Guide to Home Buying: Freehold vs Leasehold
All of us want our own private space where we can create a home to call our own. That is why we work hard to achieve a dream home for our family to live on. It is a human basic need, to have a shelter that will protect us from outside natural forces and enjoy our place of Zen. Before creating your house, you should first know the deal of the land you choose to buy. As land is the most important part of building your own place, you should consider whether you want a freehold held in estate fee in simple or leasehold in the land held for 99 years. Regardless whether it is a landed property or a condominium, normally a freehold property will cost 10 to 15% more than a leasehold property here and all land in Singapore with or without existing building are also subjected to government land acquisitions act.
First let us consider the difference between Singapore freehold vs leasehold property to guide you in your decision.
The term freehold in land deals means that you have full ownership to land. Examples of freehold titles are an estate in fee simple and an estate in perpetuity. Whether it is small or big, you have the responsibility in all the property in it like maintenance and repairs when it comes to pure landed property. If there is no establishment then the whole size of the land stated in the property documents is all yours. As the sole owner of the property, you have the decision in whatever you want to do in it. In this case, freehold is more appreciated when it comes to the ownership of land. However, when it comes to freehold condominiums and other types of properties, owners will receive a certain share value. They basically owned the unit they purchased in the development. In general, a freehold property price can be as much as 15% higher than leasehold property here.
As the term “lease” implies, it means that the property you own will expired at the end of the lease term. The ownership of land is of a fixed duration as specified in the lease document eg. 30 years, 60 years, 99 years or 999 years leasehold. If the land is owned by the government of state then if the lease expires, the ownership is reverted to the state. The 999 year leasehold property is considered similar to a freehold property as their values is will not be too far off. Banks will not impose any loan limits when it comes to 999 years and freehold. Leases are commonly granted on HDB flats, but it can also be granted on huge lands with or without any property in it. The length of the lease is usually up to 999 years and some are shorter like 30 years for some of the commercial and industrial properties. Leasehold land can extend the period of the or top up if certain criteria are met and are subjected to approval.
Seeing the contrast between the ownership, Singapore freehold property has more advantages than the leasehold. Leasehold properties will be slightly more affordable then freehold property in general. Some are located in better location with better amenities such as most of the leasehold property is located next to or near MRT Stations as most of them are state lands. Freehold ownership is more valuable as the land or property can be passed on to their children or next generations. The value of the freehold property will be much better especially if it is situated at a good location. Buying lands or property may give benefits to the owner as he have the right to have it at lease if he is not staying or for business purposes. Property owners can acquire profits from the rentals of the tenant of the property. In the agreement between the owner and tenant, the owner have the authority whatever the tenant wants to do with the property like keeping the property in good condition or making alterations to the structure. The tenant has to ask for the owner’s permission before doing anything involving the property.
A Singapore freehold property is an asset and is included in the owner’s estate and can be transferred to his/her heirs when he passed away. It is a good gift for the next generation of your family when the right time comes. Having your own land and property may not only give you profit and benefits but also ease of mind that you have something to go and enjoy your life into. Just be sure to check all the legal aspects before buying any property to avoid huge problems. And if you decided to have your land on lease, make sure that the leaseholder is up to date with the fee payments and maintenance to prevent conflicts. So which one would you choose between a freehold vs leasehold property?