If you're shopping for a leasehold property in Singapore, you've probably noticed that a 60-year or 70-year lease comes with a noticeably lower price tag than a 99-year lease. That discount feels like a win, right? The truth is more complex. Bala's Curve, a concept that's been quietly shaping how property professionals value leasehold properties, reveals why that bargain might come with hidden costs down the road. Understanding this curve isn't just about today's purchase decision, it's about protecting your investment for the next 10, 20, or even 30 years.
Bala's Curve is a valuation principle that models how leasehold property values decline over time. Unlike what many buyers assume, the depreciation isn't linear. A property with 80 years remaining on the lease doesn't lose value at the same rate as a property with 40 years remaining. Instead, the curve shows that value depreciation accelerates significantly as the lease gets shorter, especially once you dip below 60 years.
Why does this happen? Several factors come into play. First, there are hard financial constraints that kick in. Banks become reluctant to finance properties with short leases because they're considered higher risk. CPF restrictions also apply, limiting how much of your Central Provident Fund you can use to purchase a property with fewer years remaining on the lease. Second, there's buyer psychology. As a lease shortens, the pool of potential buyers shrinks because fewer people want to buy a depreciating asset. When demand drops, so does the price, often sharply.
The curve is particularly steep between the 30-year to 60-year mark. This is where many upgraders and investors find themselves caught off guard. You might have bought at what seemed like a reasonable price, only to find that five or ten years later, your property has become significantly harder to sell, and the interest from buyers has evaporated.
Understanding Bala's Curve reveals something crucial: there are optimal windows for both buying and selling leasehold properties. The sweet spot for selling is typically earlier rather than later. If your property is heading towards the 60-year mark, you'll want to exit before the steeper part of the depreciation curve kicks in. Waiting another 5 or 10 years could cost you significantly more than you expect.
For buyers, the sweet spot is different. If you're planning to live in the property for a long time, a shorter lease might be acceptable because you're not primarily focused on resale value. But if you're an investor or an upgrader who plans to sell within 10 to 15 years, the lease length is critical. A property with 70 years remaining today might feel affordable now, but in 15 years, when you want to upgrade to a bigger place or cash out, you'll discover that the curve has taken a much steeper toll than you anticipated.
This is especially relevant for HDB upgraders in Singapore. Many people upgrade from their HDB flat to a leasehold condo in their 40s or 50s, thinking they'll hold it until retirement. But life changes. Job relocations, family needs, health situations, or market cycles might force you to sell sooner than planned. If you've bought a property with a lease that's already borderline, you could find yourself in a difficult position with limited buyers and shrinking equity.
Bala's Curve isn't just about perception and psychology. It's also about concrete financial mechanics that kick in as leases shorten. Banks have clear lending policies based on lease length. Most banks will not finance properties where the lease has fewer than 30 years remaining at the time of loan maturity. This means if you're looking at a 55-year leasehold property and planning a 25-year mortgage, you've already hit a problem. The lease will be down to 30 years at the end of your loan term.
Even more restrictive, CPF withdrawal limits apply based on lease length. The younger your property's lease, the less CPF you can use to purchase it. This directly affects your buying power and your ability to refinance in the future. What looks like an affordable property in terms of absolute price can become unaffordable once you factor in these restrictions.
These aren't theoretical constraints either. They affect real money and real ability to transact. A buyer who doesn't understand these rules upfront might find themselves unable to refinance, unable to use CPF savings as they expected, or unable to sell because the pool of eligible buyers has shrunk to almost nothing.
The most dangerous assumption a property buyer can make is that a lower purchase price on a shorter-lease property is a good deal. On the surface, yes, you're paying less money. But you're also buying an asset that will depreciate faster and become harder to sell. The cost per square foot might be attractive, but the cost per year of remaining lease tells a different story.
Consider two condos side by side: Unit A has a 75-year lease and costs 1.5 million. Unit B has a 55-year lease and costs 1.2 million. The savings of 300,000 on Unit B looks appealing. But factor in Bala's Curve. In ten years, Unit A might still be worth 1.4 million, while Unit B could have dropped to 1 million. The "savings" of 300,000 has now evaporated, and you're actually worse off. You've paid less upfront but lost more over time.
This is especially true in Singapore's hot property market, where prices have already factored in lease length to some degree. A suspiciously cheap property often has a suspiciously short lease. The market price difference exists for good reasons, and those reasons become painfully obvious when you try to sell.
Whether you're a first-time buyer, an upgrader, or an investor, Bala's Curve should influence your decision-making process:
Bala's Curve isn't magic or speculation. It's a reflection of how real financial systems, buyer psychology, and market mechanics interact with leasehold properties over time. Ignoring it can be expensive. Understanding it is one of the smartest things you can do as a Singapore property buyer or investor.
25 years experience · 1,000+ transactions · 4,379 TOP units managed
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