Analysis Freehold Doesn’t Always Mean It’s Better: A Case Study Between Jardin And Gardenvista

7 min read

Let’s start with a scenario.

Condo A – freehold, nearer to an MRT station, and new.

Condo B – leasehold, further away from an MRT station, and 6 years older in age.

Now, based on these characteristics, which development do you think would have performed better in the resale market?

I’d bet that 99 per cent of you would choose Condo A, and I wouldn’t blame you for that.

After all, those are the characteristics that most people would look out for in their “ideal” development.

But as we’ve said many times, every development is different, and the real-world usage of a condo is something that many people tend to overlook.

Things like the vibe of the place, the views, the floor plans, and even down to perhaps miniscule details like the entrance of a condo all can play a bigger role than you might think when it comes down to the resale market.

In today’s piece, we will look at why one development was more unprofitable than the other over the past 5 years.

Let me introduce both in greater detail.

Jardin is a freehold development in District 21 (Bukit Timah) that was built in 2012. It has 140 units and is located across the road from Bukit Timah Plaza. Most units here have a north-south facing.

Gardenvista is an older 99-year leasehold development (by 6 years) right next to Jardin. It has 318 units with many units having an east-west facing.

Here’s what their performance in the past 5 years looks like:

Let’s compare that to Gardenvista.

[convertful id="199445"]

As you can see, despite Jardin being a newer plus a freehold development, the contrast between both developments is significant in the resale market. Clearly, Jardin being freehold here has not helped its case much and it just goes to show that buying freehold doesn’t always guarantee that you’ll make money – it just better weathers the depreciation effect since the land value is not pegged to a limited lifespan.

Now, let’s go through a few of the reasons why we think Jardin has performed the way it has.

1. Developer priced too high

Jardin was launched in December 2007 at the peak of the market. Sales were slow, as Jardin only managed to sell 19 units in the first 3 months. Amazingly, the next sale was nearly one and a half years later in July 2009.

A point worth noting here is that the Downtown Line MRT announcement came out on 27 April 2007 (announcement of station locations on 15 July 2008. So lesson learned: if you are buying a property when the information is already priced in, then don’t be expecting too much in terms of capital gains.

It’s from this example too that we can see why a new launch condo should never be seen as a sure win. While what new launches do offer is an increased likelihood of mispricing since it’s set at the discretion of the developer and not secondary market forces. So it’s important to know that this mispricing can go both ways – it’s either priced too low (e.g. High Park Residences), or too high (as in the case with Jardin). It’s also largely dependent on market conditions and whether the developer manages to stage its price up over time successfully.

2. Locational attributes

On the surface, Jardin is actually located in a good location if judged by conventional methods. It’s walking distance to the MRT station, Bukit Timah Plaza and KAP Mall are both just opposite, and you can walk to Ngee Ann Polytechnic too.

But on the ground, the situation is quite different.

First, you are flanked between 2 major roads as well as the Bukit Timah Sevenmile Flyover – so there’s traffic noise to contend with.

Next, the ever-going construction since 2008 (the Downtown line MRT), and now with the construction of Mayfair Modern and Mayfair Gardens. So that’s a drag not just on the traffic congestion during peak hours, but the noise as well.

So while Jardin may have a better location on paper, Gardenvista actually benefits here as it has the advantage of being blocked from the road noise by Jardin.

Finally on a minor note, drivers coming home would likely have to break traffic laws if they were to drive home from the direction of town. This is because of the double white lines at the entrance of Jardin, leaving you with a small zone from which to filter. So you either have to be a very skilled driver to cut in after the u-turn, or do it the proper way and head down Jalan Anak Bukit to make a u-turn.

That being said, Gardenvista faces this issue too – but it is somewhat less of an annoyance when you don’t have that leeway to take the shortcut like Jardin.

Like I said, it’s a small point that could just be a bugbear for some people.

3. Slim piece of land

Jardin was built in 2012, so it is still considered to be a relatively new development. As such, talks of development potential in the future may be premature at this point.

Still, it is worth noting that it is sat on a narrow strip plot of land – so the potential for redevelopment in the future would likely be lower than a more regular plot like Gardenvista.

4. Poor layouts despite the large size

This is probably one of the biggest reasons why Jardin has performed the way it has – and that all boils down to the layout of the units.

Like the Tennery, Jardin has quite a number of loft units.

Now don’t get me wrong, I’m not saying that loft units are bad – it’s just that it will always be attractive to a very niche range of buyers.

Perhaps its down to expectations, but let’s say you’ve come across this 3 bedroom + study unit at Jardin for sale. On paper, that 1,776 square feet sounds enticingly spacious, doesn’t it?

You’d probably head to the viewing excitedly, as it seems like you’ve found a hidden gem.

But in person, your expectations will be dashed as the layout makes it feel like a much smaller space instead.

This is down to a number of reasons:

• The void, staircase, and private lift taking up the sqft of the unit
• It’s set over two floors, so you don’t feel the size as much as you would on a single loading unit
• The void space should make the space feel bigger, but it is a rather narrow strip that doesn’t do much

Here are some photos:

• 

• 

• 

• 

So in comparison, a family looking for a 3 bedroom unit would prefer Gardenvista given its more affordable quantum wise due to not just the tenure, but its layout being more efficient with less wasted space.

Gardenvista 3+study (1,163 Sqft)

5. Demographic of buyers

The Jardin currently has quite a large proportion of foreign owners (40%).

Just like the example of the Tennery, with investors, this could play a factor in the resale market as well.

More often than not, you’ll find that projects with more foreigners tend to have lesser staying power.

That is, if the intention is to head back to their home country in the future, they may be more inclined to let go of their property – even if it’s at a loss to suit their timeline.

That is, if the intention is to head back to their home country in the future, they may be more inclined to let go of their property – even if it’s at a loss to suit their timeline.

Contrast this Gardenvista, where the proportion of local homeowners is much higher (70%), most would need to sell at a reasonable price in order to upgrade or fund for retirement, so the mindset is quite different.

 6. Facilities

Personally, I really like the rooftop swimming pool at Jardin. It’s sizeable, and offers a nice view towards Bukit Timah. But arguably Gardenvista has the advantage of a wider pool plus 2 tennis courts – a more diverse set of facilities that buyers would appreciate.

Final Words

Looking at these factors presented, you can see why a property cannot be compared in such a binary way – freehold > leasehold. So the next time you’re told to buy a property simply because it’s freehold, ask yourself if the premium on that tenure is too much, and consider the development’s competitors in the surrounding area too!

Ultimately beyond the hard numbers, you should always consider the liveability aspects of a purchase. A condo can be freehold and next to an MRT station, but these may not mean much to it being a proper home to live in. Traffic noise, congested roads, and a poorly conceived layout can all be detrimental to the actual liveability of a development. As small and seemingly inconsequential as it may seem, these things can add up.

For more on issues affecting property investment, or in-depth reviews of new and resale properties, follow us on Stacked. If you’re pondering the future gains of your property purchase, do reach out to us for a proper consultation.