A red-hot property market is characterised by the way 99-year homes are being sold at skyrocketing prices compared to freehold units.
Most homebuyers previously disregarded leasehold homes, believing that freehold units were better in terms of long-term value.
While a freehold title gives the homeowner a perpetual ownership of the property, a leasehold title allows possession for a certain number of years, with the property title going back to the state once the lease expires.
“In the past, the preference was for freehold over leasehold properties as they offered more value for money. Over time, people have changed their mindsets as leasehold properties now occupy prime locations with good capital appreciation,” said Mr. Cheng.
Nicholas Mak, a real estate lecturer at Ngee Ann Polytechnic, said homebuyers should decide based on their preference and budget.
“For investors, leasehold properties usually offer a higher rental yield (because of their lower capital cost). But that merely compensates the owner for the decaying lease," said Mr. Mak.
Leasehold properties rose and dropped by larger margins during a boom and a downturn, respectively, showing that leasehold properties are more prone to the economy’s ups and downs than the freehold ones.
“When the rise in the property market is from the bottom up, leasehold condominiums could outperform freehold ones. Conversely, if the boom is top-down, freehold units would deliver better results. However, the faster the rise, the harder the fall,” warned Mr. Mak.
Tay Huey Ying, director of research and advisory at Collier International, said that “leasehold properties are attractive to buyers who plan to rent out their property as tenure has no effect on its attractiveness or the amount of rent it can command.”
Meanwhile, Colin Tan, research director at Chesterton Suntec, said “the top priority for buyers who plan to occupy the units should be housing needs, not investment potential.”
“If you need more space, consider leasehold. If you have spare cash, then consider freehold,” he added.