Will Singapore leasehold properties make money? | Jack Sheo

Will Singapore leasehold properties make money?

Singapore property investments

Will Singapore leasehold properties make money?

A client whom I sold her landed property a few years ago, got in touch with me recently. She wanted my inputs on the property market as she is planning to enter the property market to buy a resale condo for investment.

Towards the end of my market update, she suddenly said, “An agent friend told me leasehold will not make money”.

My first thought was, “Really? No offence but does your friend know what she is talking about?”

Recent stats analysis

Coincidentally, I had compiled some stats to share & educate a client new to property investments a few days earlier before my landed client got in touch.

The focus of that stats compilation and analysis is to see how sellers who have sold their new launch condos at or close to completion in 2018 or 2019 did.

For the compilation, I selected condos that achieved TOP in 2018/2019 that had at least 15 resale transactions till date (24 April 2019) to showcase why new launches (regardless of leasehold or freehold) continue to be a popular investment choice among informed property investors.

The search yielded four condos. All four are 99 years leasehold properties.

These sellers bought these new launches in 2014 (one year after TDSR) & 2015 and sold in 2018 & 2019.

Assumptions

a) NETT PROFIT is defined as SALES PRICE – PURCHASE PRICE – STAMP DUTY.

The assumption is that only Buyer Stamp Duty was paid. No Additional Buyer Stamp Duty was paid.

Property agent’s selling fee, legal fees and mortgage interest (very low for new launches due to progressive payment) are not included in the computation.

b) INITIAL INVESTMENT is defined as DOWNPAYMENT + STAMP DUTY.

The last 2 columns show the return on initial investment assuming 80% loan (pre-July 2018 cooling measures) and 75% loan (post-July 2018 cooling measures).

P.S. The charts will show up better on a desktop or laptop. 

CONDO 1 (99 years leasehold)

53 resale transactions in all.
53 made money.
0 lost money.

Highest % return on initial investment: 144.78% (1,481 days holding period)

Highest absolute return: $397,151.62 (1,481 days holding period)

Profitable property transactions
property investment Singapore - condo 1 - diagram 2
CONDO 2 (99 years leasehold)

29 resale transactions in all.
29 made money.
0 lost money.

Highest % return on initial investment: 180.98% (1,335 days holding period)

Highest absolute return: $333,431.11 (953 days holding period)

property investment Singapore - condo 2
CONDO 3 (99 years leasehold)

15 resale transactions in all.
15 made money.
0 lost money.

Highest % return on initial investment: 161.96% (1,463 days holding period)

Highest absolute return: $322,085.07 (1,463 days holding period)

CONDO 4 (99 years leasehold)

18 resale transactions in all.
18 made money.
0 lost money.

Highest % return on initial investment: 113.46% (1,494 days holding period)

Highest absolute return: $277,610.07 (1,545 days holding period)

What can we learn?

The stats compiled above illustrate 2 important points:

a) Busting the leasehold myth

The original buyer (condo 1, diagram 1) of the 1,378sqft unit made a profit of $397,000.

The original buyer (condo 2) of the 980sqft unit made a 180% return on investment.

The thought that leasehold properties will not make money is a myth. Leasehold properties can make money. And in some cases, make handsome profit.

Although the charts I provided are only for those sold in 2018 and 2019, I can assure you that it is not only in these two years that sellers of leasehold properties made money.

Many, many sellers of leasehold properties have already made their money since many, many years ago and they continue to do so TODAY.

If you swear by freehold properties only, you will be blind to many great opportunities in Singapore’s property market.

This is another example of why, the property agent that you choose to work with or listen to, matters.

b) Making money from new launches

Property investment is something that can yield generous profits and there are many different ways to make money from properties.

Investing in new launches is but one of the ways to do so. However, there are many good reasons why investing in new launches continues to be an extremely popular avenue for savvy property investors.

Having said that, there is no such thing as “guaranteed to make” even though the data above all yielded positive returns. There is always a possibility of losses as there are many factors that can affect the outcome of a property investment.

This is why we always need to know what we are investing in, the things to look out for and what the possible worst case scenarios are.

Everyone’s needs, situation and risk profile is different.

How we minimize the risks and maximize the chances of a profit will ultimately determine the outcome of our property investments.

Has this post changed your opinion about leasehold properties and investing in new launches?

It has certainly changed my client’s thinking as the data and numbers do not lie.

What factors do you think are important, when it comes to property investments?

I welcome the opportunity to meet up with you to have a friendly chat to explore how you can possibly start your property investment / home purchase journey.

If you already own a property or multiple properties, this is a good time to evaluate how they are doing for you and whether there is room for optimisation.

Looking forward to talking to you soon.

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