Freehold Property Property

Leasehold Vs Freehold

As a real estate profession, whenever I bring the buyer to view a private property, I will receive the question from seven out of ten of the buyer, is this a “leasehold or freehold” property.

Private resident property in Singapore generally can be categories into two broad areas. The leasehold and freehold. In leasehold, most of the property can be either 99, if not 999 years.

So, which is better? Leasehold or freehold. I think this is a straightforward Answer. Of cause is freehold. It is a response that does not require too much thinking.

Technically, the freehold land, the owner can hold it forever, with no end-date to it. He can also, if he decided to do so, pass that ownership to the next generation and after.

999 leasehold, is somehow similar to freehold. The end date of the property has 1000 years before the lease ended. The owner can therefore able to pass down to 10 generations.

Why are buyers so concern about the tenure of the property, rather than the land? Do leasehold and freehold matter? To me, it does make some implication, but land tenure should not be the critical consideration when buying any property

Let us now dive into more detail on the pro and cons of both leasehold and freehold (I will categorize 999 years leasehold with freehold)

Freehold during Collective Sales

When a project is undergoing a collective sales (or, it is more layman to call it as En-bloc sales) process, which is an option that normally benefits the owner from a financial perspective.

In any collective sales, the project will normally be over 10 years of age from TOP. some of which might go as high as 30 years of age.

Lease Top-Up

Developers who involved in the collective sales will have to top-up the lease, to bring it back to 99 years. So as the value of the property is at the market when they start selling it. This top-up amount can be as high as hundreds of million.

Taking Mandarin Gardens, for example, the project has passed its 34 years of age as of 2020. The developer, in addition to the purchase of the land, will have to pay a lease top-up fee of over $300 million

With that into consideration, the developer will either offer a lower price to the current owner or potentially sell at a higher price to new development. My personal take for this is, I will rather buy low, rather than trying to sell high after development

Appreciation rate

While touching the pulse of the property market. I realize the appreciation rate of leasehold property has interesting came higher than freehold property

Statistically, it was also second to my groundwork. One of the key reasons, I felt is, there is more leasehold property as compare to freehold. Most of the leasehold property land today is closer to the key transport hub, shopping mall, and other amenities

Financing on leasehold property

With the remaining lease of the property going lesser and lesser, the government will realized obtaining the loan became more and more challenging.

Therefore, The National Development and The Ministries of Manpower, has on the 10th May 2019 updated the rules on both HDB (Housing and Development Board) and CPF (Central Provident Fund) on the usage fund in OA (Ordinary Account).

The key changes to the rule are, the total CPF can be used will depend on the remaining lease of the property and the age of the youngest buyer. This is, the remaining lease of the property must able to cover the youngest buyer to the age of 95.

In additional to above, NO CPF is allows to be used, if the remining lease of the property is less then 20 years.

The remaining lease is more than 20 years for those properties, but it does not cover the youngest buyer to the age of 95. What happens? The CPF used will be pro-rated accordingly by the authority.

Continue transfer of ownership

All properties, be it leasehold or freehold. The transfer of ownership is possible. Why was this being taken as consideration was, for a leasehold property, especially 99 years leasehold property? The effective stay-in period is less than 90 years.

Why is it lesser? The reason being that the development will take a few years before the owner starts to move in and stay. The leasehold property lease starts when the land is sold, not when TOP (Temporary Occupation Permit) or CSC (Certificate of Statutory Completion).

Therefore, when the transfer of ownership going to happen, we will need to look into the remaining lease. It might just for two-generation and this might not be enough, especially for landed property, which normally will pass on by generation.

For freehold property, the above consideration will not be required. It can be passed on generation after generation. The taking over a generation can then continue to do any renovation, Additions, and Alterations works (A&A) or rebuilding to upkeep the property.

I will hereby want to put a caveat here, Singapore does have the LAND ACQUISITION ACT (CHAPTER 152). Whereby the private land can be acquired by necessary authority for the purpose of public purposes

Rental Yield

Having to share above, the various benefit of buying freehold property over leasehold property. Is it true that there is nothing comparable between both?

The answer is no, there is still benefit, if not equal fairness on both freehold and leasehold.

Rental Yield, for example, the tender age of the property has a minimum, if not no impact on the rental yield. One of the key parameters when it comes to rental is the amenities.

As we all aware, most of the units being rented out are taken by foreigners. Since this is not their homeland, they will be looking at accessibilities to malls, public transport, and rental amount.

Investor

In property investment, or any investment. There are long-term and short-term investors. When it comes to property investment, many of the investors are more looking at the short term. This group of investor are looking at a “hit and go” type of approach

As Singapore property transaction has SSD (Seller Stamp Duty), whereby the property purchased if sold within three years, there is an SSD imposed a minimum of 4% on the actual transacted value or market value whichever higher. There will be a minimum holding period of the property. This can be overcome when they bought a brand new property

During the brand new unit’s purchase, the investor will start to make their progressive payment, which is not the full repayment. By the time the unit got its TOP, it will likely be approaching the third year.

They will now sell the unit in the open market and profit from the sales without liable for the SSD. Assuming the market is in a healthy state.

Conclusion

There are generally two categories of buyers: buying for own stay, and the second type buying as an investment.

Be it which categories you are. My most humble suggestion is to look at the property with the following priorities

Amenities

You can do any renovation for your property, but you can’t bring an MRT station, bus interchange, or mall near your place. You might be driving today, but there will come a time that you want to hop onto public transport.

Potential Growth

What and how to determine that. My suggestion will still be the development of the area you bought. If there are a transport hub or mall around, the chances of your property dropping below market value are very slim.

This is also the same selling point, in the event you wanted to sell your property

Leasehold or Freehold

I have shared earlier, and both freehold and leasehold are comparable unless you really wanted to hold the property generation after generation.


Lewis Tee - Real estate agent buying selling renting

If you have any more queries. Do contact me now. Click here to send me a WhatsApp.

Not forgetting, leasehold or freehold is the age of property, but to move ahead, there are more to consider.

Let discuss and see what option you have. Property Wealth Planning if what you need, not just buying and selling

Buying Selling Renting General Topic

Why Company Should Consider Deploying SD-WAN

In a rapid growth of application in fulfilling the business needs. the requirement of bandwidth became higher and higher. Also, due to the increase in globalization for many businesses around the world. Connectivity became a must-have and no longer a nice to have services.

Since 2010, SD-WAN became a very widely spoken term mentioned. What is SD-WAN? SD-WAN – Software-Defined Wide Area Network

SD-WAN is a technology that was implemented on an enterprise WAN, to effectively communicate between various sites across the world.

SD-WAN

Compared with the traditional WAN connectivity, such as MLPS (Multi-Protocol Label Switching) connectivity. SD-WAN connectivity provides a more cost-effective and investment productive returns, as compared to the MLPS, which cost easily 4 digits per month, in Singapore Context.

Benefit of SD-WAN

SD-WAN investment

Lower Cost

Why SD-WAN is able to deliver a lower cost. One of the key reasons is, SD-WAN is software-driven rather than hardware. It operates as a configurable service over the physical Internet connection.

Traditional MPLS required an additional connection for the WAN. Also, the circuit cost for MPLS, in general, is higher as compared to the internet circuit. Since all company already has an Internet connection established. SD-WAN can run over the same internet connection, thru reduce the investment on two connectivity charges.

In the Singapore context, Telco in Singapore does provide private WAN Connection between various sites. SD-WAN will be a good approach to establish cost-saving the same time, free corporate from the “lock-down” contract by the telco.

Some companies do subscript a backup link for the purpose of BCM (Business Continuity Management). The company is paying, in addition, about 75% of the line cost. This investment is to “reserves” the connection, in case it is required. With SD-WAN, we can deploy a 4G, in today’s Mobile Network and 5G, which is the next generation Mobile Network as standby connectivity.

Higher Flexibility

Unlike MPLS, SD-WAN uses software definition. This allows the flexibility to configure how the routing can be determined.

In addition, as it runs over the existing Internet connection. The software defines feature allows the control of security, plus a single control console to monitor the uptime of the connectivity.

Business Continuity Management

SD-WAN, having dynamic in nature, businesses are in control of the traffic and how information is to flow in the network. This control can also define, the flow of traffic under certain conditions including a total outage situation.

Software-define, which means we can invoke the BCM plans which give priority to applications and/or user. Thus ensuring the business remains operational. Should the users are not able to work on-site, The connection via SD-WAN can be used with the selected applications. Depending on the organization IT policy and security.

Better Application Performance

Application is the key baseline of any business today. If the application is not functioning. Many if not all the business function will be severely affected.

If the performance of the application is slow. The productivity will drop and resulting in a drop in company profit. Today, many companies are running applications from the cloud. Connectivity and performance are the primary needs.

With globalization, the deployment of the application is commonly in the cloud instance. Each and every site office will be accessing it through their respective location. Should the stability of the connection is not dynamic. The impact on application performance is severe.

Vendor Neutral

With the deployment of SD-WAN. There is no “lock-down” to a single vendor the solution.

The hardware platform, can be of different vendors and switch to another if there is a better one in the market,

This option allows an organization to determine, which is a better and most cost-effective solution. In the computation of ROI (Return Of Investment).

Especially in a retail or distribution frontage operational environment such as Supermarket, Food Chain operator, etc.. where the connection is required. Using public connection operating in this environment can potentially post a risk on infrastructure security.

Centralised management

Regardless of how many site you have, to be established using the SD-WAN technology. All the SD-WAN management can be centralised. Having to be centralised, this made the configuration across various sites faster and more effective.

Being centralised, it also allows templates to be created for each site. This templates will share the same routing policies accordingly.

With these assignments of templates to multiple sites, policies can be defined and the network manager is able to apply changes to the various sites easier and a single click. The configuration for these can be determined almost close to real-time.

Visibility On The Network

Having to establish the connection via a single link out. You can decide, which of the connection have higher bandwidth and which has lower. It allows better control on the usage and higher bandwidth is being allocated to the more critical application

Time to Deployment

Since the deployment has been completed. Any additional required, being a Software-Defined solution. It will be just configuration on the existing template.

This made the requirement to market much faster. There is no requirement to wait for the lead time of any hardware.

Cloud Ready

Organization todays are increasingly adopting the use of cloud services. One of the feature of SD-WAN is, it allows direct access to the cloud at the remote branch. This will reduce the amount of routing of traffic between cloud and office through the data center.

Which means user accessing the cloud application can access directly, without the needs of going to your office or data center network. Thus reduce the overhead in the bandwidth in the office network. It also reduces the risk of security in the office environment.

Reduce Design Complexity

There is more and more organization moving into digital transformation. The implementation of a transformation solution can potentially add complexity to the network.

This results in, not only poor network performance but also additional resources to manage the on-site and remote site, to manage the infrastructure.

The use of SD-WAN overcome this. It off-loads those non-critical business applications and gives priority to those that are mission-critical.

SD-WAN is not perfect. Although there a long list of benefit in using SD-WAN, there are also the flip side on it.

Disadvantage of using SD-WAN

Adoption

Although SD-WAN been in the market for some time. It is still not very widely adopted in any organization.

Today’s organization is still very much rely on old technology, which mainly MPLS. For those organization that are more tech fronting, they will take the approach of a hybrid model, to ensure continuity is there, before the full cut-over

Ownership of design

SD-WAN, being a software define solution, is mostly a Self Service operation. That means the IT professional in the organization will require the skillset to build and maintain.

Of cause, this can be outsourced to 3rd parties vendors to do the job. But in the end, it is still the responsibility of internal IT forks to decide how and what the flow should be.

Should you decide to pass everything to an external vendor, the saving of the deployment might not able to cover the resources from the vendor in providing and maintaining it.

Performance

Although there are benefits, that you can allocate bandwidth by the respective application. There is still a possibility of jitter and loss of network packet during transmission.

Continue monitoring of the network, especially during the initial implementation of any application, is important. This is to ensure, the newly deployed solution does not affect the existing application flow.

Network Security

SD-WAN is still more at the network layout. There is no security feature that comes with SD-WAN.

Should this approach of deployment is adopted, the is a requirement to look into how security can be deployed to ensure minimum risk on network vulnerability

Approach to SD-WAN

Although there is a long list of benefits to moving into the SD-WAN solution. There are also some limitations or disadvantages of taking into consideration.

From the infrastructure point of view, the decision to deploy SD-WAN has to think through seriously. Identifying the benefit and finally, the approach of migrating to SD-WAN.

Should the migration of from current to Hybrid model, cut-over by site, or big band and migrate over. The decision on what is the bandwidth to support the SD-WAN after migration should also be taken into consideration

Lastly, there are many different types of products made available in the market, for the deployment of SD-WAN. Personally, I will suggest looking into the SD-WAN equipment that has embedded with the Firewall feature. This will be an add-on to the SD-WAN solution. to overcome the gap of security.