Looking at the average PSF transacted for leasehold properties, how do they typically change over time?

The average price per square foot (psf) for leasehold properties in Singapore typically rises over the long term, driven by factors such as new project launches, general property market growth, and demand for private housing. However, the rate of increase may be slower than freehold properties, especially as the property ages.

In the initial years after completion, leasehold properties often see price appreciation, especially if they are close to amenities or MRT stations. Over time, especially as the property approaches the midpoint of its 99-year lease, the rate of price growth may slow due to “lease decay”—the steady reduction in perceived value as the remaining lease shortens. The impact of lease decay becomes more significant after the halfway mark of the lease, with sharper reductions in value typically observed once there are around 30 years or less remaining on the lease. At these points, both financing options and buyer demand can be affected.

Despite these trends, average psf for newer leasehold developments still shows positive long-term growth, bolstered by market demand and new project launches. Historic data shows that leasehold property prices have more than doubled over a 20-year period, although freehold properties generally outperform them in terms of long-term appreciation.

In summary, average psf for leasehold properties typically rises over time, but price growth slows as the lease ages and lease decay effects set in, particularly past the halfway point and as the lease approaches expiry.