Freehold vs Leasehold Shophouses in Singapore: What Buyers Should Know

Singapore's conservation shophouses are architectural gems that blend heritage with modern-day investment appeal. For many high-net-worth individuals, investors, and business owners, owning a shophouse is both a strategic asset play and a lifestyle statement. But a key decision point when buying a shophouse is the tenure: freehold or leasehold.

🏛️ Types of Shophouse Tenure in Singapore

There are three main types of tenure for conservation shophouses in Singapore:

1. Freehold – Ownership is in perpetuity. You hold the property forever, which gives peace of mind and strong resale value.

   
   

2. 999-Year Leasehold – For practical purposes, this is considered "as good as freehold" due to the long remaining lease. Prices often match freehold values.

   
   

3. 99-Year Leasehold – Most common in government land sales and newer developments. Value may depreciate as the lease runs down, especially beyond the 40-year mark.

   
   

📍 Where Are 99-Year Leasehold Shophouses Commonly Found?

99-year leasehold conservation shophouses are mostly found in Singapore’s central districts, where land is scarce and highly sought-after. These include:

• District 1: Chinatown, Telok Ayer, Boat Quay, Raffles Place

  
  

• District 2: Tanjong Pagar, Outram

  
  

• District 7: Bugis, Beach Road

  
  

• District 8: Little India, Jalan Besar

  
  

While these areas are leasehold-heavy, they remain attractive due to their strategic location, vibrant commercial activity, and strong tenant demand.

Here’s a breakdown of the pros and cons of each to help you make a better-informed decision.

Freehold Shophouses

Pros:

• Perpetual Ownership: You own the land and property indefinitely, offering long-term security.

  
  

• Stronger Capital Appreciation: Freehold properties are generally more sought after and retain value better over time.

  
  

• Desirable Legacy Asset: Freehold shophouses are ideal for multi-generational wealth planning.

  
  

• Better Marketability: These units tend to be more attractive to local and foreign investors.

  
  

Cons:

• Higher Entry Price: Freehold shophouses often command a premium compared to leasehold counterparts.

  
  

• Lower Rental Yields: Due to the higher capital cost, yields may be slightly compressed.

  
  

Leasehold Shophouses ( Typically 99 )

Pros:

• Lower Purchase Price: More accessible for investors or business owners with budget considerations, average transacted prices from $3,000PSF vary depend on the remaining lease.

  
  

• Potential for Higher Rental Yields: Lower acquisition cost means potentially better returns.

  
  

• Attractive for Short- to Mid-Term Investment: Good for those looking to reposition and exit within a few years.

  
  

Cons:

• Depreciating Asset: Value may decline as the lease shortens, particularly under 30 years remaining.

  
  

• Bank Loan Limitations: Shorter lease tenure may limit financing options.

  
  

• Resale Challenges: Harder to sell as the lease term diminishes.

  
  

📊 Market Considerations

In Singapore's prime districts like D1 and D2, many recent transactions have crossed $10,000 to $12,000 PSF (based on land area) for freehold units. Leasehold units, while more affordable, are becoming more selective buys due to rising interest rates and narrowing yield margins. Nonetheless, for opportunistic investors or end-users who want prime location access at a lower cost, leasehold can be a smart entry point.

💡 Final Thoughts

There is no one-size-fits-all answer when it comes to choosing between freehold and leasehold shophouses. It depends on your investment horizon, financing ability, and long-term goals. Freehold units offer legacy and stability, while leasehold units offer affordability and flexibility.

Leasehold Shophouses in Prime Districts

If you’re facing budget constraints but still wish to own a shophouse in prime District 1 or 2, here are some considerations:

• Look for leasehold shophouses with at least 60 years remaining – These can still attract good rental yields and are more affordable than freehold options in the same area.

  
  

• Mid-term investment horizon (5–10 years) – With strategic tenant placement and capital appreciation, it’s possible to enjoy a profitable exit before lease depreciation becomes a concern.

  
  

• Be mindful of lease decay – Unlike freehold properties, leasehold assets depreciate over time, especially as they approach 40 years or less remaining.

  
  

• Consider lease top-up potential – Some leasehold properties may be eligible for lease renewal (e.g. topping up to a new 99-year term). However:

  
  

  • You’ll need to be prepared for significant capital outlay to pay for the lease extension.

    
    

  • You may also need to refurbish or upgrade the property to meet government criteria for lease renewal.

    
    

• Cash reserves are key – For investors considering lease extension, sufficient liquidity is critical to fund both the lease premium and renovation costs.

Ready to Explore Conservation Shophouse Investment?

Unlike any other property investment, navigating the shophouse market takes expertise — from understanding zoning laws to how the performance of which district and selecting high-growth districts

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Stay tuned for our next blog where we dive into specific district-level performance data and identify hotspots to watch in the coming quarters.