Price gap between new freehold and leasehold apartments narrowing!
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June 2, 2015
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According to an article in ZaoBao
today, data complied by Knight Frank has indicated that the price gap between
new freehold private non-landed homes and their 99-year leasehold counterparts has
narrowed substantially over the past few years.
Analysts have indicated that the price difference has reduced
from 20 - 30% over the past 5 - 10 years to the current 10%. And the drop is even more pronounced in certain locations. For example, the price difference around Outram area has shrunk from 55%
between 2011 - 2012 to just 12% between 2013 - 2014.
The phenomenon is attributed
to the fact that new projects launched in recent years are mostly leasehold,
which created a new normal for private homes buyers. This is especially prevalent
with projects outside the Core Central Region (CCR).
Land tenure notwithstanding,
location remained the primary determinant when comes to the price gap between new
freehold and leasehold projects. The
price difference in 2014 for projects within the CCR was 14%, while those in
the RCR (Rest of Central Region) rose to 61%. However, projects in the OCR
(Outside Central Region) actually
registered a decline of 5.7% - meaning that prices of leasehold projects were
actually higher than freehold ones.
The article also mentioned
that prices of apartments in older projects with about 30 years of land lease
remaining are only 20% of those in new leasehold projects. And prices of
leasehold apartments that are 20 - 30 years old will see their prices falling
more rapidly. This is due to limited financing options resulting in much higher
cash outlays needed from potential buyers.
However, leasehold
apartments are generally more affordable due to their lower price quantum. They
also tend to provide higher rental yields compared to their freehold
counterparts.
So what do we think about the latest revelation?
The wife and I currently reside in a leasehold apartment located in the OCR (we think!) that is already more
than 37 years old. Instead of plummeting prices, resale transactions in our estate over the past few years has remained quite
bullish. Prices has probably come down a bit over the past year but given the
amount of space you get from a 1,600+sqft old apartment versus what you get in
newly launched projects these days, and not to mention the convenient location
with its ample amenities and established eateries, we are definitely in no
hurry to sell out...
