When it comes to purchasing a condo in Singapore, one of the most important decisions to make is whether to opt for a freehold or a leasehold property. Both forms of property ownership come with their own unique pros and cons, and the right choice will depend on several factors that the buyer has to consider. These factors include ownership duration, affordability and investment potential.
As you may have now come to realise, choosing between a freehold and leasehold condo in Singapore requires careful consideration of individual priorities, budget, and long-term plans for the property. So which tenure type fits your needs better? Read on to find out more about freehold vs leasehold condos in Singapore.
What is a Freehold Condo?
A freehold condo in Singapore is a type of condo property ownership in which the buyer has the indefinite right to own and occupy the property. This means that the buyer has entire ownership and control over the property, including the right to transfer or sell it as long as it complies with Singapore’s property regulations.
In Singapore, freehold ownership is often regarded as a highly desirable form of property ownership as it provides security and peace of mind for buyers seeking long-term stability in their property investment.
Pros of a Freehold Condo in Singapore
A freehold condo in Singapore has several benefits that a leasehold condo does not have, including:
- Indefinite ownership: Freehold condos offer indefinite ownership, which means that the buyer has complete control over the property and can occupy it indefinitely.
- Less restrictions on usage of CPF funds: 20% of the total purchase price of a freehold condo can be purchased using CPF savings, so you don’t have to use as much cash on the initial down payment.
- Better resale value: Freehold condos generally have a better resale value as they are considered as being yours forever to pass down to generations to come.
- Peace of mind: Freehold ownership provides greater peace of mind and security for buyers who wish to have long-term stability in their property investment.
In comparison, leasehold condos have limited ownership and limited resale value potential, making freehold condos a more attractive option for many buyers in Singapore.
Cons of a Freehold Condo in Singapore
On the flipside, a freehold condo in Singapore has several cons including:
- Higher upfront costs: Freehold condos typically have higher upfront costs, as their ownership is indefinite
- Lower rental yield: Freehold condos generally have a lower rental yield compared to leasehold condos, as they are regarded as a more premium form of property ownership.
- Slower appreciation rates: Based on a 2019 study conducted by 99.co, freehold condos have a slower appreciation rate as compared to leasehold condos.
- Lack of flexibility on using CPF funds: Condo owners can only use their CPF savings to pay for their leasehold condo if it has at least 20 years of remaining lease.
Overall, freehold condos in Singapore are a more premium form of property ownership with higher costs, making them less suitable for some buyers who prefer affordability and those who are looking for higher rental income.
Myths of Owning a Freehold Condo in Singapore
A freehold property is generally regarded as one that remains in a family’s possession forever, to be passed down through generations until the end of time. However, this is a popular belief that may not be the case for all freehold condos in Singapore.
There are provisions in the law that allow the government to take back a freehold condo for important infrastructural or security reasons. If your home is in the way of a new major expressway or underground MRT network, its freehold status will not safeguard it.
Additionally, if a developer makes an en-bloc offer on your freehold condo which is agreed by other residents, you will still have to sell your freehold property to the government based on the existing market transactions for similar properties in the vicinity.
What is a Leasehold Condo?
In Singapore, a leasehold condo is a type of property ownership where the buyer has the right to occupy the property for a specified period, typically 99 years.
Leasehold condos provide an affordable and flexible option for buyers who are seeking a lower level of commitment and responsibility in their property investment.
Pros of a Leasehold Condo in Singapore
A leasehold condo in Singapore has several benefits that a freehold condo does not have, including:
- Affordability: Leasehold condos are generally cheaper than freehold condos, making them a more accessible option for many buyers.
- Appreciation potential for the first 20 years: Freehold condos typically have higher appreciation potential, making them a better investment option.
- Higher rental yield: As the entry costs for a leasehold condo is lower, they typically have a higher rental yield
In comparison, freehold condos are generally more expensive, have higher maintenance costs, and require a higher upfront investment, making leasehold condos a more attractive option for some buyers in Singapore.
Read: Freehold Condos Near MRT
Cons of a Leasehold Condo in Singapore
- Lower resale value: Leasehold properties are often priced 10-15% lower than freehold properties of comparable location, age, and amenities.
- Fast depreciation rate: Once your leasehold unit passes 21 years of age, its depreciation value tends to increase at a higher rate.
- 99-year lease: As leasehold condos will return back to the government’s possession once its lease has expired.
Overall, leasehold condos in Singapore are not an ideal option for those looking for a forever home or a longer-term investment due to their 99-year tenure.
Freehold vs Leasehold: Reasons to choose a Freehold condo over a Leasehold condo in Singapore
Freehold condos are generally regarded as a more premium form of property ownership in Singapore as they are seen to be yours forever. This offers freehold condos several advantages over leasehold condos.
The key advantage of a freehold condo is the indefinite ownership of the property, providing the buyer with long-term stability and control over their investment. Even though freehold condos appreciate at a slower rate than leasehold condos, it is worthy to note that their appreciation rate remains stable throughout its ownership, unlike leasehold condos whose appreciation rate is highly dependent on their years of tenure left.
Additionally, freehold condos also typically fetch higher resale value than leasehold condos within the same district.
For condo owners who wish to hand down their property to generations to come, freehold condos are the ideal choice.
Freehold vs Leasehold: Reasons to choose a Leasehold condo over a Freehold condo in Singapore
With its 99-year tenure, leasehold condos provide a more affordable option for buyers who are seeking a lower level of commitment and responsibility in their property investment.
During its first 20 years of tenure, leasehold condos also appreciate at a faster rate than freehold condos. This makes leasehold condos a better option for condo buyers seeking shorter-term investments.
Additionally, leasehold condos yield higher rental income, as the leaseholder is responsible for the upkeep and maintenance of the common areas and property grounds.
Overall, leasehold condos provide an attractive option for buyers who are seeking affordability and flexibility in their property investment.
Freehold vs Leasehold: Conclusion
In conclusion, the choice between a freehold or leasehold condo in Singapore should be based on the buyer’s priorities, budget, and needs. Freehold condos provide long-term stability and control, but with a higher upfront cost. On the other hand, leasehold condos offer affordability and flexibility, but with limited ownership and control over the property.
The choice ultimately depends on the buyer’s individual circumstances and priorities. For example, for condo buyers who wish to call their new property their home for the long-term, a freehold condo might suit this need more. On the other hand, for condo buyers who see their new property as an investment, a new leasehold condo launch might help them realise a higher investment potential.
Therefore, it is important for buyers to weigh the pros and cons of each option and consider their budget, future plans, and personal preferences before making a decision on whether to get a freehold vs a leasehold condo.
