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The recent pandemic has halted worldwide travel causing people to look elsewhere for entertainment. With golf memberships demand and prices soaring, we wonder if this might just be another pandemic winner worth investing in.
While membership at a golf club has always been seen as a status symbol, with the recent pandemic followed by widespread lockdowns, it has become even more popular among those who can’t travel and are looking for other ways to relax and spend their free time. The sudden increase in demand has resulted in membership prices soaring to as high as S$370,000 for locals and S$500,000 for foreigners. The average membership price has increased by 24.6% between 2020 and 2021, the largest increase since at least the past 14 years, which begs the question: could this be a good investment?
Golf Club Membership: What to Consider
When deciding whether you should invest in a golf club membership, you should consider the utility you and your family will get from golf club membership as well as the associated costs and financial value of the membership. Consider asking the following questions:
- How often will you play golf per month?
- Will your family be able to join and enjoy other facilities at the club?
- What are the current membership prices?
- What are the transfer fees associated with the membership?
- When does the club’s lease expire?
You need to not only be able to consider the personal satisfaction you will get from playing the sport, but also the value you and your family will receive, as well as the costs and the resale value of the membership. While personal satisfaction cannot be measured quantitatively, the financial value of the membership can. The three main factors to consider when deciding whether or not to buy a golf club membership are:
- Membership fees (one-time initiation fee and monthly subscription fees)
- Transfer fee
- Lease expiration
Golf Club Membership Fees
There are several fees associated with a golf club membership that you need to consider, such as:
- One-time initiation fee: This is a fee paid to become a member, ranging from S$5,000 to S$370,000 (for local individuals).
- Monthly subscription fee: This is a monthly fee paid for things such as maintenance. Other fees to consider include green fees, which are fees paid to be able to play golf itself.
- Transfer fee: the fees paid to transfer a membership to another party.
The reason why transfer fees should play a key role in your decision making, is because they are directly related to the membership’s resale value, and therefore its investment potential. Part of the reason golf clubs and country clubs in general remain so exclusive is because they limit the number of people allowed in. With demand rising especially during the pandemic, prices rise as well. In addition, many popular clubs like Sentosa Golf Club have reached their capacity and therefore closed for applications.
In this case, a way to join a club that’s not accepting new members is to buy someone else’s membership. The party selling the membership will need to pay the transfer fee, hence the final price at which the membership will be transferred to another party will have to at least include the sum of transfer fee and the membership cost for the seller to break even. Therefore, higher transfer fees can make the process of breaking even or making a profit from transferring your membership more challenging.
| Club Name | Transfer Fee (+7% GST) | Subscription Fee (annual) |
|---|---|---|
| SICC | S$42,800 | S$2,311 |
| Sentosa | S$42,800 | S$2,568 |
| TMCC | S$32,100 | S$2,183 |
| Laguna | S$32,100 | S$2,568 |
| Seletar | S$21,400 | S$1,798 |
| OCC | S$10,700 | S$1,086 |
| Warren | S$10,700 | S$2,054 |
| Average | S$27,514 | S$2,081 |
Prices as of March 22, 2021
Lease Expirations
Since golf clubs in Singapore are built on land leased from the government, expiration of those leases directly affects general demand for memberships, their price, their resale value and the amount of time you can enjoy your membership in case you decide not to sell it. With more leases expired and not renewed by the government, there are fewer options available which increases the demand and price of memberships.
This may also mean that a membership purchased at a club that is set to be open for at least another 20 years may be a good investment, whether you decide to sell it later or not. If you decide to sell it, you will likely make profits since the prices will continue to rise and if you choose to stay a member of the club, you will be able to enjoy its privileges for a longer period of time.
| Club Name | Current Lease Expiry | Offered Lease |
|---|---|---|
| SICC | 31 Dec. 2021 | Dec. 2030 / Dec. 2040 |
| Sentosa | 31 Dec. 2021 | Dec. 2030 / Dec. 2040 |
| TMCC | 31 Dec. 2021 | Dec. 2035 / Dec. 2040 |
| Laguna | 15 Dec. 2040 | No new lease offered yet |
| OCC | 31 Dec. 2023 | Dec. 2030, no new lease thereafter |
| Seletar | 31 Dec. 2021 | Dec. 2040 |
| Warren | 30 Oct. 2030 | No new lease offered yet |
| Changi | 31 Dec. 2021 | Dec. 2040 |
| Keppel | 31 Dec. 2021 | No new lease will be offered |
Prices as of March 22, 2021
Golf Club Membership: Worth the Investment?
When assessing whether a golf club membership is a good investment, we need to approach this question from two different angles. First, whether it is a good investment for someone who is purchasing it solely for the purpose of playing golf and enjoying the club’s amenities without an intent to sell. Second, whether it is a good investment for someone considering selling it in the future.
Profile A: Buying To Play If you are considering buying the membership solely for the purpose of playing golf, bringing your family or friends alone, socializing and doing business, then you need to primarily consider the both one-time and the annual costs associated with the purchase, as well as the lease expiration date.
Profile B: Buying To Sell If you are considering buying the membership solely for the purpose of selling it later and making a return on your investment, you need to consider the one-time fee, the transfer fee and lease expiration date. The resale price has to be higher than the one-time initiation fee (S$370,000 for Sentosa Golf Club) and the transfer fee you initially paid for your membership in order to make a return.
In this case you need to also consider the lease expiration date, since if it expires soon there is a chance you will not be able to transfer your membership. If you know several other clubs may not be able to renew their lease, you can conclude the demand for clubs which have their lease extended will rise, as will their membership price.
As you can see from the graph above, golf club membership prices in Singapore between 2007 and 2021 have been rising, especially between 2016 and 2021. Overall, the upward trend is a positive sign when it comes to making an investment. To understand the possible returns on investing in Sentosa Golf Club membership, consider the following example: If you purchased Sentosa Golf Club membership for S$265,000 in 2019 and sold it at market value of S$370,000 in 2021, the annual rate of return of that investment would have been 18.2%.
It’s also important to remember that the recent rise in prices of 24.6% between 2020 and 2021 is likely due to the recent pandemic, so when the markets will self-correct this will likely not be as high in the years to come.
Sentosa Golf Club in particular, while the most expensive golf club in Singapore, has a lot to offer from its world-class golf courses to its facilities. But more importantly, its historically rising prices combined with recent rising demand both at home and abroad make it an attractive investment. In addition, it’s important to note that a club of this stature will not be closing its doors anytime soon, with its lease extended until at least the end of 2040.
When considering other, more affordable options for a golf club membership, consider the historical prices of the club, its likely resale value and its lease expiry. Outside economic conditions are much harder to estimate, and an attempt at doing so would be rather speculative. Lastly, when making any golf-related purchases, keep in mind that using a credit card with golfing perks can save you even more money.
This article was originally published in ValueChampion, a personal finance research firm in Singapore and republished on rovervibes.com with permission.