• Joshua Loo

How Do Some Leasehold Properties Remain Profitable After 15 Years, or Otherwise?

Balas Curve

The Bala’s Table is an interesting take on interpreting the potential value of Leasehold properties in Singapore.

Looking at this chart, it is synonymous with the sentiments of most Singaporeans in regards to their thoughts on decaying leasehold value.

However, some improvements to the chart can be done as it is grossly misinterpreted by the general public. Saying that leasehold properties will depreciate upon reaching duration milestones oversimplifies leasehold prices.

Although this train of thought aids efficiency in our real estate markets, it casually disregards the true potential of leasehold properties.

This article will discuss the primary use of the Bala’s Table and in what way is the chart misinterpreted.

I’ll be basing most of my ideas on Determining the value of leasehold land: A closer look at “Bala’s Table” by Centre for Liveable Cities Singapore.


While every effort is made by the Author to ensure that accurate information is disseminated through this medium, the Author disclaims liability for any damages that arise from acting upon the information provided on its website.

What Is the Primary Use of The Bala’s Table?

The main use for the Bala’s Table is for the Singapore Land Authority (SLA) to determine the differential premium (DP) for lifting State title restrictions involving a change of use and/or increase in intensity in regards to leasehold properties. This provides greater transparency for developers and landowners.

The Bala’s Table is therefore calculated based on the potential rent from the state to its tenants. For example, if a 99-year leasehold land is charged to the tenants at $1 per square foot a year, this dollar value will be eroded over 99 years due to factors such as inflation. Therefore, a discount rate of 3.5% has been selected for an accurate prediction of leasehold prices back in 1948 till present.

This discount rate is very important because it is linked overall to the overall idea of how much leasehold properties should cost vs freehold properties.

However, should this rate be modified to present standards? Or left as it should be?

Is the Discount Rate Accurate as of Today?

The discount rate is rather close to Singapore’s Inflation Rate from 1962-2016 (2.68%), the Total Debt Servicing Ratio (TDSR) framework (3.5% Stress test), and the Government’s cost of capital (3.4%).

However, I believe that further research can be conducted based on this discount rate.

Singapore’s Inflation Rate

The yearly inflation rate of Singapore is roughly around ~0.50-1.0% as compared to the average across past decades of 2.68%.

These spikes are largely contributed by significant turnkey events such as the 1973-1974 energy crisis (Inflation Rate: ~21%), which had a global impact. A second oil price shock occurred from 1980-82 (Inflation Rate: ~6.88%), which was quickly suppressed by monetary policies. The last significant event will be the 2008 housing crisis (Inflation Rate: ~6.63%).

All these events have occurred a long time ago and do not have significant effects on our present economy, except for the 2008 housing crisis. Averaging these inflation numbers into consideration for our present-day analysis unnecessarily skews information and provides for an inaccurate picture.

However, I acknowledge that they do serve as a reminder on how to manage inflation rates. Removing these significant events will drastically drop the inflation average from the 1960s-present to be 1.8%!

TDSR Framework Stress Test and Government’s Cost of Capital

Due to the limited publicly available data on the above points, I’m unable to give my comment on the above points. However, one point to note that the TDSR framework for property loans have been implemented since 2013, and it is based on the proposed medium-term interest rate of 3.5%. There are no changes for the past 7 years, which I believe denotes a preference for stability rather than constant experimentation.

Depreciation after 40 Years

It's rather strange when I see that most Singaporeans will set particular duration milestones for maximum profit taking/minimal losses. I believe this to be true to a certain extent, as the duration term of ownership will usually signify the overall value of the purchase. (i.e., car ownership in Singapore comes to mind)

However, the Bala’s Table should not be referred to as an exact science as and when to sell a particular development.

The SLA Leasehold table below explains the depreciation rate for properties in Singapore. We will be using this table for the case studies below.

SLA Leasehold Table

Case Studies Showing That The Bala’s Table Do Not Provide An Accurate Representation of Leasehold Prices

Orchard Court and Lloyd Court