Which is better - Freehold or Leasehold?

FREEHOLD or LEASEHOLD: Which is better?

There is absolutely no right or wrong decision. The choice ultimately depends on your objectives and goals.

For us, it is always important to establish our clients objectives whenever we discuss with our clients on their property plans.

To better assess your goals, you can contemplate on questions like: “Is this property for making profit or is it a property that you wish to pass down to your children in the future?”

We will share with you some interesting facts & figures on a “freehold vs leasehold” scenario that will hopefully enlighten you.

There will also be some examples shown. 1st example: Urban Residences & Minton (Nearby each other)

As you can see, Urban Residences is a FREEHOLD property whereas Minton is a LEASEHOLD property with 99 years lease from 2007.

The reason why we are comparing these two projects is simply because they are right next to each other.

Now let’s look at the historical price trend for these two properties.

As you can see, Minton launched at around 8xx psf and went up to its highest point at about $1300 psf.

Comparatively, the prices of Urban Residences did not move much.

It was from about $1200 psf and moved to about $1300 psf. (We are looking at the areas which has more dots and the dots represent transactions.)

Thus, from this chart, we can see that the LEASEHOLD property had a higher jump in terms of pricing as compared to the FREEHOLD property.

The question is WHY?

Why did Urban Residences prices not jump as much when compared to The Minton?

Did the owners buy at a high?

Maybe the area cannot command a higher price?

Of course, to be objective, we must also add in that after the surge for Minton, the prices remained rather stagnant.

If you are wondering why is that so, it is another topic altogether.

One reason is that if you have been following the property price trend, usually there is a surge in prices when a newly launched property reaches the TOP period as compared to when it is first launched.

This could be partly due to more demand for a property that has reached the TOP stage as buyers can collect keys and move in upon purchasing.

So back to this topic, as we said earlier, the pricing of the FREEHOLD property (Urban Residences) did not jump as much as the LEASEHOLD property (The Minton).

In fact, till today, the price of Urban Residences did not really move much.

Why is that so?

If you look at the chart, the dots represents transactions.

When you look at Urban Residences (which is the red line), there are way lesser dots as compared to The Minton (blue line).

This means that Urban Residences has lesser transactions as compared to The Minton.

Furthermore, looking at the above chart, from 2014 to 2018, there is no dots (transactions) at all!

Of course, we must note that Urban Residences is a very small development with only around 47 units as compared to The Minton which has 1145 units!

Logically, if there are lesser units, there should also be lesser transactions.

So what can we learn from this?

The volume of transactions in a development do affect the price.

Now did The Minton owners really make money?

Look at this table below: