Rationally speaking, there's no reason to sell Leasehold (LH) Land and Units to anyone. When a country begins selling land, all of the plots start out as Freehold (FH) Land; put simply, 'you buy it and therefore it's (forever) yours.'
But as a country develops and/or land becomes scarce, it becomes illogical for the running State to simply sell only FH Land and FH apartments/units to everyone. Otherwise, multi-generation whole families and property moguls will eventually obtain and manage too much of the FH plots, and by extension, manage the country in perpetuity.
To prevent this, a large portion of newly released land are sold to potential developers as LH plots. The most striking example of this being the Housing Development Board (HDB) Flats which aim to provide affordable housing, basic amenities, and manage the social cohesion of Singapore through environmental design.
If these HDB Flats were not developed and sold on a 99-Year Lease (LH), the country could not reobtain and redevelop old and worn out blocks to suit the unpredictable and changing needs of future generations. However, as a consequence of selling these developments through a limited lease LH arrangement, these blocks/units tend to be offered at a lower price than that of developments in FH plots.
Homeowners who are looking for a roof over their head which will last them a lifetime, at an affordable price, should consider long-term ownership of LH units.
Homeowners who have a bit more to spend and intend to stay and pass down their unit/land to future generations within their family, can consider shopping for FH units/land. Bearing in mind that, FH land is a scarce resource in a fast-developing country like Singapore, and likely to be extremely costly.
Since the value of a LH unit will not hold for its entire lease period, it'd seem clear to only invest in FH units/land.
But of course, it's not that simple.
LH units can, and do, still appreciate in value in the early years of its lease. And more often than not, at a lower entry price, and at a faster capital appreciation rate than FH units/land within the same holding period. As a blanket rule, you can almost assume that because FH units/land are typically priced higher for less (space), they do not enjoy the high transaction frequency of a comparably-sized LH development. Therefore, most FH units/land appreciate at a slower pace.
Investors also need to pay attention to their current and near-future stage(s) in life, and their overall targets, pegged to their total investment timeline/period. Exit timings and projected sale prices during the ideal sale period for each individual, and each project, have to be scrutinised just as much, if not more than entry timings and entry prices.
Other factors tied to the particular lot which sway the general appreciation pattern for LH versus FH investments may include; future surrounding developments, foreseeable political stability of the country, tax measures for that particular lot, socioeconomic make up or the district and country, lifestyle and market sentiment (current and future), age and health of citizens/potential buyers, cultural beliefs, world affairs, and much more.
Overlooking any of these could be disastrous, and requires teamwork on your part and mine to leave no stone unturned.
The Long-Term LH Owner
If you're looking for a great price to space ratio, a leasehold apartment will suit your needs. It's an option which many people first consider before hearing about their investment options which can be done even with a limited income. Others enter the property market too late in life, and are unable to gain from the private property market. A rare few are simply set and certain on building a life in that particular unit or community, and have no further need for legacy planning.
The Long-Term FH Owner
These days, long-term FH owners tend to be retirees or soon-to-be retirees. Others I've come across tend to be in a phase of life before their children are grown and have yet to move out. The long-term FH owner has no urgent need to hand down their property, nor do they necessarily want to. Perhaps one day, they may sell their FH unit/land or hand it over to a child. Either way, long-term FH owners are usually eclectic and are looking for multiple other ventures to embark on.
The Mid-Term LH Owner
Some owners who have yet to enter the property market in their financial prime, do so through holding their first LH home for a mid-term period of about 5 to 9 years. It is only after long consideration and learning about property investing where they begin to make moves. While not always the case, most mid-term LH owners tend to begin as long-term LH owners, and grow an appreciation for investing midway through life.
The Mid-Term FH Owner
If your circumstance requires you to stay put in a single home; and staying in a smaller resale condo while investing in other properties isn't an option. And you can afford 1 FH unit/land for a higher quantum instead of a new LH property. Owning a FH unit/land for the next 10 years would be the safe purchase to make. Mid-term FH owners are rare to come by, and seem to happen due to certain handed-down values. The antiquated values of investing in a 'secure' FH unit/land over a 'volatile' LH unit could've possible shaped the purchase decision.
The LH Investor
Most people who can afford a resale unit could act as LH investors. Be it for own-stay or purely investments, this is a reliable choice to enter the property market and begin growing your capital. By the time you are aged and you've leveraged on a few property assets; you can look forward to retiring comfortably. LH investing is preferred over FH investing due to the typically faster capital appreciation period, and lower initial and total cash outlay.
The FH Investor
The ideal FH investor would either be a long-term FH owner, or someone who had invested in a larger property at a higher entry price for a long-term holding period, with the intention to sell at a much higher exit price. Only after a certain quantum, does price make a difference. Since the $psf will be relatively higher, and holding period long, it would be preferable to afford most of this quantum in cash. For the purchase to be considered safe, many of the external factors should also support the capital appreciation projection of such an investment.
The Legacy Planner
You're thinking about your future generations and have raised and identified the successors to your name. The legacy planner is seeking to hand down FH estates to their grown children. This is a step which can come after investing in properties for a long time, or parking a sudden windfall in a FH unit/land for safekeeping. Legacy planning as a heirloom strategy is more commonly considered than you'd imagine. While most parents do tend to strive to hand something down to their children or grandchildren; being able to do so depends on how well prepared you were early in your own life.
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