FREEHOLD VS LEASEHOLD COMPARISON
You might be eyeing a private residential property that seems to offer everything you desire, from the splendor of the exquisite design, to the convenience which an all-encompassing range of facilities and amenities in the vicinity would afford you. It could be at this very moment, when you realise that the condominium is a leasehold property, and not a freehold property. Perhaps you have, like many others, always held the belief that freehold properties are more worth it than leasehold condominiums. After all, the terms, “freehold” and “leasehold”, seem to denote the very discrepancy between the two, in terms of the homebuyers’ ownership of the properties. You browse through the materials pertaining to the condominium again, and you start to mull over whether it really makes a difference.
Are freehold condominiums really better than their leasehold counterparts?
There is no standard answer to the longstanding question. When it comes down to it, it is your personal goals and needs that would determine your choice of property. Knowing the differences between the two would therefore be integral to ensuring that your property purchase would be in line with your goals.
ABOUT FREEHOLD & LEASEHOLD CONDOMINIUMS
FREEHOLD
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A freehold condominium is generally thought of as a property that could be owned for an indefinite period of time. However, the reality is that, in the case of a successful en bloc sale of the private residential site or the statutory development of the land, homeowners would still have to let go of the property.
Freehold condominiums could possibly bring about greater capital appreciation in the long run. That said, they tend to have comparatively higher entry prices. As the lease balance would not matter as much to tenants, freehold condominiums may not be able to offer as high a rental yield.
Barring exceptional circumstances as mentioned previously, freehold condominiums could essentially be owned forever. Hence, the property is an asset class that could be passed down the generations.
While prices of freehold condominiums are not at their peak, they are still considerably high. As such, it could be a good time to enter the market.
IN A NUTSHELL
While freehold condominiums may be at the top of most people’s minds, when it comes to purchasing a private residential property, it would be inaccurate to say that it is ‘better’, in comparison to leasehold properties.
Overall, freehold condominiums should ultimately be considered via a more holistic lens. Additionally, the individual condominium should be evaluated against your needs and your objectives in purchasing a property.
LEASEHOLD
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As the name of the property type suggests, leasehold condominiums would be returned to the State upon the expiry of their lease. Not only would this translate to residents having to eventually vacate the site, but the lease balance could also have an impact on the price of the freehold property, should the owner decide to sell it.
While it is not always the case, leasehold condominiums might offer better entry prices, while providing facilities that are comparable to those of freehold condominiums. This would also be an appealing factor for HDB upgraders, who are looking to enter the market.
With facilities that are not any less luxurious than those that you might expect of a freehold condominium, leasehold condominiums would be able to attract tenants on an equal footing. This, on top of potentially better entry prices, might bring homeowners a higher rental yield.
Like freehold condominiums, leasehold condominiums are also observing an increase in prices. The prominent climb in prices since the onset of the Covid-19 pandemic in 2020, may very well be indicative of a marked shift in homebuyers’ attitudes towards leasehold properties. Hence, leasehold properties could offer home investors glimmering prospects in their own right.
IN A NUTSHELL
While lease balance is undoubtedly a key consideration that homebuyers ought to take into account when purchasing condominiums, leasehold condominiums are not to be dismissed.
The upward trend in their prices illuminate how homeowners and property investors increasingly view leasehold condominiums as viable investments that would be crucial to their property investment journeys.