Freehold Property May Not Be So Good After All
When it comes to property, Singaporeans are pretty traditional about it where they want the lands that they pay for and 99 years like the Riverfront Residences won’t cut it. The obsession with freehold property is so that they can pass it down to their own next generation. Freehold property usually cost a bomb and higher than the leasehold properties. But then again, is freehold property good for security blanket? Depending on your situation, freehold property may not be the best choice.
In Singapore, property can be leasehold (held for 99 years) or freehold (held in perpetuity). Given with the size of Singapore, it is not surprising that these freehold condominiums are pretty rare as compared to the leasehold ones. Besides, almost 80% of our land is leasehold which typically lasting for 99 years. On the contrary to the popular belief, our government is not obliged to pay compensation when the lease expires.
However, leasehold do not sit well with traditional Asian perspectives since we have been raised with the mindset to equate family with land. We are going to bust some myths with a more practical angle where there are some disadvantages to freehold properties. Here are the 5 of key points why freehold properties may not be what it seems.
Borne higher costIt doesn’t take a genius to figure out the freehold property going to cost more. When all things are being equal (with the same location, same size, same annoying neighbours & etc), freehold property actually cost 10% to 15% more than their leasehold counterpart with an extra $100,000 if it’s a million dollar condo.
Then, here comes your financial situation, it gets riskier the moment your monthly repayment starts. You will have to upkeep this mortgage by delaying your retirement age or skimming down your lifestyle that you used to have.
Although, we must say that the freehold condominium is in the same category of luxury item but that does not mean you can go all out by costing you a limb. If your daily is a struggle to you, it is pointless to own your home’s freehold status.
Freehold status can be changedThe word ‘freehold’ speaks for itself, many buyers are attracted with the idea of ‘forever’ property possession. However, what they don’t know is that the status ‘freehold’ is not not permanent. Let us tell you why it may not be permanent under your possession.
Let’s just say if the government decides to build a military base, or satellite dish or even to plan an MRT station right where you are staying. There goes your freehold property, you can kiss that goodbye.
All hopes are not gone yet because by then you will receive a compensation at market value. But do not succumb to any notions of permanence because it is all subject to Urban Redevelopment Authority (URA) master plans. So, let’s not bet on the aged freehold property hoping the government might take back and get compensated.
Be aware that freehold property is also prone to en-bloc sales; after 30 or 40 years, your neighbours might decide they are sick of the scenery. Then when your condo is sold off and you are back to house hunting.
Well, this may great for the younger folks who will benefit from the cash in but it is not too great if all you want is a stable home and sanctuary.
Location, location, locationWhether it is renting or resale your property, people usually look into the location instead of the property tenure.
A leasehold condo with a walking distance to the MRT station definitely beats a freehold condo without any transport accessibility in the market value. However, if someone wants a place near their children’s schools, you might be surprise that they might be willing to pay at a higher price regardless of the leasehold status.
As for tenants, the tenure is none of their business and they couldn’t care less about it. Don’t be distracted by the freehold status and focus on your ultimate goal. What we advice is to stay focus on the rental income, location, amenities and other conveniences.
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