The 3 Stages of A Singapore 99-Year Leasehold Property Investment Life Cycle: Growth, Stagnation, or Decline Determine A Property Is Profitable or Unprofitable!

By darrenongOn October 28, 2022June 3, 2024

6 min read

The 3 Stages of A Singapore 99-Year Leasehold Property Investment Life Cycle: Growth, Stagnation, or Decline Determine A Property Is Profitable or Unprofitable!

In this article, I will share and explain the three stages of a Singapore leasehold property life cycle in the secondary market (resale market) with some examples to illustrate the different stages.

As everyone knows, property investments are traditionally considered ‘passive’ and safer as they are less volatile than investments such as equities and stocks.

However, in passive management, it does not mean that a ‘buy and hold forever’ strategy will work for all types of properties. Furthermore, the ‘buy and hold forever’ also does not mean it is automatically a safe approach as value decays over time for leasehold properties. The property value that decays over time is explained in Bala’s curve, where property value will become zero upon the expiry of the leasehold term.

In Singapore, the most common leasehold term is 99 years. Thus, upon expiration at 99 years, the property’s value becomes zero, and the property ownership returns to the state.

Aside from the Freehold (or equivalent 999/9999 years leasehold) properties, the growth trajectory of 99 years leasehold properties generally falls into three stages over time which, in short, I call GSD (Growth, Stagnation, Decline).

As a property owner, you may often overlook the different stages, and by the time you realize it, it may fall into the stagnation stage or, worst, into the declination stage. As no one can predict or time the market in any investment, it is always good to keep yourself up to date on the real estate market and monitor the trend of your property investment. If you are unsure of your property performance, you are most welcome to drop me a message for a discussion about your property performance assessment.

As a property investor or buyer, it is always good to analyze the resale leasehold property performance and at which stage it is currently, which will determine if the property is profitable or unprofitable before you start any price negotiation with the seller.

Let me illustrate some examples of the three stages in some of the condos in Singapore, about the growth, stagnation, and declination stages trend.

Properties That Are In Growth Value Stage: Example 1

One straightforward way to check the growth prospects of a property is to compare it against the price index of the resale properties and new properties of the same tenure within the same district.

Let’s take a closer look at the above example. It illustrates how over the past ten years, Condo A has performed relatively well (33.59%) vs. the prices of other 99-year new private condominiums (49.01%) and private resale condominiums (43.80%) in district 20.