If you aren’t one of the more fortunate folk who grew up living in a private home, you might be like myself: A HDB neighbourhood kid living my entire 30 years of my life surrounded by landed homes. Call it jealousy/ green with envy, but it’s fascination, and whether will I ever be able to own a landed home in Singapore. If you do a quick search online, you’ll find that many people are saying it’s nigh impossible to own one, unless it is inherited or earned through hard work, sweat, blood and tears.

Of course, we’re here to debunk this.

From the previous article that covered how there are 5 types of landed homes in Singapore (do read it, as it is a great precursor to this one), we’ve established that it is significantly cheaper to own a 99-year leasehold.

Latest Development

As of 23 April, reported by CNA, Private homes have seen the fourth straight quarter of price increase, hiking up to 2.1 per cent than in the previous quarter. OrangeTee & Tie’s Christine Sun, Senior VP of Research & Analytics, attributes this to strong local demand for private homeownership and resurgence of foreign investment. Mr Lee Sze Tech, heading the research at Huttons, added that the total number of transactions, at 8,100, is at its highest since the last quarter of 2012.

It also could be attributed to the rising prices of condominiums that upwardly affected the landed homes market.

Analysts expect private home prices to rise further, pending the low mortgage rates and recovering economy.

For more about the quarterly updates for 2021, check out our latest article — Q1 Property News 2021 — optimistic outlook for this year, profitable landed homes.

Say Goodbye to Lorong Tiga

Courtesy RememberSingapore.org

While some may think freehold property are something far-fetched for buyers, it’s worthy to note how 191 private terraced houses at Geylang Lorong 3 finished their lease end-2020, and the homeowners had to vacate their 60-year leasehold property and source for other forms of housing. Also known as the Lorong Tiga estate, Singapore Land Authority (SLA) aided in the process, and was successfully vacated. The next in line for reaching leasehold expiry? 70-year old leasehold private houses at Jalan Chempaka Kuning and Jalan Chempaka Puteh near Tanah Merah MRT station, which will reach expiry in 2034.

The truth about Freehold Landed Properties

The main concern for properties, or homes in general, are maintenance, potential land/property appreciation and responsibility. Don’t forget that the Singapore government are still allowed to reclaim freehold properties should the land obstruct national infrastructure development, though it is highly unlikely.

Freehold is priced considerably above leasehold

If you were to compare District 19’s (Hougang, Punggol, Sengkang) freehold, which dipped in interest for the landed homes sector in 2021, overall prices are on the rise, but demand has reflected this by a slight fall, though COVID-19 did see a slight recovery. A total of 21 units were sold this year, with an average price of $3.39 mil.

It might look similar on face value, but the price is actually a lot more affordable. This year in 2021, 23 units were sold with an average price of $2.31 mil. That’s more than $1 million cheaper than its freehold counterparts in District 19, and the prices seem to be stabilising between last year and this year.

We know what you’re thinking. Just District 19 is not a good enough comparison, which is why we’ll include the following for a more balanced comparison.

With this year, 2021, averaging at $3.28 mil, the city centre area is of course a highly sought-after location. Transactions here are healthy, and the prices doesn’t seem to be dipping. The average price in 2019 was considerably $300,000 lower, at $2.98 mil.

This year’s freehold transactions averages at $8.78 mil. Transactions were at 100 last year in 2020, compared to a 58 count this year, and we are not fully through April. The home types for landed vary, however, comprising mostly semi-detached and terraces.

From this, we can now confirm that freehold is definitely priced higher than 99-years, based on the average price 99-year $3.28 mil to freehold $8.78 mil in districts 9,10 and 11, and district 19’s price average of freehold at $3.39 mil and 99-years at $2.31 mil. The trend is islandwide, and 99-years will be a great entry point for upgraders looking for a landed experience.

But let’s say you would rather rent, as you’re unsure of the next few years (pending maybe an overseas venture, or a migration), how much difference will 99-years and freehold be?

For District 19, this year’s rental price are gradually increasing, up to $5966 monthly. The volume has dropped significantly to a volume of 40, from 312. Aftermath of circuit breaker, maybe?

Rental prices for the same D19 area, with 99-years, are only slightly lower at a monthly of $5,686, and we observably see a trending plateau over the past four years despite COVID-19 hitting.

Thus, we come to this conclusion.

If you’re looking at short-term investment, 99-year leasehold properties are a better option, while long-term should be still a freehold.

Tenants are not concerned on a property’s tenure. Freehold or leasehold, it’s the same to them, which mean buying a freehold at a higher price may not equate to better profits in a short-term scenario, and 99-years falls snugly to be affordable and profitable.

Can you afford a landed home? 

Truth is, the wisest of us squirrel our money in a diversified portfolio to increase our wealth. And if you are contemplating on a landed home purchase, how much is a comfortable benchmark for that?

Here’s one our latest landed homes currently featured.

Example A

Matthew is a businessman, heading several businesses, with a family. He intends to buy a large landed freehold for investment. He owns a condo, and is fully paid. Condo is in demand, and can sell for additional holding cash.

Housing loans are capped at 75% loan-to-property value.

In order to avoid the Additional Buyer’s Stamp Duty (ABSD), he decouples with his wife successfully. Total Debt Servicing Ratio has a 60% cap, meaning loan repayments must not exceed that percentage of your average income.

Assuming that the house is in move-in condition, without requiring any touch-ups, and with all the furniture you need for now.

(Cash) Option to Purchase (paid in cheque) – 1%X $10.8 mil = $108,800

(Cash) Exercise Option – 4% = $435,200

(Cash) Down payment – 25% = $2.72 mil

Loan required for remaining balance – $10.8 mil- $2.72 mil)= $8.08 mil

Based on interest rate – 1.5% (Peak of prevailing floating and fixed rates)

Loan tenure – 25 years

Down payment for loan – 25% = 25% X $8.08 mil = $2.02 mil

(Monthly) Repayment – $32,314.86

*Mortgage repayments based on mortgage calculator.

Example B

From this, we can also check how do we afford a modest 99-year landed home in D19? Taking D19’s average price of $2.31 mil, we can apply the same formulas here:

(Cash) Option to Purchase (paid in cheque) – 1%X $2.31 mil = $23,100

(Cash) Exercise Option – 4% = $92,400

(Cash) Down payment – 25% = $577,500

Loan required for remaining balance – $2.31 mil – $577,500)= $1,732,500

Based on interest rate – 1.5% (Peak of prevailing floating and fixed rates)

Loan tenure – 25 years

Down payment for loan – 25% = 25% X $1,732,500 = $433,125

(Monthly) Repayment – $6,928.90

Example C

16 Jupiter Road is a Freehold within District 20, with an asking price of $7.8 mil. A built-up of around 7,000 sq ft and a land size of 4,930 sq ft, it reveals a 5-bedroom, 6-bathroom layout, with a roof terrace and more.

(Cash) Option to Purchase (paid in cheque) – 1%X $7.8 mil = $78,000

(Cash) Exercise Option – 4% = $312,000

(Cash) Down payment – 25% = $1.95 mil

Loan required for remaining balance – $7.8 mil – $1.95 mil)= $5.85 mil

Based on interest rate – 1.5% (Peak of prevailing floating and fixed rates)

Loan tenure – 25 years

Down payment for loan – 25% = 25% X $5.85mil = $1,462,500

(Monthly) Repayment – $5849.07

Of course, there are other ways to refinance and to make purchases. Better yet, to pay more in cash, will always equate to more savings in the long run. But as the popular saying goes, it’s wise to be cash rich, asset rich, and not asset rich, cash poor.

We hope this article has been more insightful for you for landed homes. Keep abreast with the latest developments in the property market with our Insights blog. On socials, on Telegram, keep in touch with PropertyLimBrothers. Stay tuned for our next Landed Home Series.