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There are two common misconceptions in the property market today: the first is that freehold properties are “better,” and the second is that old leasehold properties are to be avoided. This is based on the oversimplified notion that freehold properties “last forever” whereas leasehold properties will decline to zero.
We see this fear in public housing as well, where a common complaint is about HDB flats being a “99-year time bomb.” Reality however, is much more nuanced. A good example in District 15 are the HDB flats in Marine Parade. We will touch on that in another article.
For now, let’s take a look at at an older leasehold condo, Cote D’Azur, and examine how its performance disproves common assumptions.
The outperformance of Cote D’Azur condo
Cote D’Azur is a 612 unit leasehold condo, located along Marine Parade Road (District 15). It’s one of the closest condos to Parkway Parade Mall (right next door), and its 99-year lease dates back to July 2001. The condo was completed in 2004.
As this is a 20-year old condo with a balance lease of 76 years, many buyers will be concerned with the depreciating lease. However, let’s look at its performance:
The above shows the five-year price and volume trend of Cote D'Azur, just before Covid through to the post Covid period today.
In July 2019, the average price at Cote D’Azur was $1,268 psf. As of July 2024, this had reached $1.686 psf. This is an annualised return of about 5.86%. and an increase of 33% over the past 5 years.
Now, let’s compare Cote D'Azur to all resale condos in District 15, in which we also include freehold condos.
In July 2019, average resale condo prices in District 15 stood at $1,405 psf. As of July 2024, this average climbed to $1,810 psf. The average growth is about 29%.
This is the first point of attention to consider: whilst Cote D’Azur is an older leasehold condo, its performance at 33% growth has significantly outperformed the district average of 29%.
Now, how about comparing it to a newer leasehold condo?
One of the beliefs is that, when it comes to leasehold, newer will “always be better” as there’s less lease decay. If this is true, then we should see substantially higher returns from a much newer leasehold condo.
Silversea is located just next to Cote D’Azur. Like Cote D’Azur, it’s a leasehold condo. However, Silversea's lease commenced in 2007 (but TOP only in 2014), as compared to Cote D'Azur which has its lease commenced in 2001 (and TOP in 2004).
Back in July 2019, Silversea averaged $1,495 psf. Moving forward to July 2024, the average price has risen to $2,203 psf. This is a growth of 47% over the past 5 years, as compared to 33% for Cote D'Azur.
While the balance lease of Silversea is only 6 years more than Cote D'Azur, Silversea is completed 10 years later than Cote D'Azur.
Silversea's facade and amenities are newer as compared to Cote D'Azur (at the point of writing, Cote D'Azur is doing new tiling near the main entrance, and laying new timber deck in front of the function room).
Silversea is also more exclusive, with only 383 units sitting on a smaller land area with Gross Floor Area (GFA) of 56,821sqm, as compared to Cote D'Azur at 69,058sqm.
Being smaller and more private can lead to higher prices, or having less room for facilities can impact appreciation. But whatever the reasons, the performance of both Cote D'Azur and Silversea suggests the same point:
Leasehold condo can perform as well as a freehold condo.
Since we are on this point, let's do a comparison between Cote D'Azur and a nearby freehold condo, One Amber.
One Amber is almost similar to Cote D’Azur in size: a medium development with 562 units. It was completed in 2010, but as the point of freehold is to ignore lease decay, this shouldn’t matter too much.
Here’s how it performed:
Let’s look at the same five-year period.
As of July 2019, average prices here were at $1,599 psf. There were no transactions in July 2024, but there was a month before in June 2024 - this was at $2,021 psf.
Taking this, the annualised return would be about 4.8%, and a growth rate of 26%, as compared to 5.86% annualised return and 33% growth rate for Cote D'Azur.
Why does the performance of One Amber pale when compared against Cote D'Azur?
It’s precisely because One Amber is freehold: The prices are higher to begin with, and you need a longer period of appreciation for freehold status to truly matter (assuming the condo doesn’t go en-bloc before it starts to bite).
So again, leasehold status - even among older condos - doesn’t necessarily make them worse off.
Let’s take a moment to look at the standalone performance of Cote D’azur condo.
What I want to address here is the oversimplified notion that, for older leasehold condos, there’s no prospect for appreciation. We can see this is clearly not happening to Cote D’Azur, despite its 20 odd years.
To date, Cote D’Azur has recorded 103 profitable transactions, and only one loss. That particular loss was in October 2020, when the overall market was still reeling from Covid. In addition, the “loss” was really just the unit being sold at the same price it was bought (but we would still consider this a loss due to the lack of appreciation).
Minus this transaction, which is clearly an outlier, Cote D’Azur has an untarnished record of profitability.
Sale date | Unit size | Sale Price | Original purchase Price | Holding period |
8 Oct 2020 | 1,141 sq.ft. | $1,315 psf | $1,315 psf | Since Oct 2010 |
Let’s also look at some of the recent transactions, that occurred in this 20-year old condo this year:
Sale date | Unit size | Sale Price | Original purchase Price | Holding period | Profit | Annualised return |
21 Feb 2024 | 1,109 sq.ft. | $1,804 psf | $1,342 psf | Since Dec 2020 | $512,000 | 9.7% |
27 Mar 2024 | 1,270 sq.ft. | $2,008 psf | $748 psf | Since April 2007 | $1.6 million | 6% |
21 May 2024 | 1,389 sq. ft. | $1,894 psf | $1,318 psf | Since April 2018 | $800,000 | 6.1% |
28 May 2024 | 1,302 sq.ft. | $1,927 psf | $1,405 psf | Since October 2019 | $680,000 | 7.1% |
From here, it should be quite clear that - just because Cote D’Azur is an older leasehold condo - it doesn’t mean it’s less desirable or failing to appreciate. In fact, it appears to be one of the leading performers in District 15, even compared to freehold and newer counterparts.
Why is Cote D’Azur condo “defying gravity?”
For the simple reason that certain sayings - such as “old and leasehold is bad” - are oversimplified. Fundamental issues such as location, size, nearby alternatives, and rental (if the unit is rented out) play a huge role in performance; a role that’s usually much bigger than age and lease status.
Consider for instance the changes in District 15: the Marine Parade MRT station has just opened up in front of Parkway Parade, which by definition means that Cote D’Azur now has walking access to the TEL line. This provides a direct train service all the way to Marina Bay.
Also consider that, within District 15, there’s an abundance of highly exclusive, freehold and boutique condos (by which I mean projects that have very small unit counts, such as 50 or below). While these are great for those like privacy and exclusivity, it also means that projects like Cote D’Azure are well differentiated: Boutique projects tend to have smaller facilities, whereas full size condos like Cote D’Azur have space for more (tennis court, large pool, proper sized clubhouse, etc.)
We also need to factor in the nearby HDB flats, of which Marine Parade is a particularly famous enclave. Having HDB flats within a kilometre of a condo can greatly improve resale prospects. This is because HDB upgraders tend to look for condos that are at least similar in size to their flats, and that are also close to the locations they’re familiar with. For the Marine Parade enclave, that makes Cote D’Azur a near-perfect choice. Many will be moving closer to Parkway Parade and the train station, without a compromise on size (as newer condos tend to be smaller).
As for those who intend to rent out the unit, remember that tenants don’t care about your lease status, and won’t pay more rent for freehold
District 15 is a well known expatriate enclave, especially near the Parkway Parade area. If you intend to capture this market, bear one thing in mind: a leasehold condo in the same location can generate the same amount of rent as a freehold one.
There’s no reason for a tenant to pay more for freehold status, as it has no bearing on them. Therefore, the higher cost of a freehold condo will simply translate to lower rental yields. Couple this with the greater room for appreciation, and you’ll see why seasoned landlords look at far more details than just lease and age.
If you’re interested in the District 15 or 16 areas, and you’re looking for hidden gems in these neighbourhoods, reach out and I can help you find the right property assets for your portfolio.
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About The Author
Vivian joined the real estate industry in 2002.
Over the years, she has transacted numerous property deals, including HDB and private properties. She is well-versed in policies and regulations involving selling and purchasing residential properties. She has also handled complicated transactions like contra, divorce, administration/probate cases, and decoupling / part-share purchases.
Aside from her professional achievements, Vivian is a dedicated mother to 2 boys. Her role as a real estate mom has allowed her to strike a balance between her career and family, spending quality time with her children as they were growing up. Both boys are passionate footballers, and she takes great joy in supporting them at their school and club games.
Vivian is an active real estate salesperson and team leader. Call her at 98577714 for your real estate matters or if you are looking to join the industry.