Recently, I have been hearing a lot of people talking about the declining value of HDB Flat due to the 99 year leasehold problem. The opposition political parties members also went on to rattle away about how the current government is not doing enough to address this problem and it is wrong to be telling Singaporeans that HDB is an appreciating asset. In addition, many folks began to assert that owning a freehold property is the best solution to preserve the capital value of the investment into housing which is a major component of all assets for most families.
The "Legend of Freehold is King" in Singapore is not entirely correct for a number of reasons:
(1) In one of my previous post, I have mentioned that in land-scare Singapore, no one can guarantee that the Singapore Government will not invoke the use of a major weapon in their arsenal, that is, the Land Acquisition Act to take away even Freehold land. Hence freehold in Singapore context does not contain the essence of perpetuity relative to other neighboring countries such as Thailand.
(2) Once a property reaches 30 years old or older, chances are that there will be many property maintenance issues regardless of being HDB, private leasehold or private freehold properties. Common problems include spalling concrete, worn out electrical fittings, water pipes bursting or leaking, pneumatic disposal system, major refurbishment of old and frequently broken down lifts etc. I have not known of any property that just because of its status being "Freehold" are exempted from these old age maintenance issues. The collapse of the bridge in Italy has shown the world that reinforced concretes do not last forever.
(3) In land scare cities such as Hong Kong and Singapore, buying any type of property is an extremely expensive affair. But in Malaysia and Thailand, there are abundance of freehold land and properties all around but at so much cheaper prices and also the associated maintenance cost. The cost of maintenance alone for any type of property is high in the context of Singapore. Tearing down and rebuilding are known to be very expensive for individual owners to undertake. Only the very rich minority upper class benefit from holding a freehold property and not the middle class folks which forms the majority.
(4) If freehold is so wonderful, then why do many private freehold owners in Singapore wanted to go the En Bloc route for redevelopment via selling off to private developers citing aging properties and maintenance issues. Most of these properties are less than 40 years old. Not even reaching half of 99 years old.
(5) Freehold properties are generally at least 10%-20% more expensive than leasehold properties. One would be better off investing the differences into other income generating investments for additional passive income. Personally, I will not pay a single cents more for a freehold status property over a similarly located property if the purpose is just for own stay.
(6) Most freehold properties locations are inferior to 99 years old leasehold properties in the context of the middle class which forms the majority base of Singapore.
As alluded to the above factors, my personal thoughts are that having the so called "coveted" freehold title is not an effective solution to the 99 years declining value problem in our local Singapore context. For own residential living in Singapore, holding a HDB flat may in fact turn out to be a better choice than other forms of property and which makes the most financial sense.
Please also refer to my other posting with regard to the (i) preservation of value for HDB and (ii) also the latest "VERS" announced by government:
In simple the government have divided the rich the poor n the working classes most of our older building frame structures n ground holding have enough strength to last 250yrs more comparing to the building been sat aside as historical or heritage buildings the make up looks might be lovely to look at but the real truth it frame structures n building foundation do give us alot more to worry abt with the land shortage in Singapore should be reconsider or HBD lease should be extended after the 99 lease expires giving owners options its no point squeeze us more money when the building is 70yrs for a fresh look for just 29yrs the same amount monies up keeping the building n structures should be used so the building would have a longer life lease talking abt recycle this would also help the greenery if our government are so against to extended our land lease states its time we should get in other to government the country with the people interest at their heart n souls its time people should think of a change of leadership after all we have no reason to fear as we are already been inform where 85% of the population living in that our asset would depreciate as we already seen happen to people in the geylang Vicinity area it time for a change n ppl should protect themselves from the government who have lost interest inits own ppl
ReplyDeleteHi,
ReplyDeleteIf the freehold property is landed, children or grandchildren who inherit it can still fix it here and there or eventually demolish it and rebuild. Saving the cost of the land helps a lot especially if they are not so wealthy to afford other place but still need a place to stay. Alternatively, they can also sell it away to developer and split the money between themselves.
On the other hand, if the property is apartment/condo type, I think it is not so easy to maintain, for example pipe leaking.
Regards,
MSAPersonalFinance
My dream and wish list is to also own a freehold landed property. :)
DeleteMost governments have a land acquisition act in their legislation.
ReplyDeleteYes Choon Yuan. Singapore government has been using it frequently. Look out for the earlier years in on how it was being used.
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