Freehold or Leasehold Property?

One of the most often raised questions among property investors is whether to purchase a leasehold or freehold property in Singapore. While many would argue that freehold is definitely better than leasehold because of the perceived perpetual ownership, this argument may not hold water in Singapore due to the Land Acquisition Act.

In this article, I would share my views on freehold property in Singapore. Once again, I am putting a disclaimer that this article is not meant to be a form of financial nor legal advice. The content is produced to the best of my knowledge and research. If there are any factual errors, please feel free to let me know. I would be happy to amend my article.

Leasehold property

Generally, 99 years old leasehold property must be returned to the government upon expiry of lease. In March 2017, Minister for National Development, Lawrence Wong, highlighted specifically that all leasehold private and public housing will be returned to the state upon expiry. Due to land scarcity, the government needs to recover land to meet changing social needs.

Effectively, this means that home-owners will [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Read my other articles on property:

  1. Negative HDB sales
  2. Wealth destruction from CPF Accrued Interest
  3. Devastating HDB Loan and CPF Accrued Interest
  4. CPF’s Home Protection Scheme (HPS)
  5. The Dark Side of CPF Housing Withdrawal Limit
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Updated: March 22, 2019 — 2:43 pm

5 Comments

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  1. Singapore has 2 laws that it can use to compulsorily acquire your property:

    1) The more commonly known Land Acquisitions Act — that is used in the normal day-to-day redevelopment of the country.

    2) The Emergency Powers Act — that can acquire other assets such as vehicles, not just property. Used only when a state of emergency is in effect e.g. war, national catastrophe, pandemic, etc etc.

    For Geylang Lor 3, if they wanted to do enbloc, they should have done it at least 20 years ago (at least 1/3 of lease left). Because otherwise it will be very expensive for developers to top-up the lease & make it unattractive and/or result in low compensation for the owners. Not forgetting that the developer will have to pay extra to govt to increase the Gross Plot Ratio to build higher buildings.

    As for extending the lease, very doubtful for the Gaylang Lor 3 owners to succeed if govt had already planned for more intensive use & buildup for the area.

    Experienced property investors will prefer leasehold over freehold, all things being equal. Becoz rental income doesn’t depend on holding status. Investors may buy freehold for other unique factors e.g. low valuation, no leasehold in that area, unique in-demand location or characteristics, etc.

    Investors won’t normally hold investment properties for very long term, but will tend to sell or enbloc or redevelop during hot property market cycles. It’s just a cash cow for them. Just like how farmers view their lambs or cows — they’re not pets or poor animals, just walking assets to be milked & killed for maximum profits.

    They will go for freehold only if they intend to pass down to descendants, or to have very long-term family business control e.g. construct office / commercial building for continuous rental & business activities.

  2. Agree with you. Recent Merpati Rd is another good example. Some live there for ages and want to pass to next generation. But govt want to develop high rise condo or hdb. Rumour is 30 storey. They buy FH ppty cheap and likely will convert it to leasehold and sell to the public. Very clever hor. Thats why 5 households refused to shift and was served court order and eventually surrendered. I viewed one unit in 2009 GFC but decided not to buy. Else i would have lost money based on the compensation. In SG, govt always win because of the law in place.

  3. Hi Sinkie,

    Thanks for the sharing. Yes, indeed, leasehold is more popular for investors hoping to cash in on the en-bloc fever.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

  4. Hi Henry,

    Blessing in disguise for you!
    Of course the government will always win in Singapore. They set the rules.
    For commoners like us, just make sure we know the rules and don’t lose wealth.

    Regards,
    Gerald
    https://www.sgwealthbuilder.com

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