Research 04
The Leasehold Paradox: If a 99-Year Lease Is a Wasting Asset, Why Are Buyers Still Willing to Pay So Much?
A practical look at lease decay, freehold premiums, quantum and why real-world buyer behaviour can diverge from textbook tenure theory.
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In theory the position is simple. A 99-year lease has a finite legal and economic life: the land interest expires, and with it the housing benefits the owner receives. Freehold is perpetual tenure, with no contractual expiry. On that basis, permanence should always command a premium and a wasting asset should always be discounted.
Yet buyers do not purchase tenure in a vacuum. They purchase a total property proposition subject to a budget: a location, a project of a certain age, a unit of a certain size, a financing commitment and an expected holding period. Tenure sits inside that bundle rather than above it. The useful comparison is therefore not freehold versus leasehold in the abstract, but what a buyer receives in exchange for giving up permanence — and whether that exchange is worth making.
Permanence has value. But today’s purchase quantum is paid today.
Lease decay is real — but it is not linear from day one
The NUS study found freehold and leasehold private non-landed depreciation looked similar in the first decade, with a clearer divergence only later.
The evidence
What did the NUS ageing study actually measure?
Using more than 618,000 resale transactions from 1997 to 2017, age-related depreciation for private freehold and private leasehold non-landed housing was similar over roughly the first ten years; after ten years, private freehold generally depreciated more slowly, and after 21 years or more the fitted results report materially greater depreciation for private leasehold.
Concept
Depreciation with age: freehold and leasehold paths
0 – 10 years
Age-related depreciation looked broadly similar for private freehold and private leasehold non-landed housing.
10 – 20 years
A clearer divergence appears: private freehold generally depreciated more slowly than private leasehold.
20+ years
The study's fitted results report materially greater depreciation for private leasehold than private freehold.
What this means
Holding period changes the tenure question. A buyer planning to hold five to eight years is making a different decision from a family considering thirty to forty years of ownership.
Why does a freehold premium exist at all?
Work using Singapore condominium transactions to compare 99-year, 999-year and freehold properties reaches a conclusion that is easy to state in plain English: the premium paid for longer-duration tenure captures how buyers value housing benefits far into the future. Pay more for perpetuity and you are, in effect, paying today for use and ownership decades from now.
Separate hedonic modelling of 99-year non-landed private transactions found remaining lease to be relevant to transaction prices, while area and infrastructure variables materially improved the model. Both findings point the same way: a tenure premium is economically rational in theory, and it sits alongside location rather than replacing it.
Concept
What each tenure buys you, over time
Freehold
Ownership interest continues
99-year lease
Housing benefits stop at expiry
Then why do buyers still choose 99-year projects?
Signature visual
The quantum trade-off
Buyers optimise the whole bundle, not tenure alone. Tenure is one of five variables being traded against each other inside a single budget.
01
Total purchase price
The quantum is paid today, and it constrains everything else the household can do.
02
Location
Access, catchment and surrounding amenity are fixed at purchase and cannot be renovated in.
03
Project age / newness
A newer project carries different maintenance, layout and financing characteristics.
04
Unit and amenities
Layout efficiency, size and facilities affect daily use and future saleability.
05
Holding period
The intended horizon determines how much the tenure difference is likely to matter.
Illustrative scenario — not market data
- Option A — Freehold
- S$2.6m
- Option B — 99-year
- S$2.1m
- Difference today
- S$500k
The 99-year option could still be a rational choice if the S$500k difference buys a better location, a newer project, a lower financing burden or a more comfortable household balance sheet. That does not make it the better purchase. It makes the trade-off visible, which is the point.
Has the freehold premium actually compressed?
Strong demand for well-located 99-year projects makes compression a plausible hypothesis. It is not, on the evidence we have, an established fact, and we are not going to present it as one.
Demonstrating a change in the freehold premium requires matched-cohort or hedonic transaction analysis that controls for location, project age, project quality, unit size, the market cycle and new-sale versus resale effects. URA’s public headline price indices are not sufficient on their own to establish a changing premium, because a headline index moves with the composition of what happens to transact.
What rising prices may change: the importance of quantum
The evidence
What is the current price and supply backdrop?
Overall private residential prices rose 0.5% quarter on quarter in 2Q2026 and 1.4% over the first half of 2026. Around 60,600 private residential units including ECs are expected to be completed over the next few years, and the full-year 2026 Confirmed List supply of 9,320 units is more than 50% above the ten-year annual average.
There is a simple arithmetic point buried in a rising price level. When absolute prices rise, even an unchanged percentage tenure premium produces a larger dollar gap. The percentage can stay exactly where it is while the cheque a buyer has to write to secure permanence grows.
Arithmetic illustration
The same percentage, a larger dollar gap
| Purchase price | Dollar gap at a 15% premium |
|---|---|
| S$1.0m | S$150k |
| S$1.8m | S$270k |
| S$2.5m | S$375k |
What this means
A buyer may rationally place more weight on the absolute dollar gap as property prices rise, because that gap is what has to be funded, financed and lived with.
Time horizon changes the answer
Framework
Three decision horizons
Shorter hold
e.g. 5 – 8 years
Entry price, market cycle, saleability and transaction costs may dominate the tenure question.
Medium hold
e.g. 10 – 20 years
Tenure begins to matter more, alongside project ageing and the redevelopment cycle.
Very long / legacy hold
20+ years or intergenerational
Perpetual tenure can become substantially more relevant to the decision.
These ranges are conceptual decision horizons. They are not hard rules, thresholds or forecasts.
Where the horizon is intergenerational, the tenure question merges into a legacy question. We examine what makes a property worth holding across generations in Research 02: Property & Legacy.
The Strax Tenure Trade-Off
Decision framework
The Strax Tenure Trade-Off
- 01
How long do I realistically expect to hold?
- 02
What is the absolute dollar premium for freehold here?
- 03
What do I receive from the leasehold alternative in exchange — location, newness, size, amenities, lower quantum?
- 04
How strong is resale demand likely to be for this specific project as it ages?
- 05
Does the purchase leave enough flexibility elsewhere in the household balance sheet?
This is a decision framework, not a score. It does not rank properties and it does not produce a recommendation on its own.
Where this leaves the decision
Freehold is not automatically superior at any price. Permanence is worth paying for only when the asset deserves to be held for a long time and the premium being asked is proportionate to what is given up elsewhere.
Leasehold is not automatically inferior because the lease decays. Time horizon and absolute quantum are central to the comparison, and both are specific to the household rather than to the tenure label on the title.
The best tenure is the one that makes sense for the asset, the price and the intended holding period.
Comparing a freehold and 99-year property?
Speak with Nicholas about the trade-off behind the price.
Sources & methodology
This piece draws on published academic work on lease decay and tenure pricing in Singapore, together with official URA statistics on private residential prices and supply. Where the published evidence supports only a qualitative conclusion, we state it qualitatively rather than attaching a number to it.
- The NUS ageing study is based on historical resale transactions from 1997 to 2017 and should not be treated as a current price forecast.
- The conceptual tenure and depreciation visuals summarise published findings and do not reproduce fitted numeric values.
- Any quantum examples in this article are arithmetic illustrations only, not measured market premiums.
- This article does not conclude that the freehold premium has compressed. That remains an empirical question requiring controlled transaction analysis.
- URA has historically published sub-indices by tenure for some housing types; we have not used tenure-series values here because we have not verified them directly from the source.
- Strax frameworks are decision aids. They are not legal, tax, regulated financial or investment advice.
Full source list (6)
NUS Institute of Real Estate and Urban Studies (IREUS) · 6 April 2019
Aging and Decaying Leases of Residential Propertieshttps://ireus.nus.edu.sg/2019/04/06/aging-and-decaying-leases-of-residential-properties/
NUS ScholarBank · 2020
Lease Decay and the Prices of Private Residential Properties in Singaporehttps://scholarbank.nus.edu.sg/entities/publication/2a342ad6-1ef4-4eb4-badb-817482b86a6d
NUS News (study published in the Journal of Applied Econometrics)
NUS study estimates low long-run discount rates using Singapore condominium transactionshttps://news.nus.edu.sg/nus-study-estimates-low-long-run-discount-rates-using-singapore-condominium-transactions/
Urban Redevelopment Authority · 2Q2026
Release of 2nd Quarter 2026 real estate statisticshttps://www.ura.gov.sg/news/media/pr26-57/
Urban Redevelopment Authority
Private residential property price index time series (eService)https://eservice.ura.gov.sg/property-market-information/pmiResidentialTimeseries
Singapore Department of Statistics / SingStat TableBuilder
Household income series (background reference for quantum and affordability context)https://www.tablebuilder.singstat.gov.sg/table/TS/M810871
Continue exploring
- Freehold Property in Singapore: What Is Permanence Worth?
Tenure and long-term value
- The Space We Trade Away
Property and life stage
StraxPropSG ResearchAbout the writers