Discovering the Response of Private Property Owners towards the 15-Month Wait-Out Phase
TLDR The blog post discusses the impact of the 15-month wait-out period cooling measure on private property owners in Singapore....
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TLDR
Freehold vs. leasehold condos in Singapore show nuanced performance differences over the past decade. Leasehold units often deliver stronger percentage returns, especially in mass-market areas like the Outside Central Region (OCR), where affordability drives appreciation. Freehold properties, however, tend to achieve higher absolute gains, particularly in larger unit categories, though they face weaker ROI in smaller one- and two-bedroom segments. New launch data highlights leasehold dominance, while resale transactions reveal a narrowing gap, with freehold units performing comparably in annualized returns. Regional dynamics matter: leasehold in the OCR outpaces leasehold in the Core Central Region (CCR), where high entry prices and freehold competition dampen growth. Ultimately, tenure alone is not the decisive factor—location, affordability, and unit mix play greater roles in shaping returns. Investors should focus less on freehold prestige and more on practical drivers of demand and appreciation. jaysonang.com
A frequent query among potential homebuyers in Singapore revolves around the perennial debate: “Should I buy freehold or leasehold?” While property price movements are influenced by numerous factors beyond tenure, an updated analysis of price performance since 2014 provides intriguing insights. For this analysis, 999-year leases are considered effectively equivalent to freehold.
Freehold vs. Leasehold Price Movements (2014-2024): General Snapshot
This section examines overall price movements across all types of sale transactions (new-to-resale, resale-to-resale, etc.), excluding new-to-resale Executive Condominiums (ECs) to avoid distorting the picture with their subsidized initial prices.
For one-bedroom units, leasehold properties demonstrably outperformed their freehold counterparts in terms of ROI, average gains, and annualized returns. In the two-, three-, and four-bedroom categories, performance was quite close. Leasehold units generally saw slightly higher ROI and annualized percentage gains, but freehold units typically achieved higher absolute gains. For five-bedroom units, leasehold significantly outperformed in annualized percentage gains, while freehold again showed larger absolute gains. However, caution is advised for the luxury segment (larger units) due to potential price volatility.
New Launch Performance: Leasehold Dominance
Examining only new launch transactions, a clear pattern emerges:
New launch leasehold units generally outperformed their freehold counterparts across all size categories in terms of ROI and annualized returns. Freehold properties showed particular weakness in the one- and two-bedroom segments, with significantly lower ROI compared to leasehold units. While freehold units achieved higher absolute gains for larger four- and five-bedroom units, the limited transaction volume for five-bedroom freehold units makes strong conclusions difficult. This trend is often attributed to the inherent characteristics of mass-market, fringe-region condominiums, where many large leasehold plots in the OCR offer a lower initial entry price, providing more room for price appreciation compared to the freehold premium.
Resale Performance: A Narrowing Gap
The picture shifts when focusing solely on resale transactions, where properties have already undergone initial price discovery.
In the resale segment, the gap between leasehold and freehold performance narrows considerably. Freehold units often achieve higher absolute gains for two- and three-bedroom units, while the annualized returns between leasehold and freehold become quite similar (often within 0.2-0.3%).
Segment-Specific Performance
Breaking down performance by region and tenure reveals further insights:
Leasehold units in the Outside Central Region (OCR) demonstrated the strongest annualized returns, reinforcing the idea that affordability and mass-market appeal drive percentage gains. The OCR generally outperformed the CCR. Conversely, leasehold units in the CCR showed the weakest performance, facing a double disadvantage of high initial prices combined with a potential psychological “contrast effect” when surrounded by freehold counterparts. Due to the high volume of leasehold transactions in the OCR, their overall impact on average performance is significant, though the performance difference between leasehold and freehold within the OCR itself is not as substantial.
Conclusion:
While leasehold properties have generally outperformed freehold in terms of percentage returns, this is often attributed less to tenure itself and more to factors like location, affordability, and unit mix. The prevalence of leasehold condos in the OCR, where land is cheaper, allows for a lower base price and greater room for appreciation. This suggests that for investors, focusing on these underlying drivers—affordability and mass-market appeal—may be more impactful than tenure alone.
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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