Leasehold Profits Are Growing. Does This Make Them a Better Buy than Freehold Properties?

From choosing an HDB or bank loan to deciding between a new launch or a resale unit, today’s homebuyers have no shortage of important decisions to make. Likewise, choosing between a freehold and leasehold property is another key consideration, given the potential bearing on investment yields.

This is due to the unique advantages that freehold and leasehold properties present as investments. Freehold residential properties can be held indefinitely without any expiry date on their lease, allowing owners to retain them as long-term wealth-building assets. Conversely, while leasehold properties offer ownership for a limited period, they often come with lower entry prices that upgraders may find more appealing.

Beyond these distinctions, there is also a common perception that freehold condominiums represent the best option for homebuyers due to their lifetime tenure. However, this belief may not hold true for everyone – particularly homebuyers targeting a medium-term investment window of 4 to 6 years.

In relation to this, a comparative study by ERA Singapore observed that leasehold condominiums are steadily closing the historical profitability gap with freehold homes, driven by the increasing returns of 99-year properties during the aforementioned medium-term holding period.

Chart 1: Median profits of freehold and leasehold residential properties within 2km of selected MRT stations (2017 and 2024)

Source: URA, ERA Research and Market Intelligence

In 2017, sampled freehold developments located within 2km of selected MRT stations posted a median profit that was 5.9 times higher than their leasehold counterparts. By 2024, this same figure had fallen to 1.1 times, thus reflecting a shrinking gap in profitability.

But what exactly is driving this growing trend? And how might it influence your next homebuying decisions? For more answers and insights, keep scrolling!

Just how close is the median profitability gap between leasehold and freehold condominiums?

To delve deeper into the profitability gap between leasehold and freehold condominiums, we analysed caveat data from non-landed private residential developments within a 2km radius of nine selected MRT stations, focusing on units bought and sold over a ten-year period from 2015 to 2024.

A 2km radius was also chosen to determine which of the selected MRT stations influenced the profitability of developments across a wider neighbourhood rather than only those in the immediate vicinity. This contrasts a 1km radius, which is a better measure for examining how proximity to an MRT station affects profitability.

The selected MRT stations include: 1) Katong Park, 2) Great World, 3) Marymount, 4) Beauty World, 5) King Albert Park, 6) Outram Park, 7) Tampines East, 8) Potong Pasir, and 9) Serangoon.

The study covered 765 condominium developments, excluding Executive Condominiums. 617 have freehold tenure (including projects with leases exceeding 900 years), while the remaining 148 are leasehold developments.

Furthermore, to ensure a meaningful comparison, only developments with at least 30 transactions during the 10-year period from 2015 to 2024 were included in the analysis.

This methodology yielded 7,032 profitable secondary market transactions for further analysis. The leasehold and freehold properties involved in these transactions had median holding periods of approximately 4 to 6 years, aligning with the medium-term investment window.

Additionally, projects located between two MRT stations were assigned to the closest station for analysis. And finally, profitability was calculated based on the net difference between buying and selling prices – this excludes common administrative costs, such as stamp duties and legal fees.

By applying these criteria and analysing relevant transaction data, we uncovered the following insights:

1. The profitability gap between leasehold and freehold properties has been narrowing at a growing pace

Chart 2: Median profits of freehold and leasehold residential properties within 2km of selected MRT stations by year

Source: URA, ERA Research and Market Intelligence

Based on the data pool of transactions for selected condominium developments, it is apparent that the gap between leasehold and freehold property returns has narrowed significantly.

In 2019, the median profit achieved for freehold condominiums was $242,556, which is $118,568 or 95.6% higher than the $123,988 median for leasehold units. One year later, this margin narrowed sharply to 44.9% in 2020 and has steadily declined since. As of 2024, this gap was just 9.7% – much smaller than the sizeable near-100% difference observed five years earlier.

Chart 3: Percentage gap in median profits of freehold and leasehold residential properties within 2km of selected MRT stations by year

Source: URA, ERA Research and Market Intelligence

This trend is predominantly driven by the increased volume of secondary market transactions occurring at larger and newer leasehold developments, which subsequently leads to more significant price appreciation.

For instance, Jadescape, a 1,206-unit leasehold mega development that obtained its Temporary Occupation Permit (TOP) in 2023, accounted for the largest share of profitable transactions among condominium developments near Marymount MRT station; this strong performance represents 180 of the 745 successful deals identified among projects in the vicinity.

A similar outcome was observed for Treasure at Tampines, another large-scale leasehold condominium project comprising 2,203 units that also achieved its TOP in 2023. On its own, it accounted for 484 of the 1,157 profitable transactions at condominium developments near Tampines East MRT station.

Both of these examples lead us to our next key observation…

2. Leasehold condominiums near MRT stations in the RCR and OCR saw the greatest overall volume of profitable sales

Given their dominant lead in profitable sales at their respective MRT locations, Treasure at Tampines and Jadescape naturally secured places among the Top 10 projects with the highest number of lucrative secondary market transactions.

At the same time, this underscores another key finding: all of the Top 10 best-performing developments are clustered around MRT stations located in the Rest of Central Region (RCR) or Outside Central Region (OCR).

Beyond Tampines East and Marymount, other stations outside of the city centre – like Serangoon and Potong Pasir – also feature prominently in terms of profitable secondary market transactions; this is evidenced by corresponding developments, such as Botanique at Bartley (TOP 2019) and The Poiz Residences (TOP 2019), emerging as standout performers.

Table 1: Top-performing condominiums within 2km of selected MRT stations by volume of profitable transactions

Source: URA, ERA Research and Market Intelligence

This exceptional performance by newer leasehold developments is noteworthy, as it was achieved despite the significantly smaller number of leasehold projects compared to freehold developments in the study (148 vs. 617).

In addition to their newer completion status and convenient access to their respective MRT stations, the success of these top-performing leasehold developments is also linked to their location within popular residential areas. Due to the availability of desirable neighbourhood amenities nearby, such as shopping centres and popular primary schools, RCR and OCR leasehold projects tend to draw substantial HDB upgrader demand. This, in turn, fuels both transaction activity and price appreciation.

Likewise, buyer priorities may have played a role in shaping leasehold demand and price growth too. For instance, families opting for leasehold properties near popular primary schools may view their decision as a strategic medium-term investment, with tenure taking a backseat to the chance of being placed in a desired educational institution.

3. Freehold condominiums saw higher overall median profitability at more MRT locations than leasehold projects

Table 2: Median profits and transaction volume of freehold and leasehold residential properties within 2km of selected MRT stations

Source: URA, ERA Research and Market Intelligence

Although leasehold developments accounted for a larger share of profitable transactions, freehold properties were observed to deliver higher median profits across more MRT locations.

Out of the nine stations studied, six saw freehold properties nearby delivering fatter median profits compared to their leasehold counterparts. This trend was particularly notable for stations in city-centre locations that also saw fewer new launches. For example, near Outram Park and Great World City MRT stations, freehold properties achieved median profits of $230,000 and $350,000 respectively; this far exceeds the $93,600 and $107,000 recorded for leasehold equivalents nearby.

Conversely, leasehold properties experienced higher median profits at ‘mass-market’ locations such as Potong Pasir and Serangoon, where a larger volume of newer leasehold projects may have resulted in more transaction activity, and hence, stronger price growth.

So, what do these findings mean for the private residential market and homebuyers?

While the freehold-leasehold profitability gap may narrow further in the future, the real certainty lies in how supply dynamics will continue to influence price movements for properties of both tenure types.

On one hand, the release of more Government Land Sales (GLS) sites is expected to drive continued price growth in leasehold properties. New projects in popular areas like the future Bayshore estate and Chuan Grove are likely to spur higher transaction volumes, which would further support the price appreciation of leasehold developments in these neighbourhoods.

On the other hand, freehold properties may experience sharper price growth in the near future due to supply-side constraints. With fewer en-bloc opportunities coming to market, the scarcity of freehold redevelopment sites is expected to limit future supply. Such an outcome would result in fewer buying opportunities, and quite possibly, bigger gains for freehold property owners.

Given these equal likelihoods, the wisest course of action for today’s buyers is to base their purchasing decisions on their investment goals, rather than attempting to time or predict the market.

Ultimately, those seeking a legacy asset for future generations should find freehold properties more appealing, given their immunity to lease decay. This characteristic alone makes freehold properties ideal for long-term holds over a decade, making them relevant to buyers prioritising asset preservation and intergenerational wealth transfer.

Conversely, investors targeting medium-term horizons of 4 to 6 years may find leasehold properties more appealing – especially those in suburban locations earmarked for development under URA’s Master Plan. As amenities, connectivity, and commercial offerings improve in line with planned developments, leasehold properties in these areas or estates may see increased transaction volumes and greater resale potential in the foreseeable future.

Disclaimer

This information is provided solely on a goodwill basis and does not relieve parties of their responsibility to verify the information from the relevant sources and/or seek appropriate advice from relevant professionals such as valuers, financial advisers, bankers and lawyers. For avoidance of doubt, ERA Realty Network and its salesperson accepts no responsibility for the accuracy, reliability and/or completeness of the information provided. Copyright in this publication is owned by ERA and this publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval.