If you’ve been puzzled with questions like, which is a better investment Freehold (FH) vs. Leasehold (99)? Which areas holds the best value, Core Central Region(CCR), Outside Central Region(OCR) or Rest of Central Region(RCR)? Landed lease hold or Freehold Landed? Where to put my money to get the best returns in Singapore property? In short, what is the better investment in Singapore?
We’re willing to bet the answer will surprise you as it did us!
If you’ve come here looking for answers to one of the primary questions when handling property in Singapore, you’re at the right place. But here’s a disclaimer; this article will be a little dicey, a bit confusing, but we’ll make sure you have a breezy ride. So, let’s dive in.
What’s FH vs. 99?
These are the terms given to explain the type of ownership. A leasehold property is one in which you own the property itself – albeit for a certain period, such as ’99 years’ – but not the land on which the property stands.
In contrast, a freehold property is one where the land and property are in your ownership – no two doubts about it. Flats and houses can both be Leasehold or freehold.
Before we unbox technical terms like CCR, OCR, and RCR, to name a few, concerning FH vs. Leasehold, let’s learn a bit more about both types of properties and their pros and cons.
Freehold & Leasehold – Which One Is Better?
They both are, depending on your requirements.
Benefits of freehold property ownership:
- Freehold properties do not come with a lease. You don’t have to worry about the length of your lease or when it will run out. As a buyer or investor, you can sell your freehold land anytime you want. And it can be in your family till the next Zombie Apocalypse wipes out the human race.
- The rules of holding freehold does have to abide by Singapore’s governing laws though.
Disadvantages of freehold property ownership:
- In sporadic cases, you may not always have “all” the rights of a freehold property. This is usually when the government has to do some construction on the land, and you have no choice but to move. Rare, but possible since the Land Acquisition Act of 1966.
- They are generally more pricey, much more than leasehold properties.
Advantages of leasehold property tenure:
- The initial purchase costs are less, at least as compared to freehold.
- You can buy bigger properties as a result and have more cash flow.
Disadvantages of leasehold property ownership:
- The biggest downside of a leasehold is its tenure, which permits ownership only for a limited time.
- The value of investment doesn’t hold as well especially after 35 yrs where prices seem to come down quite a bit.
Now that we are done with the essentials, let’s compare pricing for both properties, especially for apartments (read: condominiums). We’ll cover pricing and growth analysis for All districts, CCR (core central region), OCR (outside the main area), RCR (rest of significant part), and the Landed Region to conclude which property is best in terms of investment and ROI for each zone.
What are CCR, OCR, and RCR in Singapore?
Knowing what these terms mean, and importantly, which parts of Singapore fall under each domain is essential to understand the analysis better we will do next.
For one thing, Singaporeans love acronyms, as evident. The URA master plan (urban redevelopment authority) has divided the country into three areas called ‘market segments.’ This means that all 28 regions of Singapore fall under these acronyms that go by the complete forms; Core Central Region, Outside Central Region, and Rest of Central Region.
CCR (Core Central Region) contains 9, 10, and 11, and parts of 1, 2, 4, 6, and 7. Few well-known areas include Orchard, Somerset, River Valley, Sentosa, City Hall, and Boats Quay, to name a few.
OCR (Outside Central Region) contains 16 to 19, 21 to 28, and 5, 14, 15, and 20. Few well-renowned places include Ang Mo Kio, Tampines, Pasir Ris, amongst others.
RCR (Rest of Central Region) contains the ‘rest of Singapore’ – 3, 8, and 12, and parts of 1, 2, 4, 5, 6, 7, 13, 14, 15, and 20. Fort Canning, Little India, Farrer Park are some of the areas under the RCR region.
FH vs 99 Condo: Pricing and Growth Analysis
It gets very confusing if we put in too many ‘factors’ so lets make some general Keys:
Time frame is throughout Jan 2014 to October 2021 a year just after the first ‘cooling measures’ and ABSD Additional Buyer Stamp Duties were implement.
- Orange line: Freehold property
- Blueline: Leasehold-99 Property
- Top chart: Average price
- Bottom graph: Percentage in the growth of prices (per square foot)
1. All Districts/Regions.
The above two graphs are for freehold, and leasehold condos, where the orange color is critical for Freehold Property and blue color is essential for the 99-leasehold property. The first graph depicts the average prices from January 2014 to August 2021.
The second or the lower graph shows the percentage of the growth of the prices of both properties over the same period.
As you can see, the graph for price growth shows that both types of property are rising steadily with time, with the freehold being pricier than Leasehold. FH price has reached $2000 by Jan 2021 – grown by the rate of 31% – whereas leasehold properties reached an apex of $1750 in Jan 2021 – at a rate of 52%.
However, it is the second graph that indicates the critical metric. The colors switch, and we can see that 99-leasehold property outpaces freehold property in percentage growth. There’s an evident 20-30% gap between the two.
In all district regions, the leasehold property wins with a tremendous increase in prices over the years. This translates to the fact that, keeping the past few years in consideration, the 99-leasehold property is a better investment than freehold condos.
2. Core Central Region (CCR)
Keeping the same key, we can see from the graphs that both types of properties are jumbled up and meet at several points throughout the period. To be more specific, there has been only a minor difference in the pricing of condos/apartments in core central regions – around $2500 for both properties by August/October 2021. The difference is only 20% and 16% respectively for Freehold and Leasehold properties.
Similarly, the second graph is more or less the same, with no switch of lines whatsoever. This translates to the fact that for CCR, there are no winners. Both FH and 99-leasehold draw in percentage change of prices with only minor differences.
3. Rest of Central Region (RCR)
The graphs are given for the rest of the central region clearly display that both freehold and Leasehold have been tracking similarly for most of the time. Their ups and downs are mirrored until after January 2020. After a dip, freehold (the orange line) picked up the pace again to enjoy a slight edge over 99-leasehold.
The average price chart suggests that freehold properties have been priced around $2050, whereas 99-leasehold condos are currently at around $1890-1900. The significant difference is in the second graph, where freehold condos have enjoyed a marginal percentage in growth and price return with a hike from 12,000% to more than 35,000% in September 2021 and beyond. On the other hand, Leasehold has been regular with a negligible percentage in growth to tie the competition.
Therefore, the final verdict for the rest of the central region is that freehold property wins the ground.
4. Outside Central Region (OCR)
The outside central region of Singapore, namely districts 16 to 19, which usually is three-quarters of Singapore and has mass-market condos at a lower price range, belongs to 99-leasehold property condominiums (including executive condos).
This is evident from the graph that shows there is quite an affinity in pricing for freehold and leasehold property of the area. Still, the percentage growth and return have a noticeable difference. The 99-leasehold property easily outperforms freehold with a hike of 51,000% to 55,000% return in prices from January 2020 to January 2021, respectively. The freehold stands at only around 25,000% growth return by January 2021.
This means that for areas such as Flora Drive, Loyang, Changi to Yishun, Sembawang, the 99-leasehold property takes the prize.
5. Landed Region
Landed Property in Singapore is attached directly to the land your purchase. They can be standalone, semi-detached, or terraced houses.
When comparing average prices for freehold and Leasehold Landed Property, the graph indicates that both track well – almost similarly, over the years. As far as percentage growth of the prices is concerned, the chart shows that Freehold property has fared significantly better than 99-leasehold. The development has touched the apex with 125,000% after January 2020, whereas 99-leasehold hovered around 0% and continued to dip lower afterward.
The winner here is super clear; Freehold landed property.
If you haven’t already guessed it, the return-on-investment results for all districts/regions when comparing freehold and 99-leasehold are that they both are winners in their selected domains. Out of the five areas, there’s again a tie. Freehold property sweeps two districts, and so does 99-leasehold. In one place, they draw.
This comparative analysis is a go-to resource for investors who plan to purchase a condo in one of the districts of Singapore. Using this analysis, quickly determine which type of property returns better according to the region you intend to buy land in.
We hope you had a fun time understanding jargon and faring of each type of land in Singapore. The rest, as they say, is up to you!
But as usual, if you need some help navigating Singapore Property, contact us because we love to help!