Property News
There has been much debate on the premium a new sale private residential property has over a resale property. Aside, many questions have been asked about the discount a 99-year leasehold has over a comparable freehold or 999-year leasehold project. In this simple analysis, we will flash out charts that look at these trends for non-landed private residential properties.
Graph 1: CCR Freehold and 999-year Leasehold New Sale vs Resale Prices*
Graph 2: CCR 99-year Leasehold New Sale vs Resale Prices*
Graph 3: Premium of CCR New Sale to Resale for Various Tenures*
Table 1: Premium of New Sale vs Resale for Various Tenures in the CCR
Graph 4: RCR Freehold and 999-year Leasehold New Sale vs Resale Prices*
Graph 5: RCR 99-year Leasehold – New Sale vs Resale Prices*
Graph 6: Premium of RCR New Sale to Resale for Various Tenures*
Table 2: Premium of New Sale vs Resale for Various Tenures in the RCR
Graph 7: OCR Freehold and 999-year Leasehold New Sale vs Resale Prices*
Graph 8: RCR 99-year Leasehold New Sale vs Resale Prices*
Graph 9: Premium of OCR New Sale to Resale for Various Tenures*
*: Data was sourced from Real Estate Analytics
Table 3: Premium of New Sale vs Resale for Various Tenures in the OCR
Over the past decade, whether it is in the CCR, RCR or OCR, the premium of a new sale has increased over that of resale. We believe that a major part of the increase has been due to rising land and construction costs. On land costs, for the period 2013 and 2017, GLS land prices (adjusted for location and other factors) fell and thus when the projects were marketing in 2014 and 2018 respectively, developers had the flexibility to reign in on the selling prices. However, in the period 2021 to 2022, not only did land prices accelerate, Covid led disruptions also caused construction costs to rise sharply and developers had no choice but to raise selling prices of new launches to a new tableau. This widened the gap between them and those on the resale market.
Ultimately, should people buy new or resale, freehold/999-year, or 99-year? That depends on the objective of the buyer. On the question of new or resale, which is better, a buyer who intends to move into a private property or reap almost immediate rental income should obviously consider resale properties. For those who intend to put their savings to good use, such as buying high yielding instruments or businesspeople who wish to use dormant cash for working capital purposes, a new sale, notwithstanding the higher premium to resale, may be more optimal. The progressive payment structure permits them time to recycle their equity in their business before the call for the next progressive payment. Also, for those buying for investment, the rent for a new apartment/condominium is often higher than those from older ones.
On whether freehold/999-year or 99-year is better, for those buying for investment, they need to do the sums to calculate the overall return yield. This would have to factor in the rental yield and the potential of reaping a premium from a collective sale. For end-users, it doesn’t really matter that much because a freehold/999-year property would have a pricing premium over 99-years to account for the tenure. It boils down to whether the end-user has an emotional attachment to the property.
Singapore has a dense real estate landscape and a developed information system that property owners and buyers can quite easily access. The private residential market here is therefore not as imperfect as in countries with a larger geographical spread and little information about recent real estate transactions. While there can be instances where there are pricing anomalies, today, buyers and sellers should not be overly concerned about overpaying or underselling. It boils down to what the parties to a transaction really want for themselves.
Table 4: Median Sizes of Units Transacted
Source: URA Realis, Savills Research & Consultancy
Table 4 shows the median sizes of units transacted islandwide. For Freehold/999-year new sales, the sizes have been increasing. The median size for this category is in part dependent on the location where collective sales were concentrated a year or two before the launch. As most Freehold/999-year sites are located either in the CCR and part of RCR, developers these days often design them to cater to the ultra-high net worth or families seeking to upgrade. For 99-year new sales, their sizes have generally been quite constant. This is because most of them are derived from Government Land Sales and hence have common parameters that ultimately govern their average sizes.
It is in the resale market that the sizes are declining. One reason is that rising prices on a S$psf basis have motivated buyers to accept smaller floor areas to suit their budget. Another reason is that the projects that were first launched a decade ago, and hence smaller in size, are now coming back to the resale market. For example, a 99-year new launch in 2014 may have median sizes of about 764 sq ft. These could come to the resale market in the coming years and hence bring down the median sizes for resale properties.