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Buy 99 years leasehold or freehold property in Singapore?

Tuesday, December 20, 2016

For home buyers in Singapore, most would qualify for a BTO HDB flat. It gives the best value for money. 

Even a resale HDB flat is a good deal compared to the sky high asking prices of private condominiums. 

However, regular readers know that I would caution against buying very old HDB flats.

"It's OK lah. I like the location and there are 60 years left to the lease."

And how long are you going to be staying there for? Is there a possibility that you might want or have to sell it sometime in the future? 

To be prudent, we might want to think a bit further along those lines.

For whatever reason, many people aspire to stay in a private property here even though it would cost at least 3 times more compared to a BTO HDB flat, location for location, size for size. 

And it is not $50,000 for a HDB flat versus $150,000 for a condo hor. 

It is more like $350,000 for a HDB flat versus $1 million for a condo kind of proportion!

Hello! This is Singapore!

Some people pay so much just to stay in private properties that they become slaves to their mortgages. They become house poor

House poor is definitely not fun. Why? 

No money left to have fun lor.

Even if people can comfortably afford to stay in private properties, to me, one compelling reason to go private in Singapore is because we want to get a property sitting on freehold land or with a land lease that is significantly longer than 99 years. 

Otherwise, buying a private condo (with a 99 years land lease) here is like paying at least 3 times more for a home just because it comes with some (usually inadequate) facilities which have to be shared with tens or hundreds of other households in the estate. 

(In the case of buying a landed property with a 99 years land lease, don't even have facilities lor. Alamak. Does that sound similar to a HDB flat?)

Oh, did I also mention that the monthly building maintenance fee which condo dwellers have to pay could be 5 times more than what a HDB flat of comparable size would attract?

Silly, isn't it?

So, if you are buying a private property in Singapore, with very few exceptions, it is my opinion that unless the price is truly attractive (think Rule of 15 and value for money), it should be on freehold land or 999 years leasehold land.

For those who do not follow me on Facebook, this was a conversation I had with a few readers on the issue of lease decay:

Jack James:
Does it matter ? Hahahha .
Ooooii ... our Sarawak landed houses are all on 60 years lease la !!

Assi AK:
I not staying in Sarawak wor.

Jack James:
Just to tell you such lease/leasehold/999years/ freehold are really not a big deal .

Assi AK:
If I don't have a choice, then, nothing to say. If I have a choice, I rather have a longer land lease.
Lease decay does not change whether it is landed or not.
It matters if you care about leaving your home as a legacy for future generations.

Jack James:
Trust me , 99years is already a big deal . 
My colleague parents bought 3 rooms flat at Little India area for S$6,500 and now it worths close to S$400,000 .
So long , you have something on hands , it appreciates .
Well , even if you have freehold property , don't dream the next generation would love to stay at the old hundred years old house , they probably cash out and buy new houses . In view of that , buying lease or freehold for next generation ? I am sure they will cash out too . No problem one la lease units.

Assi AK:
What future generations do is up to them.
I am inspired by how my friend's family stay in a FH walk up apartment which their grandfather left behind. He bought a few units in the estate back then. They can collect rent in perpetuity. No issue with lease decay. We have to do what matches our motivation.

Jack James:
Wait until it is 100 years and see who will rent a 100 years old freehold condo .

Haha... Singapore is not that old yet but going by what I see in the USA, homes which are more than 100 years old find ready tenants too... Just need renovation from time to time but there is no problem with lease decay.
It costs money to renovate an old property but it beats returning the asset to SLA upon expiry of the land lease.

Jack James:
I can see you inject a big fears on lease decay . In any circumstances , you will still reap a big profits in leasehold . Not an issue . Just be SMART to cash out before it is too late .

Seah Chen Yang:
by the time it reach 100 years, you are already long dead to know about it and can do nothing to change it either way. lol. so that is why AK say freehold or not depends on whether you wanna leave it for your next generation and we have no control on what they want to do after we pass even if we say we want to leave it for them to earn rental income for life but they choose to sell for capital gain after we pass.
Yup, owners of 99/60 years leasehold properties must bear that in mind. Lease decay is a real issue which many property agents play down because it suits their purpose. Having said that, all investments are good at the right price.
We can only hope that our future generations will be financially prudent and savvy. We can only make what we feel are the best decisions for them when we are still around. Right?

Raymond Chiam:
U.s houses may be old but they are not 10 over storeys like our FH condo. Such tall buildings may become structurely unsound after 40, 50 years. Let alone 100! Definitely need to tear down n rebuild n that's provided neighbours don't all opt for en bloc. So FH unlikely to last more than 2 generations in my opinion

Assi AK "... built to ensure safety in the event that they are overloaded beyond the calculated "design event" and/or to account for mistakes in the building's design or construction... The combination of using a 50-year recurrence for design loading events and safety factors in construction typically results in a design exceedance interval of about 500 years, with special buildings (as mentioned above) having intervals of 1,000 years or more. This means we would expect a typical structure to fail once in every 500 to 1,000 years."

Assi AK I did a search because I remember a friend telling me that unless it was built in the 70s or early 80s, newer skyscrapers are able to last a long time.

Assi AK It might also be interesting to note that compared to buying land in Singapore, construction cost is relatively inexpensive. Having land or a share of the land in perpetuity (even for redevelopment) is better than returning the land to SLA when the lease expires.

Assi AK If we are worried, we can always stick to buying FH condos in Geylang. They are typically a maximum of 8 storeys high. ;p

Assi AK Anyway, if it comes to a need for redevelopment, it is going to be generations away. All I can do is leave my future generations assets which I hope they will cherish. What happens in the future will be their responsibility. 

A decision to buy FH, 999 years (as good as FH) or 99 years (these days even 60 years or 30 years) leasehold properties is only probably right or wrong in relation to our motivations. 

What we choose to buy should very much depend on what we plan on achieving.

As usual, if you have money oozing out from your nose and ears, you can pretty much buy whatever you want. Don't mind me.

AK is just a frog croaking in a well.

Buying freehold.

Related post:
60 years leasehold condo in Singapore.


Singapore Man of Leisure said...



I see its the same reader that buys Life insurance for his child...

A bit of cognitive dissonance - his views on 99 property leases do not match the long term insurance planning for his child ;)

But then, how one spends his own money is his own business. I would surely love to be the counterparty making the sale to him!

And I don't have to do any selling!

AK71 said...


Can tell you Lit student. Cognitive dissonance!

Already bought a 99 years leasehold condo here and in a not so good location? If you like the place and want to make it your home, if money is no issue, you don't have to care what others say. It's your money. ;)

Never underestimate our power to rationalise away bad decisions, I always say.

Now, I am not saying it is a bad thing. If we need morphine, we should take it.

AK71 said...

From my FB wall:

Quan ChengJi:
"Lease decay is good point highlighted, But what is the chance of a 99/60 lease unit not to En-bloc in 60 years?"

Assi AK:
"People who buy older 99LH residential properties speculating on chances of going en bloc must realise they are speculating. MND said before that not all older HDB flats will benefit from SERS. As for older 99LH private condos, see lucky or not lor"

Yeo Meng Choon said...

My first married house was a brand new 4 rooms HDB flat next to the Causeway Point around 20 years ago. At that time, the flat was still very much affordable at $95,000 (partly has to do with young couples were reluctant to move to Woodlands while for us we faced with budget constraint).
Later we upgraded to a brand new condo with the profits from the sale of the flat (the condo price was about three times of the resale flat). We stayed there happily until we bought a new condo at 2010. We hedged the new condo price until 2012 when we took over the new condo and sold the old condo. We still made $200,000 profits and most importantly recover our CPF monies. We are are using the CPF savings to self finance with the new condo.
A 99 years condo is better than a flat when we not only enjoy the facilities but also expand our potential buyers from just pool of Singaporeans and PRs but also the foreigners. I read form the papers that freehold condo at Marine Parade also lost money in disposing their properties. This shows that location and timing determine our property values. Anyway staying happily is more important than anything else!

AK71 said...

Hi Yeo,

I would say not to throw caution to the winds. However, I am sure that there are happy stories like yours around. Thanks for sharing. :)

AK71 said...

What we do would depend on our motivations:

They chose financial independence over home ownership.

We must bear in mind that what has worked for some in the past might not work for some in the future.

Yeo Meng Choon said...

Just check the URA Caveat and have found out that the recent transactions still very healthy. If we are willing to downsize, we can still be able to make another $200,000 profits. As we do not have any plan yet, so we shall stay put anyway the CPF needs to be better utilized or else 2.5%-4% can't really beat inflation or enough for our retirement. Merry Christmeas!

AK71 said...

Hi Yeo,

I am happy you had a winning streak. :)

Whether such a winning streak can be replicated today is harder to say. Hence, I have been advising caution in my blog.

The CPF money should form a cornerstone in our retirement funding strategy. 2.5% to 4% compound interest is risk free and volatility free. At 4% per annum, money will grow at more than 50% every decade. Investments are not risk free nor volatility free.

We might want to take note that betting on higher future prices of our homes is not investment. It is a form of speculation. We should note that there are also many people who have lost their bets.

With vacancy rates and interest rates both going up, the risk seems more to the downside.

Again, I am happy that things have turned out well for you. Merry Christmas. :)

AK71 said...

National Development Minister Lawrence Wong recently warned in a blog post that people should not be buying very old Housing Board (HDB) resale flats in the hopes that they would be selected for the Selective En bloc Redevelopment Scheme (Sers). Under Sers, the Government picks HDB estates it wants to acquire for redevelopment and gives flat owners market-rate compensation, and replacement units at discounted prices.

Recent trends have shown that young buyers are willing to pay high prices for ageing HDB resale flats as they assume that the Government will bail out flat-owners and offer Sers, or other schemes with generous payouts as the lease nears its 99-year expiry date.


AK71 said...

This is indeed a wake up call for those who say land lease is not a serious consideration when buying a property here.

"Owners and occupants living in terrace houses in Lorong 3 Geylang will have to move out in 2020, when the land occupied by these houses returns to the state.

"Now, residents there are struggling to come to terms with the fact that they have to move out in about three years - with no compensation - when their 60-year leases expire.

"Mr Yeo, like other residents, hopes to get some form of compensation from the Government, that will not happen as this is a case of the land's lease running out."


AK71 said...

JJ Wong says...
Lakeside Apt owners may collect $2 millions if enbloc successfully was

AK says...
As for chances of enbloc, for every 99 LH condo that enbloc successfully, there are many, many others that do not. That is speculative and I am more interested in what is less so. ;)

AK71 said...

Peter Somtam says...
We need to compare Apple to apple as each country is different. Most of us stay on 99 years lease whether it is HDB or condo. For other like Thailand, all will buy FH. For the local prefer landed property but for us condo only
unless you brought under spouse name for landed property. I am happy with staying in HDB and be crash rich.

AK says...
I am not disputing that most of us live in 99 years property.
I agree that the best option for Singaporeans is to stay in HDB flats and be cash rich.
If you read the blog carefully, that is exactly the point I am making.
Why buy and stay in a 99 years LH condo when you get a 99 years LH HDB flat for much less?
It is a pretty long blog but you might want to read it again.

AK71 said...

Christopher Lee says...
There is all this talk about HDB 99 yr lease.
But wouldn’t 99 yr leasehold private property face similar situation in future?
Or there is some difference that I am missing out here? 🤔

AK71 said...

Raymond Ng says...
IMO, the private property value will depreciate to zero upon lease expire.
However, private property has one advantage, that the residents can decide enbloc themselves. The only problem is G has to agree to extend the lease period.

AK71 said...

A condo near Adam Road en bloc failed because Ah Gong says lease top up not allowed.

AK71 said...

Raymond Ng says...
I am think of buying BTO flat but the rule said that I will have to sell my private condo first and wait for 30 months before I can apply.
Why like that one? Wait for 30 months means I have to rent a flat. Aiyo.

AK says...
I know. I know. :(

AK71 said...

Jack James says...
Be it 99 years or Freehold , so long you reap profits from it !
Who cares about the title ! 🤷‍♂️😈

AK says...
For people who want to leave their homes as a legacy for their future generations, it matters.
Otherwise, as long as the remaining lease is sufficient for our lifespan, why worry?

AK71 said...

AK says...
Buy Freehold or 999 year leasehold, no such problem (of failure at topping up lease for enbloc sale).

Ana Liang says...
Many FH or 999 year leasehold properties are transacted at below value. This includes several developments in D9 and D10. The only ‘downside ‘ is that the estate is old (> 10 years) or a small development with not much / no facilities.

AK says...
Value for money. Buy. :p

Ana Liang says...
I saw a few transactions in D9
Along River Valley, within walking distance to future GReat World City MRT sold at less than $1600 per square feet in 2017&2018. Old estates, not walk ups. Some of the estates have full facilities.
But I understand most SG prefer new ones with many facilities.

AK says...
I always think way ahead and maybe worry too much.
Just ignore my anyhow talking to myself. :p

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