Leasehold vs Freehold: The Classic Showdown
When it comes to property investing, the debate has been raging longer than your favorite binge‑watch series: Leasehold or Freehold? Both come with their quirks, perks, and a handful of pitfalls that can turn a dream home into a headache.
What’s the Deal with Leasehold?
Imagine owning a house that’s on a piece of land you rent from someone else. You’re the proud owner of the building, but the land is owned by the landlord. Here’s the low‑down:
- Lease Length: Typically a long–term lease, but eventually it’s—okay—completely yours. Most leases last 99 or 125 years.
Thoughts? Upcoming renovations can be a (big) surprise. - Ground Rent: Think of it as a rent‑like fee you pay yearly. Sometimes it’s fixed, sometimes it goes up—like a surprise in your monthly budget.
- Maintenance: The landlord can impose extra charges. One day, you’re paying for a roof repair you didn’t know you needed.
- Extension Options: You can extend the lease (a big help if your “leaseexpiry” date is looming), but the price can be steep.
What’s the Deal with Freehold?
Freehold = you own both the building and the land. No one else has control over your piece of earth.
- Ownership: You own the entire property outright. The sky’s the limit for modifications and upgrades.
- Maintenance Costs: All of them fall on your shoulders. Pro tip: Set a budget! Nobody likes surprise roof costs.
- Selling Simplicity: No one has to get their OK to sell. Faster sales, presumably fewer headaches.
- Tax Benefits: Freehold owners often get more favorable mortgage triggers—just a piece of trivia for the smart investor.
Which One Wins?
There’s no definitive winner; it’s like comparing a cozy cottage to a sprawling estate. Here’s the scoop:
- Freehold is generally seen as the “cleanest” choice: no ground rent or landlord meddling. Ideal for long‑term plans or if you want complete control.
- Leasehold can be cheaper upfront, and the lease price locks in the property value. It’s like a short‑term rent that might pay off over time—if you’re lucky.
Think of it like a game of chess: freehold gives you a king who moves unimpeded; leasehold gives you a queen who can flick a ceiling somewhere. Your choice depends on your investment horizon and appetite for risk.
Experts’ Take – Watch the Prime Time Segment
On Prime Time’s “Powering Your Property” segment, Rachel Kelly and Shezad Haque chatted with Nicholas Mak, Head of Research and Consultancy at ERA Realty. Here’s what he dished out:
- Timing Matters: “If you plan to hold the property 10+ years, freehold usually pays off.”
- Ground Rent Trends: “They’re creeping up—so don’t get caught with a lease that climbs like your last rent hike.”
- Improvement Freedom: “Don’t let a lease restrict your dreams. You can extend or buy the land, but it’s pricey.”
- Financing Options: “Mortgage deals differ between the two. Some lenders love freehold more for their underwriting.”
Bottom line? Do your homework. Look at lease length, ground rent, maintenance obligation, and expected resale value. And if you’re still on the fence, talk to a property guru—like Nicholas Mak—to get the low‑down on the local market.
In the world of property investing, both leasehold and freehold have their own stories. Pick the one that suits your style, ambition, and call a financial advisor before moving. Happy investing!
Rachel Kelly: Why are some properties on a lease, while others are freehold [what differentiates them]?
What Do You Really Own When You Buy a Property?
Picture yourself at a buffet. Buying a property is like picking a plate that comes with a set of perks—what you can do with it, for how long, and who gets to enjoy it next.
Freehold: The Evergreen Friend
With freehold, your rights are forever. Think of it as owning a land‑owning cookie that never goes stale. You can keep it, sell it, or hand it off to your grandkids—no lease deadline to worry about.
Leasehold: The Clock Protects
Leasehold is a bit like renting a room for 99 years. There’s a start and an end. When the timer strikes the final tick, the rights fade, and a new owner takes over.
- Residential lease: ~99 years
- Commercial lease: ~99 years
- Industrial lease: 60, 30, even 20 years
- Some dream homes: 999 or 9,999 year leases (now that’s a long haul)
The Longest Lease Ever?
I once spotted a lease that’s almost a million-year long journey—like buying a property and pledging to keep it for the entire cosmos. Talk about a long story!
Stick around to dive deeper into how these ownership bundles work and what that means for your future.
RK: What would be the difference between a leasehold property that is one year short of a million years and a property that is freehold?
Leasehold vs. Freehold: Do They Really Matter?
Short answer: Not really. A property that comes with a lease of over a thousand years usually sells for pretty much the same price as a bona‑fide freehold.
Where the Long‑Time Lease Idea Came From
Back in the mid‑19th century, British landowners got creative with their contracts. Most of the 999‑year leases you’ll find in the UK were drafted between 1852 and 1856. That era was all about keeping property tied up, but giving owners the illusion of “ownership” for a very long time.
Why These Lease‑Hold Properties Still Look Pretty Shiny
- They’re practically the same as freeholds when you look at market prices.
- The huge lease length (think 999+ years) makes the property almost as good as owning the land outright.
- Investors love them because they provide stability without the full legal headaches of a freehold.
But There’s a Catch: Shorter Leases
Not all leaseholds are created equal. If you spot a property with a lease of 99 years or less, the price can drop more noticeably. It’s basically like a time‑bomb on your investment—you have to keep an eye on the expiry date.
Pro tip for owners: Always check the lease’s end date. It can make a big difference, especially if you plan to hold onto the property for many years.
Shezad Haque: What should property buyers take into consideration when purchasing either a leasehold or freehold property?
Finding the Right Property – Lease vs Freehold, But First…
Location, size, and price are the headline stars in any property search. Before you get lost in lease‑vs‑freehold debate, ask yourself:
- Does the place fit your lifestyle goals?
- Can you comfortably afford the mortgage and ongoing costs?
Only after you’re sure the property matches your needs and budget should the tenure type become the real question.
When Older Homes Enter the Picture
Everything changes a bit when you’re eyeing properties that’re at least 30 years old. Here’s why:
- Most older homes come with a 99‑year lease. That means you’ve got roughly 60 years or less left to enjoy the place.
- For younger buyers using CPF savings to finance the loan, a shorter lease can feel like a ticking clock.
- If you’re looking at a freehold, the lease issue disappears, but age still shows its fingerprints – think wear, tear, and sneaky maintenance costs.
So remember: an older property, whether leasehold or freehold, requires a second look at:
- Maintenance costs – are repairs coming up soon?
- Visible damage – what’s really hidden behind paint?
Choosing the right property is less about the legal nuances and more about how it fits your life and budget. The tenure type is just one piece of the puzzle – and it’s only a piece if the other basics are solid.
SH: In your opinion, is there a correlation between location and leasehold properties?
The Great Singapore Property Showdown: Freehold vs Leasehold
Ever wonder why some homes shout “free‑hold” while others buzz “leasehold”? Let’s break it down—Singapore style.
Where the Two Types Hang Out
- Freehold: The rares gems—usually scattered in older districts or those prime slices of Singapore that still feel a bit like the old world.
- Leasehold: The majority—found all over where the government has fresh land like Punggol, Choa Chu Kang, Woodlands, and Jurong.
Why? Because the land’s hero—the government—holds the lease title and sticks to selling only leasehold places.
Do Prices Follow the Same Script?
Long, long story, but here’s the short version: Freehold homes tend to cost more.
Why the Premium?
- Ownership is eternal: you own the property forever—no ticking clock.
- Resale math: Take a 99‑year lease condo vs a freehold condo of similar size and amenities. The freehold baby usually tags up 25‑35 % on top.
It’s not just a number—think of the peace of mind that no lease adjustments will pin you down.
And the Real‑World Take‑Away
So if you’re hunting a dream home, decide whether you’re ready to pay a bit extra for the certainties of freehold or if leasehold’s price attractiveness is your ticket.
Let the choice be the one that best fits your lifestyle, not just the ledger.
SH: How will en bloc developments affect the owners of freehold and leasehold properties differently?
Freehold vs Leasehold: The Developer’s Tale
Picture this: a developer spots a charming old condo block. The building’s condition? Who cares. The real treasure? The land beneath. But every real estate game has its twist.
Freehold Freedom
When the shot comes from a freehold building, the developer’s job is mostly straight‑forward:
- They can rebuild however they wish—unlimited floor plates because there’s no lease limit.
- The only hurdle? A development charge to bump up the allowable floor area.
- No lease top‑up dance required — freehold means perpetual rock‑solid ownership.
Leasehold Lament
Now, this is where the plot thickens. Suppose the developer wants to buy that same block but it’s a 99‑year leasehold that’s already aging. That means:
- They must hand over a lease‑top‑up premium to the government to renew & refresh the lease back to 99 years.
- On top of that, the usual development charge still applies.
- In other words, that’s an extra two‑step payment process for the land.
Why This Matters to Owners
Owners thinking of selling their 8‑year‑left 99‑year leasehold condos via en bloc? Expect a touched‑by‑relief price drop compared to freehold owners. The lease’s dwindling lifespan is a bearish factor in the resale market.
Key Takeaway
Freehold = simple upgrade. Leasehold = extra $$$ & extra paperwork. And that difference can seriously dent the final selling price.
Curious About the Numbers?
Want the full scoop on rental values for both freehold and leasehold properties? Hop on Awedio. SPH’s free digital audio streaming service brings you the in‑depth insights, and tells you what happens when a lease hits its 99‑year curtain call.
Listen to the complete podcast
Download the podcast now and let the hearing help guide your next investment decision.
Source: Money FM 893 & propertyHome BuyersInvestment.
