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Understanding Leasehold and Freehold Properties in Singapore

In Singapore, all Government Land Sale (GLS) sites are typically offered on a 99-year leasehold (99-LH) basis. However, there are still developments available with 999-year leasehold (999-LH) or freehold status. The last sale of freehold land parcels occurred before the GLS Programme was established in 1967, primarily before Singapore gained independence.


Iron Triangle. Image Source: ERA Research

Given Singapore's limited land availability, the government opts for 99-year leases to maintain flexibility in land allocation and to adapt to the changing needs of society.


The Rarity of Freehold Land

Currently, new freehold developments are primarily created when property developers acquire freehold land through the collective sale of older projects. These new developments are rare and highly desirable since they do not experience lease decay, making them appealing for buyers looking for a home or a long-term investment.

Terra Hill, a freehold development located just 400m from Pasir Panjang MRT Station
Terra Hill, a freehold development located just 400m from Pasir Panjang MRT Station: Source ERA Research

With a quiet en-bloc market and numerous sites listed in the 2024 GLS Confirmed List, the availability of new freehold condominiums is diminishing. Developers are hesitant to invest significantly in freehold sites due to the additional costs and complexities involved, especially when there are many leasehold options available under the GLS scheme. Consequently, only 603 freehold units are anticipated to be launched soon.


Buyer Preferences and Market Trends

When considering property purchases, buyers often navigate an "iron triangle" of trade-offs involving property age, location (such as proximity to MRT stations), and affordability. Freehold properties tend to be more expensive, making it challenging for buyers to find their ideal property.


Source: URA, ERA Research and Market Intelligence

According to ERA’s My Dream Home Survey, homebuyers prioritize affordability, property size, and access to public transport. Over 55% of participants expressed a preference for new launches when looking for private properties.


Locations of Freehold Condominiums

Freehold condominiums are distributed throughout Singapore, with a higher concentration in central areas like Orchard, River Valley, Bukit Timah, Newton, and Novena, as well as city fringe locations such as Katong and Marine Parade. These central developments command higher prices due to their prime locations. While freehold properties can also be found in suburban areas like Serangoon and Pasir Ris, their availability is limited, as these regions were developed later with leasehold tenures under the GLS programme.


Freehold condominiums are distributed throughout Singapore, with a higher concentration in central areas like Orchard, River Valley, Bukit Timah, Newton, and Novena, as well as city fringe locations such as Katong and Marine Parade. These central developments command higher prices due to their prime locations. While freehold properties can also be found in suburban areas like Serangoon and Pasir Ris, their availability is limited, as these regions were developed later with leasehold tenures under the GLS programme.


The Appeal of New Developments


Despite older resale condominiums often being more affordable than freehold properties in the same area, they may incur higher renovation and maintenance costs. Older units may not be well-maintained and could feature outdated designs, making them less appealing. Additionally, aging facilities may pose safety risks.


Source: URA as of 7 Aug 2024, ERA Research and Market Intelligence, FH transactions include 999-LH
Source: URA as of 7 Aug 2024, ERA Research and Market Intelligence, FH transactions include 999-LH

Freehold property owners typically pay a premium for perpetual ownership and are less likely to sell unless maintenance costs become prohibitive. Buyers seeking newer properties may need to explore the market carefully or monitor the en-bloc market, as freehold developments are becoming increasingly scarce.


Affordability of Freehold Properties

Although freehold properties command higher prices, they remain attractive due to their perpetual ownership and better value retention over time. The price gap between freehold and leasehold properties has narrowed significantly, from 9.8% in 2019 to just 1.3% in the second half of 2024.


Source: URA as of 6 Aug 2024, ERA Research and Market Intelligence
Source: URA as of 6 Aug 2024, ERA Research and Market Intelligence

In the first half of 2024, 2,264 freehold condominium units were sold, with an average age of 14.8 years and a price per square foot of $1,953. A significant portion of these transactions involved homes aged between 10 to 20 years, as buyers weigh the trade-off between age and affordability.


Price Growth of Freehold Properties

While 99-LH properties often outperform freehold or 999-LH properties in terms of profitability, this is largely due to the lower transaction frequency of freehold homes. Owners of freehold properties tend to reside there long-term, lacking urgency to sell. The ongoing release of 99-LH GLS sites leads to more transactions and price movements in that segment, resulting in faster price growth compared to freehold developments.


Source: URA as of 31 Jul 2024, ERA Research and Market Intelligence, New sale project’s age based on estimated TOP date
Source: URA as of 31 Jul 2024, ERA Research and Market Intelligence, New sale project’s age based on estimated TOP date

Conclusion: Are Freehold Properties Right for You?


If you are willing to invest more for the benefits of freehold tenure, it is advisable to hold onto the property long-term. For those looking to profit from property sales in the short term, the differences between freehold and 99-LH properties may be minimal.


Available Freehold Developments


There are still opportunities in the market for new freehold developments that cater to various budgets and preferences. For example, Kassia in Flora Drive starts at $1,830 per square foot, while The Arcady near Boon Keng MRT Station offers city fringe living. Terra Hill in the West Coast provides a tranquil environment close to an MRT station, and The Continuum presents a comprehensive mega-development for East-side residents.



Disclaimer

This information is extracted from ERA Research and is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided.

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