Can a leasehold landed property be profitable? (and some other surprising examples)

Can a leasehold landed property be profitable? (and some other surprising examples)
PHOTO: The Straits Times file

We tend to fall back on common sayings or beliefs when it comes to comparing properties in Singapore. These range from the age-old belief in the supremacy of freehold condos, to assumptions about region and size.

But here's the thing about property, the variance can be huge as there are just so many variables to think about.

For example, the entry price matters a lot, but so does the length of time that you hold the property. Other less visible factors could be the amount of renovation work done or just the type/size of the unit, as compared to the rest of the units in the development.

As such, while it is useful to know what are the usual factors for a profitable development, sometimes this can vary too depending on the unit. In other words, you shouldn't overlook certain properties simply due to certain blanket rules.

Here are some examples that go against the grain:

*We tried as much as possible to look for transactions that were bought and sold within a close time period and price point to minimise the effect of property market timing and price.

Do note that while these are just singular transactions (which may have their nuances that are not disclosed, like renovation works, etc.), this is purely to show that you shouldn't always close your options due to old assumptions.

Sometimes you have to dig a little deeper, to see why this could be an astute purchase.

1. Leasehold in a fringe area, versus freehold in a prime area

This is a typical example of freehold versus leasehold property, where most people would assume that a freehold property would be a superior choice.

Let’s say you have around $1.7 million to purchase a property, and you find two options: one is leasehold, in a non-central area, whilst the other is freehold, in a location near the Botanic Gardens. It should be a no-brainer right? 

But check out these two transactions below:

Project Name Size Tenure Type Bought Price Bought Date Sell Price Sell Date Profit
THE CLEMENT CANOPY 1,346 99 yrs from 09/03/2016 Apartment $1,707,000 25-Feb-17 $2,450,000 28/2/23 $743,000
THE ASANA 635 Freehold Apartment $1,690,920 22-Jan-18 $1,500,000 18/8/23 -$190,920

The freehold condo actually fared much worse, and saw a loss. The two properties above are the Clement Canopy, a leasehold condo completed in 2019, and The Asana is a freehold condo completed two years earlier. 

Besides lease status, Clement Canopy is also disadvantaged with regard to public transport. It's not within easy walking distance of an MRT station, whereas you can walk from Asana to Botanic Gardens MRT station (CCL, DTL). Asana is also much more exclusive, with just 48 units versus the mid-sized (505 unit) Clement Canopy. 

Regardless, the Clement Canopy unit comes out way ahead, with annualised returns coming to an impressive 6.2 per cent, while the Asana transaction was a hefty loss. 

This may have something to do with Clementi's strong access to schools like the NUS High School of Maths and Science, better access to NUS itself, etc., along with the wider range of day-to-day amenities in surrounding HDB enclaves.

Regardless, it does show that a prime freehold property is not always the better choice. 

2. Boutique versus large development

Boutique projects make many investors nervous: they're notorious for volatile price movements because of the sparse transactions, and some buyers just don't believe the bare-bones facilities are appealing. As such, there's a strong preference for larger projects these days; particularly in the OCR. 

So again, we made a comparison between two projects, with units at a roughly similar price of around $800,000. Here's a comparison between a freehold boutique unit, and a bigger leasehold launch:

Project Name Size Tenure Type Bought Price Bought Date Sell Price Sell Date Profit
ASCENT @ 456 753 Freehold Apartment $800,787 12-Jan-17 $1,060,000 5/1/23 $259,213
THE GLADES 495 99 yrs from 21/01/2013 Condominium $795,100 11-Oct-16 $745,000 9/5/22 -$50,100

Ascent@456 is the boutique condo here; it's a small project with just 28 units, right alongside Balestier Road. Meanwhile, the larger project is The Glades, a 726-unit condo close to Tanah Merah MRT. 

From the results, Ascent@456 clearly comes out ahead with annualised gains of 4.8 per cent, while the Glades saw a losing transaction. So although the current market shows a strong preference for larger projects, don't always assume that boutique projects are at the losing end. There could be other reasons that support why some boutique condos could be profitable.

In this example, sometimes it is less about the type of development and more about the entry price.

This unit was part of a bulk purchase in January 2017, where they were sold at a discount at an average of $1,000+ psf (compared to the launch prices of $1,400+ psf). As such in 2023 when prices picked up, this unit was able to be sold at a profit of $259k instead.

3. Leasehold landed versus a condo development

Leasehold landed properties have a troubled reputation in Singapore.

Often seen as distinct from "true" landed, these projects tend to be derided for issues like closely packed units (if it's cluster housing), and small prospective buyer pools (it's assumed that affluent buyers want an intergenerational freehold asset). As such, most property buyers will swear by regular condos instead of a leasehold landed project. 

So here's an example of a comparison between a leasehold landed unit below, and a "regular" condo where the bulk of transactions were profitable. Note that in this case, the condo was cheaper as you'd expect ($3.8 million), whilst the leasehold landed around $4.3 million. 

Project Name Size Tenure Type Bought Price Bought Date Sell Price Sell Date Profit
VICTORIA PARK VILLAS 2,352 99 yrs from 23/09/2013 Semi-Detached House $4,382,000 15-Jul-17 $5,800,000 14/6/23 $1,418,000
MARTIN MODERN 1,421 99 yrs from 28/09/2016 Condominium $3,840,000 25-Jan-18 $3,970,000 18/12/23 $130,000

Victoria Park is the leasehold landed project in question, located close to Holland V. Martin Modern, located in River Valley, was the leasehold condo used for comparison. Both are fairly strong locations, with Martin Modern being a bit more central, whilst Victoria Park gets the benefit of a low-density, landed area. 

Martin Modern in particular was a surprising one given that this condo has recorded strong profits for the first owners of the property. In fact, 3 owners here have even made profits of more than a million!

But Victoria Park actually comes out ahead with annualised returns of 4.9 per cent, whilst its Martin Modern counterpart had an almost flat price movement. 

ALSO READ: 8 HDB BTO flats reaching MOP in 2024/25

This article was first published in Stackedhomes.

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