Why Buy Leasehold If the Lease Gets Shorter?

If freehold has no lease expiry and leasehold does, why do buyers still pay substantial sums for 99-year homes?

Because buyers are choosing more than a tenure label. They are choosing a location, a layout, a building, facilities and a financial commitment.

A leasehold home may offer a shorter commute, more usable space or a lower purchase price. Those benefits can matter today, even though the remaining lease gets shorter.

A shorter lease does not mean the price falls every year

The lease declines with time. The market price does not follow a simple countdown.

Prices also respond to demand, nearby improvements, the wider market, maintenance and the price paid at purchase. A leasehold home can rise in value during your ownership even as its lease shortens.

That does not make lease expiry irrelevant. It means several forces affect the price at the same time.

Historical NUS research found that age-related depreciation differed more clearly between private freehold and leasehold non-landed homes after their early years. It is useful background, rather than a timetable for any particular property.

Compare the extra dollars

Imagine a freehold option costs S$2.6 million and a leasehold alternative costs S$2.1 million. The difference is S$500,000.

These are invented figures, not market prices or a typical freehold premium.

The useful question is what the additional S$500,000 buys. Is the freehold home otherwise comparable? Would it require a larger loan? Would choosing it mean giving up a better location or a more suitable layout?

You are comparing two actual homes and their costs. Tenure is one part of that comparison.

Your plans change the answer

If you expect to sell in several years, entry price, transaction costs and future buyer demand may matter more than ownership far beyond your lifetime.

If you plan to hold for decades or across generations, the remaining lease deserves more weight. Think about how much lease will be left when the next owner needs to sell, rather than only when you buy.

Plans can change. A purchase should leave room for a longer hold if selling at your preferred time becomes difficult.

Do not assume the freehold premium has narrowed

Strong sales at a leasehold launch do not prove that buyers value freehold less. A fair comparison needs similar locations, ages, layouts and transaction dates.

One thing is simple arithmetic: at higher prices, the same percentage premium becomes a larger dollar amount. For example, an assumed 15% is S$150,000 on S$1 million and S$375,000 on S$2.5 million. That illustrates the dollar gap; it is not a measured market premium.

The Strax view

Leasehold can make sense when the benefits, price and remaining lease fit your plans. Freehold can make sense when lasting ownership is worth the extra commitment.

Ask what you receive, what you give up and who might buy from you later. Those questions are more useful than declaring either tenure the winner.