There is a common belief that it may not be financially wise to hold on to a residential property for too long. When a property hits about 20 years old, the value may start to decline as it ages, potentially leading to financial losses.
This leads us to the question of whether an optimal holding period exists for residential property investments. Also, are older properties destined to steadily lose their value, thereby causing owners to contemplate selling them as expeditiously as possible?
To answer these questions, one perspective is to look at historical transaction data to assess how the duration of property ownership impacts its financial gain. For instance, will a home owner or investor generate a higher profit by selling the property before or after the 10-year mark?
Many home owners sold their properties within 10 years
In this study, we analysed individual private residential units’ buying and selling dates to determine how long they were held and calculated the gross gains and losses by comparing the Urban Redevelopment Authority’s Real Estate Information System (Realis) new sales caveats with the resale caveats of the same units.
The data set comprises nearly 90,000 matched properties spanning three decades from 1995 to June 2024, including those acquired during price lows at financial crises and at record highs during property booms. HDB flats, private resale-to-resale transactions, and new homes that were never resold are excluded in this study due to a lack of information.
The analysis shows that many property owners sold their units within the first 10 years of ownership.
Specifically, 50.8 per cent were resold between five years and 10 years of purchase, and these are usually new homes resold in the secondary market within five years of obtaining the temporary occupation period (TOP). Another 15.5 per cent was resold within five years, which are new homes resold before or immediately after TOP.
About a third of the owners held on to their properties for extended periods before reselling: 23.5 per cent of transactions were of those resold at around 10 years to less than 15 years, while 6.4 per cent were of those resold at between 15 years and less than 20 years. A small minority of properties, comprising 3.8 per cent, were resold after 20 years.
Landed and freehold properties are kept longer
Such owners are probably not concerned about their lease expiring and are not in a rush to sell their units. Others might hold on to their property for a better profit, as freehold properties are generally pricier and less common in the market.
For instance, a higher proportion of freehold condo owners, at 35.7 per cent, retained their properties for at least 10 years before reselling, compared to 32.6 per cent of leasehold condo owners.
Landed property owners usually hold on to their properties longer. A significant 43 per cent resold their properties only after 10 years, while another 7.5 per cent kept their properties for a minimum of 20 years.
The longer the holding period, the higher the gross profits
Selling a property quickly does not always guarantee high profits.
Historical data indicates that property owners who hold on to their investments for a longer duration are likely to experience increased profitability, particularly if there is consistent price growth, as has been the case for Singapore’s properties over the past few decades.
Steady rental growth, indicating strong investment potential for our residential properties, has also supported property values. Moreover, many older properties were bought at significantly lower prices, resulting in greater profits.
Higher profitability over extended holding periods has been observed across all property types, including leasehold and freehold properties.
Generally, those who held their properties for 20 years or longer earned an average gross profit of around $665,000, while those who held them for 15 years to less than 20 years earned slightly lower at around $600,000, and for 10 years to less than 15 years, the average gross profit dips to about $320,000.
While many owners resold their properties within five years to 10 years of ownership, this group of buyers reaped the lowest average gain at around $200,000.