Calculate the adjusted psf for leasehold property

Price per square foot (psf) figures seen on property websites lack the measure of time. How do you compare $X psf for a freehold apartment versus $Y psf for an apartment with 80 years remaining on the lease? Enter the adjusted psf. See the following real-life examples.

Example A

365 Yishun Ring Road

Storey: 10 to 12

Floor Area: 74 sqm or 796.53 sqft

Lease Commence Date: 1989

Remaining Lease: 67 years 7 months

Resale Price: S$ 253,800.00

Resale Registration Date: Sep 2020

The psf for Example A is S$ 253,800.00 / 796.53 sqft = S$ 318.63

We want to normalise the psf value to obtain the equivalent price had the unit been sold freehold. To do that, we bring in the Leasehold Table (or Bala’s Table).

More details about the Leasehold Table are available:

https://www.clc.gov.sg/docs/default-source/commentaries/balas-table.pdf

https://www.edgeprop.sg/tags/leasehold-table

https://www.99.co/blog/singapore/balas-curve-leasehold-property-value/

The Leasehold Table is reproduced below.

The Leasehold Table tells us that the value of land with 67 years (rounded down from 67 years and 7 months) remaining on the lease is 84.2% of its freehold value.

Therefore, the adjusted psf for Example A is S$ 318.63 / 0.842 = S$ 378.42

Example B

333B Yishun Street 31

Storey: 04 to 06

Floor Area: 67 sqm or 721.18 sqft

Lease Commence Date: 2015

Remaining Lease: 94 years 3 months

Resale Price: S$ 315,000.00

Resale Registration Date: Sep 2020

The psf for Example B is S$ 315,000.00 / 721.18 sqft = S$ 436.78

The Leasehold Table tells us that the value of land with 94 years (rounded down from 94 years and 3 months) remaining on the lease is 95.4% of its freehold value.

Therefore, the adjusted psf for Example B is S$ 436.78 / 0.954 = S$ 457.85

Notice the two examples were:

(a)Transacted in the same month (Sep 2019)

(b)Of the same flat type (3 Room)

(c)Within walking distance of each other

The adjusted psf gives a better comparison of value compared to the psf that we are familiar with. Example B is at a 21% premium to Example A when compared on an adjusted psf basis. A note of caution that the unit in Example B is about 6 storeys below Example A. The comparison also does not account for unit facing, unit condition, renovation, etc.

To smooth the differences in height and unit facing, we will compare all the 3 Room units transacted surrounding Examples A & B for the past 12 months.

Data Set C (units surrounding Example A)

The average adjusted psf for Data Set C is S$ 383.36 

Data Set D (units surrounding Example B)

The average adjusted psf for Data Set D is S$ 453.13 

Data Set D (newer units) is at a 18% premium to Data Set C (older units) when compared on an adjusted psf basis.

It is possible that the condition of the newer units in Data Set D (presumably move-in condition) are worth a hefty 18% premium compared to the older units in Data Set C (which you might want to completely tear down and renovate). The adjusted psf difference of S$69.77 is akin to spending S$ 55,573.90* on renovating a unit in Data Set C.

* S$ 69.77/sqft x 796.53 sqft = S$ 55,573.90

 Bala would be proud.