Is your (LEASEHOLD) Property Value Decaying ?
Everyone wants to make a good investment in property. The fact is there will be some who will successful in property investments while others who will not be successful.
The properties that are the least risk are the Freehold properties as they do not run out of time whilst the properties with the 99-year and 103 lease tenure.
Properties in Singapore generally fall into 4 different tenures
- Leasehold properties with 99-year tenure
- Leasehold properties with 103-year tenure
- Leasehold properties with 999-year tenure
- Freehold Properties
What happens the property tenure expires
The one asset class which has the most potential of decaying is the HDB - aka Housing Development Board or public housing. At 40 years old, the value of the HDB flat drops in value. Hence, some owners tend to sell their flat at the 30 year mark.
Furthermore, the loan that the bank can offer to the buyer diminishes after 40 years. Having said that, there are buyers specially search for properties with shorter tenure as the price of the property will definitly
The main reasons for purchasing such flats are
- Location of older flats
- Size of older flats
Built To Order (BTO) flats which are purchased directly from HDB are usually smaller in size and are also more expensive compared to a similar sized resale falt.. The location of new BTO flats are usually built in non-matured estates, however in recent years, HDB has made a changes . Haence these older flats still hold their value.
Having said that the same is similar to the private leasehold condo. However, the private condo has a tool that can be activated which is not available to HDB owners. This is the enbloc tool. Enloc allows the current owner to unlock the value of their properties by collectively selling to a developer or multiple developers.
So whilst both the HDB and private condo suffer from the decaying effect, the road taken by the owners is definitely different. It is wise if you are financially capable to upgrade to at least a leasehold condo which you will have the opportunity to go through enbloc process. The important thing to rememeber is it is a potential opportunity whcih also means that the enbloc may not pull through for various reasons. This will be discussed in another article.
For this reasons, some investors buy a condo unit in a potential enbloc estate which may not materialise. Investment is not just about upside gains but rather it is about managing the downside risk too. Those who can manage their investment risk, WINS !!!
If you stay in a HDB, there is still a potential for enbloc but it is more in the hands of the govenment rather than residents voting for it. This means that the chances are even lower.