RISK AND RETURN WITHIN LEASEHOLD AND FREEHOLD CONDOMINIUMS IN SINGAPORE

Abstract

With the upward momentum in the residential property market today, more homeowners and investors are turning to investing in private condominiums. As such investments involve large sums of capital, the behavior of residential property prices and their ability to generate returns has always been of interest to investors and owners alike.

This dissertation analyses the return performances of condominium properties in the Central and Western regions of Singapore across different investment horizons, tenure and region to provide insights to their capital appreciation patterns. Addressing the common notion that higher investment returns come with higher risk, this paper also sets out to test if this perception is true.

Observations from this study found that 999-leasehold condominiums in the central region make the best form of investments as they yield the highest returns during good times and are resilient to price depreciations during bad times. Holding properties over a longer investment horizon are observed to carry higher risks and lower rate of returns. Observations and statistical test also offer evidence to suggest that condominium investments that generate higher returns do not necessarily carry higher risk.