VERSALYTICS
Descriptive Analysis
For this section, we will perform some exploratory data analysis using a variety of charts to provide some descriptive insights.
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Tool: Jupyter Notebook
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Your questions answered...
1. Freehold or Leasehold?
We often get asked by people these questions: Freehold properties are more expensive but are they worth the price? Are they more profitable if we sell them later on? So let’s see the data for the price trends of freehold versus leasehold. Indeed, the mean transacted price of freehold properties are consistently higher than leasehold.
But if we slice the data into three floor area categories, you will see that the differences in Transacted Price between Leasehold and Freehold is more pronounced for mid (900-1500 sqft) and larger sized (>1500 sqft or larger) properties, but less so for small (<900 sqft) ones.
In general, freehold properties fetch higher profitability by % increase in transacted price over the previous transacted price.
And the profitability differs by postal districts, with D8 (Little India) outperforming all others, be it freehold or leasehold.
2. New Launch or Re-sale?
When comparing new launch profitability (2nd transaction) to the others, it seems to have a wider distribution of P/L percentages, indicating higher variability in results for that particular transaction. The spread of data points for the 2nd transaction also extends further upwards, suggesting some instances of very high profits compared to other transactions. The density of the data points is represented by the width of the shaded violin plot portion, with the 2nd transaction showing a more substantial density around the lower P/L percentages.
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In contrast, subsequent transactions have narrower violin plot shapes, indicating less variability and a tighter range of P/L percentages. The vertical spread of the lines for these transactions does not reach as high as the 2nd transaction, suggesting fewer instances of extremely high profit or loss outcomes.
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So generally, yes new launches are more profitable but there is also higher variability, meaning we are unable to gauge accurately how much profit/losses a new launch buyer can profit or lose. This trend is more pronounced for transactions executed in the recent years (2017 - 2023).
3. How fast do leasehold property value decay?
Leasehold decay rates are similar across most postal districts (yellow). However, for districts 9 (Orchard, Cairnhill, River Valley), 10 (Ardmore, Bukit Timah, Holland Road, Tanglin), 11 (Watten Estate, Novena, Thomson) and 20 (Bishan, Ang Mo Kio), we notice more green (increase in value) of properties that are older (28 - 48 years from the start of the lease year). In other words, in these estates, older leasehold properties have demonstrated good value retention despite lease decay.
You may refer to the next section where to uncover the trends for leasehold properties that are launched in 2008, 2013, and 2018.
* Caveat: Analysis does not consider factors such as holding period, sales frequency, unit layout, development size etc.