Is it safe to buy leasehold property in Singapore? This is a common question that many homebuyers ask themselves when considering a property purchase. With the majority of Singapore’s land being leasehold, it is important for buyers to understand the risks and benefits of buying a leasehold property.
What is a leasehold title?
Firstly, it is important to understand what a leasehold property is. In Singapore, a leasehold property is one that is owned by the buyer for a specific period of time, usually 99 years, or the less common 999 years. After the leasehold period ends, the ownership of the property reverts back to the state. This is in contrast to freehold properties, which have an indefinite ownership period.
Advantages of Leasehold Properties
One of the biggest advantages of buying a leasehold property is the lower upfront cost compared to a freehold property. Leasehold properties typically have a lower purchase price, making them more affordable for first-time homebuyers or those looking to invest in the property market. Additionally, many leasehold properties are located in desirable areas, making them an attractive option for buyers.
Risks of Leasehold Properties
There are also risks associated with buying a leasehold property. One major concern is the decreasing lease term. As the leasehold period approaches its end, the value of the property may decrease, making it harder to sell or refinance. This can be particularly problematic for those who plan to hold the property for a long time or for those who plan to pass it down to future generations.
Another concern is the potential for leasehold properties to face en bloc sales. En bloc sales occur when a group of property owners collectively decide to sell their properties to a developer for redevelopment. While en bloc sales can be lucrative for property owners, they can also be disruptive and costly, particularly for those who do not want to sell their property.
Despite these risks, buying a leasehold property can still be a safe and viable option for homebuyers in Singapore. One way to mitigate the risk of decreasing lease terms is to purchase a property with a longer lease term, such as a new condo launch with a 99-year lease. It is also important for buyers to do their due diligence and research the property thoroughly before making a purchase.
What Happens at the End of a Leasehold
In Singapore, most leasehold properties, including condominiums, have a lease term of 99 years. At the end of this lease term, the ownership of the property reverts back to the state. This means that the property no longer belongs to the owner, and the state can choose to redevelop the land.
When a leasehold property approaches the end of its lease term, its value may decrease, making it harder to sell or refinance. As such, it is important for property owners to plan for the eventual end of the leasehold period.
Is it safe to buy leasehold property?
In conclusion, while there are risks associated with buying a leasehold property in Singapore, it can still be a safe and affordable option for homebuyers. By understanding the risks and benefits and doing proper research, buyers can make an informed decision and find a property that meets their needs and budget. So, is it safe to buy leasehold property in Singapore? The answer is, it depends on your individual circumstances and risk appetite.
One way to mitigate the risks of buying a leasehold property in Singapore is to consider purchasing a new launch leasehold condo. These properties typically have a longer lease term and are often located in desirable areas. In addition, new launch condos often come with modern amenities and features, making them an attractive option for homebuyers.
Furthermore, buying a new launch leasehold condo also provides buyers with the opportunity to enjoy potential capital appreciation as the property ages in its first 20 years. In fact, according to a study by 99.co, it is estimated that over a 10-year period, leasehold condos appreciated by 86.7%, compared to freehold condos that only appreciated by 60.8%.
It is important to note, however, that new launch leasehold condos may come at a premium price compared to resale leasehold properties. Buyers should carefully consider their budget and financial situation before committing to a purchase.