About Lease Decay

I'll love to shed more light and share more about lease decay in this post. In our current Singapore market, the 2 most common tenures are 99 years, and freehold. With freehold being a property that is not bounded by time, but for this, a premium is added on top of the quantum to justify this seemingly timeless function. While it serves as a way for a legacy inheritance, it also serves to illustrate the certain limitation of a 99-year tenure.

As literal as it sounds, a 99-year tenure property would effectively last for, 99 years.

After the term, the land would be effectively be returned to the government, and because of this, technically the land would be worth $0 at the time of its 99th tenure. Because of this, for properties that are 99-year would face something known as lease decay.


To discourage young couples from buying older flats, there are currently some limitations implemented, such as in simple terms. You'll need to take note of the remaining lease of properties that you're purchasing, making sure it adds up to 95 years. This function would make the age range of the buyers smaller and smaller, rendering it harder to sell off an old property.

Also with the lease decay, the property is less likely to achieve its full potential of appreciation as it is "fighting against time", against the lease decay would would "eat up the property value over time". With the Bala curve that illustrates the value, it felt like a 99-year property would always have an expiry date. It is however worse if there is a negative sale.

A negative sale would happen when after selling your property, your proceeds are lower than the total amount of the CPF paid including the accrued interest. In this scenario, you'll be required to top up your CPF accounts due to this shortfall.

So over time, if the value of the property keeps depreciating, given the constant growth of the amount of CPF paid together with accrued interest, the gap would widen. Meaning the longer you're holding onto your current property if there's no "stimulus" to increase the value, the more you would have to top up due to the growing shortfall. "Stimulus" in this case varies from the different factors that could raise the property value, from an upcoming MRT, or a spike in demand in the property market.

Despite the lease decay, only older properties would be affected. In fact new 99 year properties are increasingly popular among investors. In regards to the Bala curve, this only illustrates a generic lifecycle of a 99-year lease property. There might be other factors such as en-bloc opportunities that are not taken into account in the Bala curve which can be considered depending on the location, the project or any notable future government plans.