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The Shore Residences and Converted Freeholds (Part 2)

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Continuing from Part 1, I will discuss about the 2nd point on whether the price gap between freehold and leasehold properties which may disappear during good times, but will appear as property ages is indeed true.

The statement makes sense. Buyers would naturally value a freehold property over a leasehold one, specifically a 99-year leasehold (999-year leasehold properties are as good as freehold in my book), since you get to keep it forever. However empirical evidence is needed to show how price gaps change over time. Due to insufficient data and time (Singapore is only 45), we can only really test the 1st part.

Firstly, The Shore Residences is not the first freehold conversion. Is there another freehold project that was converted to a 99-year leasehold? What other freehold-leasehold pairs are there with enough data to compare with? And lastly the sales data must go through 2006 – 2007 which is the period of Singapore’s recent property bubble or the good times.

1. District 10 – Jervois Jade (Converted freehold to 99-year leasehold vs Valley Park (999-year leasehold)
2. District 21 – Pine Grove (99-year leasehold) vs Pandan Valley (Freehold)

Round 1: Jervois Jade vs Valley Park

Jervois Jade and Valley Park are located in River Valley at the point where Jervois Rd, Delta Rd and River Valley Rd meet. Jervois Jade is on a freehold site but the property was converted to a 99-year leasehold. It is the apartment awkwardly shaped like a thin slice of cheese. I’m not 100% certain about the freehold conversion so do leave your comments. Valley Park on the other hand can be prominently seen from the main road by looking for the only Starbucks in the area.

Valley Park was constructed in 1997 while Jervois Jade was only completed in 2000, so our comparison goes back just 9 years. Clearly we are not comparing like for like here. Jervois Jade is a smallish 45 unit apartment while Valley Park is a 728 unit condo with full facilities and even a shopping centre, but the sales data over the years shows a remarkable similarity.

Jervois Jade vs Valley Park

The sales data have been smoothened for clarity and the price gap is the $ psf difference between Valley Park and Jervois Jade. As you can see from the stability of the price gap, there is a baseline level at $200 psf where I drew in a trendline so it can be seen better.

According to the article, The price gap between freehold and leasehold properties which may disappear during good times.

As such, one would expect the price gap to dip below the trend line and approach $0. The results show this is to be untrue! In fact the gap had widened during the property boom from $200 to as much as $500 psf during the property boom. As that bubble burst, the price gap then reverted back to the baseline level before widening again with the new rising trend. It seems that property buyers still prefer freehold over leasehold properties during the good times.

Round 2: Pine Grove vs Pandan Valley

Pine Grove and Pandan Valley are located along Ulu Pandan Rd. Pine Grove, once a HUDC now a privatised condominium and waiting for en-bloc. Pandan Valley, built in 1979 and older than me, is a full facilities freehold condominium. Both have over 600 units and over 25 years of history, so we have a nice set of data to work with.

Pine Grove vs Pandan Valley

Firstly, we can draw in a trend line at $140 psf where prices had found support. What is different from the Jervois Jade chart is that there were 2 significant dips in ’06 and ’08 where the price gap broke the trend line and came as low as $40 psf. The dips also corresponded first with the property boom and then with price decline in ’08. Unlike Jervois Jade, the price gap did return back to the trend line level.

This is significant as even in declining property prices, the price gap had also decreased. Being leasehold we expect Pine Grove to fall in line with Pandan Valley, perhaps falling even more as its demand is less inelastic. Another factor is at work here to keep prices supported at $600 psf – En-bloc speculation. Pine Grove much like Gillman Heights is sitting on a huge and lucrative morsel of land, which can be profitably redeveloped.

En-blocs are directly correlated to economy strength, i.e. the good times. The link is that en-blocs require a lot of capital, in the hundreds of millions. For a project like Pine Grove  if say every owner gets paid $2 million, the developer would have to pay out $1.32 billion. Such credit can be loaned from the banks more easily at low rates during economic expansion than in crisis. As we recently seen in ’09, tightening of bank lending meant there was only 2 en-blocs the whole year.

So en-bloc speculation might explain the difference between the 2 charts, but there are similarities as well. You can see that after the dip in ’06, the price gap again spiked to $400 psf and then declined, much like Jervois Jade above it still follows the economic cycle. So buyers still seem to prefer freehold over leasehold properties during good times, unless there is en-bloc potential.


As the results show, during the good times of property boom, the price gap actually widened significantly instead of disappearing. For the gap to decrease, as the price of the freehold property increases, the price of the leasehold must increase even more. The charts showed that both leasehold properties increased less than their freehold counterparts, apart from dips which might be explained by the en-bloc potential of the leasehold property.

I feel that owners of Pine Grove should note when these dips occur where Pine Grove and Pandan Valley prices are almost par. Sell your property then and buy a freehold unit. Returning to The Shore Residences, there is uncertain en-bloc potential for the site, so that is a loss of capital appreciation potential by purchasing a converted freehold, on top of the high valuation Far East has attached to the project.

Do your own research. If you own a leasehold property with similar freehold properties in the area, you might find that they have sales data with the same characteristics as the properties above. That might give you an edge in timing the sale of your property and getting a freehold unit that lets you fully participate in a property market boom.


Written by L

January 11, 2010 at 6:17 pm

The Shore Residences and Converted Freeholds (Part 1)

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Back for the new year, I noted a Straits Times article on 3 Jan, “Freehold better than Leasehold?”  where Joyce Teo talked about the emerging trend of buyers preferring leasehold to freehold properties with The Shore Residences as a case in point.

Originally a freehold plot, Far East Organisation repackaged the former Rose Garden site as a 103-year leasehold property. This means that the property returns to them at the end of the lease or at such point when Far East wishes to collectively repurchase it from the owners.

In the article, Joyce mentions 2 points that are rather interesting.

  1. The developer cannot yet get the full value for the property. (The 10-15% premium that freehold properties have over similar leasehold properties)
  2. There is a price gap between freehold and leasehold properties which may disappear during good times, but will appear as property ages.

For brevity, in Part 1, I will talk about the property’s full value and Part 2 will be more data-centred on the above price gap.

The Shore Residences at the preview in early December was priced at about $1,200 psf, so according to the article,  full value can be considered $1,380 ($1,200 * 115%) psf. Using that as the basis of comparison, lets look at the freehold and leasehold properties in the area to see if Far East indeed did not yet realised the value of the property.

Nearby projects,

  • Silversea (Far East Organisation, 99-Year): Tower 3 & 4 units are priced as a staggering $1,500 psf. However it is positioned as a luxury project with a magnificent sea view to boot.
  • One Amber (Brendale, Freehold): Highest sales by psf in December and November were $1,150 and $1,250 respectively, and for high storey units (20+).
  • The Esta (Richdeal, Freehold): The Esta sold between $1,050 and $1,200 psf during the last months of the year. It did peak at $1,334 psf during August.
  • The Sea View (Wheelock Properties, Freehold): Sold in December and November at $1,350 to $1,400 psf. It is arguably the most luxurious of the new projects along Amber Road.
  • Cote D’Azur (Fraser Centrepoint Homes, 99-Year): Its sale price hovers about the $1,000 psf mark. And being leasehold, it is the closest condo to The Shore Residences.

First off, Far East Organisation agents would surely tell you that compared to Silversea, The Shore Residences is some 20% cheaper. It may not have a view to East Coast beach, but comes with a man-made private beach built-in. Unfortunately because of slight but significant location difference, Silversea is not an ideal comparison. However, the fact that Silversea has sold out Towers 1 & 2, The Shore Residences could be worth more than the $1,200 might suggest.

Next the Amber Rd projects of One Amber, The Esta and The Sea View. It is clear that The Shore Residences is practically priced the same as both One Amber and The Esta. Having not seen the showflat, I cannot comment about their build and features similarity. But using full value as $1,380, then Shore Residences is considered by Far East to be closest to The Sea View levels. Realistically, I think that buyers would compare it to One Amber and The Esta, its closest neighbours.

Lastly we have Cote D’Azur, a 99-Year condo just a few blocks away at Marine Parade Rd. At $1,000 psf if we add the 15% premium put forth by the article, a freehold Cote D’Azur could be valued at $1,150. And that is just about right. One Amber and The Esta both averaged $1,150 during the last 2 months of the year. The Shore Residences, at 104-Year is remarkably priced closer to $1,200 and will likely be priced higher still once sales are open to the general public.


I dare say that The Shore Residences is already fully valued at freehold levels when released. Market buoyancy and economic optimism is doing its part to keep the leasehold and freehold price differential at a minimum. Far East Organisation has not only cleverly sold the project as “Buy 99 years and get 4 years free” while getting freehold value, the lease allows them to keep the land as an asset in their balance sheets and also participate in its future development.