Embarking on the journey of property investment can be overwhelming, especially when confronted with terms like freehold and leasehold. Unraveling the significance of these terms and their impact on your long-term investment strategy is crucial for making well-informed decisions when purchasing property.
Are Freehold Condos Worth More?
Owning a freehold condo implies perpetual ownership, theoretically lasting a lifetime. Unlike leasehold properties, freehold condos do not face the challenge of expiring leases. However, it's important to note that the government, under the Land Acquisition Act (LAA), can reclaim the land on which freehold properties stand for development, providing homeowners with market-level compensation.
Another factor that can affect freehold condo ownership is the possibility of collective en-bloc sales. In such scenarios, property developers may attempt to buy the land from homeowners, offering attractive resale prices. While this requires the agreement of 80% of homeowners, the financial incentives can be compelling.
Despite the potential risks, freehold condos are often considered better investment opportunities, commanding higher prices than comparable leasehold condos due to their enduring value. However, it's essential to assess your financial capacity and the long-term feasibility of the investment.
Benefits of Owning a Freehold Condo
Owning a freehold condo facilitates the passing down of property to future generations. Excluding governmental acquisitions or en bloc sales, the property remains intact, providing a stable housing option for descendants. This presents an opportunity to ease younger family members into homeownership.
While freehold condos may involve higher initial costs, they often yield higher resale and en bloc sale prices. Unlike leasehold properties that depreciate over time, the value of freehold condos can continue appreciating, offering potential returns even in retirement.
Freehold condos have fewer Central Provident Fund (CPF) restrictions compared to leasehold properties. CPF savings can be utilized for the purchase, covering a significant portion of the initial down payment or reducing monthly mortgage obligations. This flexibility is not enjoyed by buyers of leasehold properties, who may face additional out-of-pocket expenses.
HDB Flats: Freehold or Leasehold?
Housing Development Board (HDB) flats predominantly comprise 99-year leasehold properties, mirroring the ownership structure of leasehold condos. Aimed at providing affordable housing, HDB flat buyers benefit from various government grants and subsidies, differentiating them from private leasehold or freehold properties.
In conclusion, the choice between a leasehold and a freehold condo hinges on personal circumstances and risk tolerance. The allure of perpetual homeownership may justify the higher premiums associated with freehold properties for some, while others might prioritize liquidity for diverse aspects of life. The decision ultimately rests on individual priorities and financial considerations.