Evaluating the impacts of lease decay on condominiums in Singapore: Bala's table revisited

• Main Authors: Aw, Vernice Ming Hui, Yap, Cassandra Pin Xuan, Yap, Jun Hean
• Other Authors: Tang Cheng Keat
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2024
• Subjects: Social Sciences; Lease decay; Bala's table
• Online Access: https://hdl.handle.net/10356/174859
• Institution: Nanyang Technological University

This paper attempts to analyse the effects of lease decay on freehold and leasehold non-landed private properties, referred to as condominiums in this paper using data covered from the period 1995 Q1 to 2023 Q3, as well as to investigate the relevancy and accuracy of the Bala’s Table in reflecting the lease decay of condominiums in Singapore at present. Our findings suggest that there is an inverse relationship between lease decay and condominium prices in Singapore. Additionally, based on our re-calculations of Bala’s Table using a hedonic regression model, leaseholds are valued much less than what the current official Bala’s Table suggests; our regression results suggest a 99-year lease condominium at start will fetch a price that is 16-20% less than its freehold counterpart. Our results also translate to a 1.67% long-run discount rate, lower than the implied discount rate in Bala’s Table. The rate of depreciation of leaseholds due to lease decay as captured from our findings increases gradually over time, as opposed to the original Bala’s Table where relatively more drastic depreciation happens at the very end of a leasehold unit’s tenure.