale regions of Districts 9 and 10, such as the bustling Orchard and scenic Bukit Timah, it is not uncommon to come across aged freehold properties compared to their leasehold counterparts.
However, the reverse is true for District 25, nestled in the rustic Woodlands, where almost all properties are on a leasehold basis. Due to the low transaction volume in some districts, using the average gains as a measure may not accurately reflect the market trends and prices can fluctuate greatly.
As such, relying on the gains in well-established districts like 9 and 10 may offer a more precise depiction of the area. It is worth noting, however, that caution should be exercised when considering District 15, as it encompasses a myriad of boutique freehold condos that are known to experience dramatic price swings.
When Does Investing in Freehold Premium Make Financial Sense?
Generally speaking, the freehold premium, which typically ranges from 15 to 20 percent higher than a leasehold, may take quite some time to pay off. In the short term, say within a decade of purchasing, the freehold title may hold little significance. However, as the years pass and you approach the 30-year mark, the value of freehold ownership becomes evident without the looming threat of lease decay.
Nevertheless, with an extended holding period, one cannot help but wonder about the maintenance of the property. This concern is especially valid in sprawling developments with a multitude of amenities. Will the numerous swimming pools, manicured gardens, and BBQ pits retain their charm after decades of use? While freehold status may safeguard against lease decay, it cannot guarantee competent condo management.
Should You Buy, Sell or Wait?
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
I can help you by:
- Offering Strategic Real Estate Advice – I can help create a comprehensive plan to guide you through your property journey.
- Connecting Your Home with the Perfect Buyers – Through stunning visuals, an effective communication strategy, and an in-depth knowledge of the market, we’ll ensure your home is presented in the best possible way to fulfill your goals.
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