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Freehold properties in Singapore more resilient, new report suggests

It found that found that price gains for freehold condominiums and terraced homes have outpaced those for similar homes with 99 year leases since the third quarter of last year despite economic uncertainty and cooling measures introduced by the government.

Prices of leasehold condos have increased by 1% in each quarter in the 15 months to the end of September but those of freehold condos have averaged quarterly rises of 2.2%.

In the last decades freehold condo prices have increased 62% while leasehold condos appreciated 48% in the same period, said Credo.

It is a similar story with landed homes. While prices of leasehold terraced properties fell by 0.1% in the three months to the end of September, freehold terraced prices increased by 4.9%. Prices of freehold terraces have increased by 97% in the past 10 years compared with 52% for leaseholds, the report also reveals.

‘Freehold or 999 year leasehold are the preferred tenure for many property buyers as many are concerned that the value of 99 year leasehold properties may not appreciate well when the duration of the leasehold reduces,’ the report says.

But transaction volumes and price increases for all home segments have taken a hit since July last year as the market coped with two additional rounds of cooling measures following similar moves in September 2009 and February last year.

More recently, the financial market turmoil and uncertainties surrounding the euro zone crisis have further dampened home buying sentiments.

However, Credo’s research and consultancy head, Ong Teck Hui, said that while buyers should go for freehold properties from a purely investment point of view, 99 year leasehold homes will still be in demand.

‘They still have a price advantage over freehold equivalents and many 99 year leasehold projects are located near amenities and transport. These are crucial factors, especially for upgraders, for whom affordability and convenience rank high on their priorities. Such attributes can be found in sites in or near HDB estates which the Government puts out for tender on a regular basis under its land sales programme,’ he explained.

The report also noted that freehold and 999 year homes made up the lion’s share of the new sales market from 2007 to 2009, some 61 to 69% of the market during that period.

But this trend has since turned with the Government pushing out a bumper supply of 99 year leasehold state land over the past year to meet demand.

Prices increased 18% last year and have gone up 6% in the first nine months of this year. Since last year, new 99 year leasehold homes, excluding executive condos, have made up the majority of new sales with some 60% of market share.