Saturday 11 April 2015

Price gap between freehold and leasehold shrinking? - PropertyGuru

Prices of freehold non-landed homes have suffered a sharper drop of more than four percent since Q3 2013 versus the one percent dip for leasehold units, according to media reports citing Cushman & Wakefield’s study of URA data.

As a result, the disparity between prices of non-landed freehold homes over its leasehold counterparts has shrunk, said the consultancy’s research director Christine Li.
“If you look at Newton 18, which is a freehold property as compared to its neighbour Amaryllis Ville, (which has a) 99-year lease – if you compared the price gap in the early days, say 2002-2003, the difference is actually about 35 percent or so. But in recent quarters, the gap has narrowed to 15 percent, which means that over time, leasehold projects might outperform freehold projects,” Li shared.
“In terms of outlook, if everything is status quo, if the Government does not loosen the cooling measures, Total Debt Servicing Ratio (TDSR) or stringent requirements for en bloc sales, we think leasehold properties could outperform freehold properties, given that attributes of some leasehold properties are better in terms of location and amenities,” she added.
However, experts cautioned that the statistics may have been distorted by the low transaction volumes.
The price performance between the two segments also depends on their potential to be sold via a collective sale. Usually, freehold properties fetch a higher price premium when the en bloc market is hot.
Meanwhile, a Knight Frank study of caveats showed a different trend whereby the price gap between freehold and leasehold non-landed homes in Singapore has increased further to 44 percent in 2014 from around 33 percent in the previous year.
Last year, average prices of freehold units rose 9.8 percent to $1,532 psf on an annual basis, while for leasehold it dipped 0.4 percent to S$1,045 psf.
“Going forward, in the next few years, as the Government gradually releases land sites which are all leasehold tenure, the availability of freehold properties is slated to remain stagnant or decline,” said Alice Tan, Knight Frank’s research head.
“Given that limited supply, I think buyers will still have freehold properties as their first choice,” she added.

Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
Source: PropertyGuru (07 Apr 2015)