Ask Mr. Propwise #7 – Capital appreciation for older 99-year leasehold properties?

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Hi Mr. Propwise,

Would like to hear your views on a property investment matter.

I tend to prefer 99-year leasehold non-landed properties as they are more affordable for me. Getty (and some other experts like Ku Swee Yong) also commented that resale properties offer better value than new launches.

But what is your view on the capital appreciation of older 99-year leasehold properties? Is it worth considering properties older than 10-15 years? Or should we aim to look for resale properties that are still relatively new and target to sell after they have reached 10-15 years?

Thanks and regards,

C.H.

Hi C.H.

Regarding your question on older leasehold properties, I’ve observed several things:

– After about 10 years, new leasehold properties often have a sudden drop in prices. So a property with 80+ years left on its lease often sells at a significant discount to other surrounding leasehold properties that still have 90+ years.

– Very old leasehold properties (i.e. 20+ years) tend to be illiquid, i.e. very few transactions and difficult to buy or sell.

– As for capital appreciation, it all depends on the cycle – during a bull market anything can go up. For example, International Plaza (a 30+ year old 99-year leasehold property in Tanjong Pagar) used to go for $300+ psf a few years ago. Now transactions have hit over $1,100 psf! That’s a lot of capital appreciation 🙂

Of course, when you’re buying leasehold, make sure you get an appropriate discount versus other projects depending on the age of the property. All other things being equal, you should pay less for a leasehold property that has fewer years of lease left.

I think the most important thing for capital appreciation is to get a good price (discount versus other units or projects) in a good location (not necessarily the prime areas, but an area where things are happening) on the right side of the property cycle.

Hope this helps!

To wisdom and beyond,

Mr. Propwise

8 Replies to “Ask Mr. Propwise #7 – Capital appreciation for older 99-year leasehold properties?”

  1. Hi –

    It is interesting to read your comment with example like International Plaza. This is interesting!

    My question is, using Intl Plaza as the specific example, can you share your view of the investment perspective for such project? If the 1000 psf still a potential or it is more a sunset situation? Do u think such property at such location should be en-bloc for redevelopment in to some better usage at that location?

    Hope to hear your view on this. Thanks.

  2. Hi Prowise,

    Appreciate your view as to how much discount to ask? Let says I wanted to buy a 4 room HDB flat which is over 30 years old. Assuming the flat is move-in condition and is a 10-15 min walk to MRT. Assuming the valuation is $350k. We ask for a 10% discount of $315k? Surely the seller won’t agree to sell below valuation price and surely they will ask for a COV?

    Look forward to your advice. Many thanks.

  3. Actually, i notice that some older leasehold properties also go en bloc, with lease top up by developer. Sometimes, for rare condos in good locations, thst happens. But do correct me if i am wrong. Would also like to ask your opinion on bayshore. It is 99 year leasehold, and quite.affordable compared to mass market OCR.

    1. Hi Ade, yes it is certainly possible for older leasehold properties to go enbloc, but as you pointed out it will require a lease top up by the developer, which will lower the price they are willing to compensate the owners. Sorry but I don’t know enough about Bayshore to comment specifically on it.

  4. I am pep holder and own a condo. Now i have a ssvings of sgd 200,000 shall i buy some commercial property and give it on rent. Is this a good idea to invest my savings?

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