Can old leasehold condos still be profitable? A case study of 355 leasehold condos

Can old leasehold condos still be profitable? A case study of 355 leasehold condos
PHOTO: Stackedhomes

The perspective on leasehold condos has been changing in recent years. Homebuyers are a little less hung-up on freehold status; that's thanks to the high freehold premium and the realisation that many condos go en-bloc long before it matters.

But this doesn't change the fact that leasehold condos do depreciate over time — and many buyers still want to know what they can expect. So we took a look at the performance of older leasehold condos over the years:

Looking at older leasehold condos

For the following, we looked only at condos with 99 to 103-year leases. This covers 355 condos, with 61,766 transactions. 

First, let’s look at the average price per square foot of a leasehold condo, based on age:

Years/Age Less Than 10 Years Old Less Than 20 Years Old Less Than 30 Years Old Less Than 40 Years Old Over 40 Years Old Grand Total
2014 $1,356 $1,038 $900 $872 $870 $1,276
2015 $1,344 $1,033 $911 $828 $908 $1,222
2016 $1,384 $1,016 $854 $762 $816 $1,247
2017 $1,438 $1,019 $897 $805 $875 $1,272
2018 $1,408 $1,051 $959 $946 $1,007 $1,252
2019 $1,416 $1,059 $971 $976 $1,078 $1,242
2020 $1,363 $1,038 $940 $918 $944 $1,208
2021 $1,365 $1,101 $1,019 $987 $1,043 $1,251
2022 $1,462 $1,214 $1,134 $1,071 $1,124 $1,361
2023 $1,583 $1,342 $1,232 $1,175 $1,230 $1,465
2024 $1,606 $1,398 $1,279 $1,206 $1,159 $1,504
Grand Total $1,410 $1,100 $991 $931 $997 $1,283

So those of you looking for a quantum of under $1.5 million (affordable to many HDB upgraders), do take note: you probably can get a 1,000 sq ft unit, if you’re okay with a resale condo in the 20+ year age range. 

Now let’s look at percentage gains or losses in price psf, based on age

Years/Age Less Than 10 Years Old Less Than 20 Years Old Less Than 30 Years Old Less Than 40 Years Old Over 40 Years Old
2015 -0.9per cent -0.4per cent 1.3per cent -5.0per cent 4.4per cent
2016 3.0per cent -1.7per cent -6.3per cent -7.9per cent -10.2per cent
2017 3.9per cent 0.2per cent 5.0per cent 5.7per cent 7.2per cent
2018 -2.1per cent 3.1per cent 7.0per cent 17.5per cent 15.1per cent
2019 0.6per cent 0.8per cent 1.3per cent 3.1per cent 7.0per cent
2020 -3.8per cent -2.0per cent -3.2per cent -5.9per cent -12.4per cent
2021 0.1per cent 6.1per cent 8.4per cent 7.6per cent 10.5per cent
2022 7.1per cent 10.2per cent 11.3per cent 8.5per cent 7.7per cent
2023 8.3per cent 10.5per cent 8.6per cent 9.6per cent 9.5per cent
2024 1.4per cent 4.2per cent 3.8per cent 2.7per cent -5.7per cent
Grand Total 1.77per cent 3.11per cent 3.71per cent 3.58per cent 3.31per cent

For the newest ones (10 years old or under), the gain is due to the shorter holding period. But we can see that older leasehold condos do continue to show gains, even after 20, 30, or 40 years and beyond. 

Here’s a look at average profits based on age:

Years/Age Less Than 10 Years Old Less Than 20 Years Old Less Than 30 Years Old Less Than 40 Years Old Over 40 Years Old Grand Total
2014 14.5per cent 8.9per cent 13.0per cent 18.0per cent -0.5per cent 13.6per cent
2015 13.1per cent 15.2per cent 18.6per cent 26.0per cent 22.0per cent 14.2per cent
2016 15.7per cent 18.6per cent 21.9per cent 31.5per cent 23.6per cent 16.9per cent
2017 13.9per cent 22.4per cent 23.8per cent 29.8per cent 17.8per cent 16.9per cent
2018 13.1per cent 20.1per cent 22.6per cent 18.9per cent 26.7per cent 15.8per cent
2019 19.1per cent 27.4per cent 27.9per cent 20.4per cent 24.5per cent 22.0per cent
2020 23.9per cent 34.7per cent 30.7per cent 37.5per cent   27.5per cent
2021 21.4per cent 30.4per cent 33.5per cent 19.9per cent   25.0per cent
2022 8.5per cent 37.8per cent   3.5per cent   15.6per cent
2023 -0.4per cent         -0.4per cent
Grand Total 14.8per cent 18.8per cent 21.4per cent 25.5per cent 18.2per cent 16.3per cent

The above includes only condos bought and sold between 2014 to 2024. 

The gains do get noticeably weaker once a project is past 40 years, and one possible reason is the financing issues:

Once a project has 60 years or less remaining, banks often lower the maximum loan quantum (e.g., buyers may only be able to borrow up to 55 per cent of the value, instead of the usual norm of 75 per cent). This means a higher cash outlay for the oldest condos, which can pull prices down. 

Another point of note is that 40+ year-old condos are quite rare — most projects tend to go en-bloc before that stage. As such, there’s also a much lower volume of transactions for these units.

Next, we take a look at how location plays a role. Here’s the performance by district:

Years/District D1 D2 D3 D4 D5 D9 D10 D11 D14 D15 D16 D17 D18 D19 D20 D21 D22 D23 D26 D27
2014 25.0per cent 33.8per cent     16.2per cent -2.6per cent 17.8per cent -3.9per cent 0.0per cent 15.2per cent 12.1per cent 28.4per cent 1.4per cent -9.5per cent 36.3per cent 27.9per cent 19.5per cent 9.9per cent 23.0per cent 9.0per cent
2015   23.7per cent 24.8per cent 26.7per cent 6.8per cent   20.1per cent 23.5per cent 4.6per cent 24.7per cent 18.0per cent 21.5per cent 12.5per cent 42.0per cent 21.8per cent 19.7per cent 27.1per cent 11.9per cent 21.8per cent 6.9per cent
2016   12.1per cent 24.4per cent   18.3per cent 44.1per cent 14.5per cent 39.2per cent 31.0per cent 25.4per cent 29.0per cent 15.9per cent 19.8per cent 12.6per cent 62.2per cent 30.7per cent 32.0per cent 17.7per cent 6.3per cent 17.6per cent
2017   4.0per cent 19.3per cent   18.9per cent   26.9per cent 28.7per cent 18.5per cent 30.0per cent 29.7per cent 33.1per cent 17.9per cent 35.6per cent 30.2per cent 29.1per cent 27.3per cent 26.0per cent 26.6per cent 12.0per cent
2018         19.0per cent   16.9per cent 24.2per cent 15.0per cent 18.2per cent 21.8per cent 37.8per cent 14.4per cent 18.0per cent 20.6per cent 38.9per cent 29.6per cent 18.0per cent 33.3per cent 18.6per cent
2019   14.4per cent 19.8per cent   24.2per cent 1.7per cent   24.1per cent   20.8per cent 24.6per cent 26.7per cent 21.2per cent 63.2per cent 17.5per cent 13.2per cent 16.6per cent 34.8per cent 46.4per cent 26.2per cent
2020 48.0per cent           26.4per cent     24.3per cent 44.6per cent 33.6per cent 37.7per cent 45.4per cent 29.0per cent   36.6per cent 26.1per cent   41.6per cent
2021         25.7per cent         24.3per cent 34.0per cent   28.3per cent           50.6per cent  
2022                   1.2per cent           5.8per cent        
Grand Total 36.5per cent 14.9per cent 22.4per cent 26.7per cent 18.0per cent 10.1per cent 20.6per cent 23.1per cent 17.1per cent 23.3per cent 25.8per cent 29.6per cent 14.2per cent 29.3per cent 29.8per cent 27.2per cent 25.5per cent 18.6per cent 28.9per cent 15.1per cent

Unfortunately, not much is revealed as districts are not like HDB towns. They are quite wide-ranging, which makes it hard to generalise factors — and the distribution of condos across districts is much less even, with some districts having low transaction volumes.

As an example, here are the transaction volumes:

Years/District D1 D2 D3 D4 D5 D9 D10 D11 D14 D15 D16 D17 D18 D19 D20 D21 D22 D23 D26 D27
2014 1 1     7 2 2 3 1 15 9 4 12 2 5 7 12 9 4 5
2015   2 4 1 4   6 1 1 16 15 1 7 6 4 7 5 5 6 4
2016   1 4   8 1 3 2 2 19 20 1 8 3 1 5 7 13 2 4
2017   3 5   11   4 7 10 25 37 5 14 2 5 9 11 10 5 4
2018         5   1 2 6 16 18 1 4 1 2 4 2 10 7 5
2019   2 1   5 1   6   6 11 1 4 1 1 1 2 3 4 2
2020 1           1     7 6 1 1 1 4   1 1   1
2021         1         2 1   1           1  
2022                   1           1        
Grand Total 2 9 14 1 41 4 17 21 20 107 117 14 51 16 22 34 40 51 29 25

Nonetheless, we can see some interesting quirks. A significant portion of condos 30+ years old (224 of 635 transactions) come from Districts 15 and 16, which are the areas of Marine Parade and Bedok (including the stretch of Upper East Coast). 

There is a higher concentration of older properties here, with about a third of them being in the 30+ age range. The locations here also seem to see better performance, but it's unclear if this is related to the age issue — it may also be down to the individual quirks of the condos here. 

We can also conclude that, even in districts with low transaction volumes, the relative performance of older leasehold condos is still decent. 

Contrary to common fears, leasehold condos don’t start plummeting in value as soon as they reach 20+ or even 40+ years old.

This could be due to us having never actually seen a condo reach the end of its lease. We've only seen residential properties reach the end of their lease once so far, and those were not condo developments. 

There seems to be a general assumption that an en-bloc will happen before that, thus providing an exit plan for even the oldest leasehold condos. It's a bold assumption, but it's one that hasn't been proven wrong so far. 

It's certainly an issue to think about in 2024, when new launch prices are still high, and freehold status could add a premium of over 15 per cent on top of that.

ALSO READ: Where have freehold/leasehold condo prices dropped the most in 2023/24?

This article was first published in Stackedhomes.

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