Why did 99-year leasehold condos outperform freehold condos?

In recent years, 99-year leasehold condos have outperformed freehold condos in several aspects, challenging the conventional belief that freehold properties are always the better option. Here are some key reasons:

Rapid Appreciation

99-year leasehold condos, especially those in newer projects (less than 20 years old), have shown more rapid appreciation in value. On average, these condos yield returns that are three times higher than those of freehold condos for projects less than 10 years old.

Lower Entry Price

Leasehold condos typically have a lower entry price compared to freehold condos, making them more accessible to buyers. This lower initial cost can lead to better gains as the property appreciates over time.

Market Dynamics

Factors such as the disparity effect, where the price difference between leasehold and freehold properties in the same enclave can influence buyer preferences, have contributed to the outperformance of 99-year leasehold condos. In some cases, 99-year leasehold condos are even selling at higher prices per square foot than their freehold counterparts due to their desirability and market demand.

En Bloc Potential

Leasehold condos can yield more profit for homeowners in the event of an en bloc sale compared to freehold condos. This potential for higher returns through en bloc sales adds to the attractiveness of leasehold properties.

Stability During Economic Downturns

While freehold condos are generally considered a safer option during economic downturns due to their stable returns and lower volatility, the current market dynamics have shown that 99-year leasehold condos can still perform well and even outshine freehold condos in certain enclaves.

These factors collectively contribute to the outperformance of 99-year leasehold condos over freehold condos in specific market conditions.