Singapore Property: The Cost of Doing Nothing

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5 days ago
4 min read

Singapore Property: The Cost of Doing Nothing

In the Singaporean context, "buy and hold" has long been the gold standard of financial wisdom. For previous generations, holding onto a property for 30 years was a guaranteed ticket to wealth.

However, as we move through 2026, the landscape has shifted. While property remains a resilient asset, a passive "set it and forget it" mindset can quietly erode your net worth. The cost of doing nothing isn't just a missed opportunity; it’s a tangible financial drain.

Here is how the "buy and hold" strategy might be working against you and what you can do to optimize your portfolio.

1. The Trap of "Locked" Equity

Many Singaporean homeowners sit on properties that have appreciated by $500,000 or $1 million over two decades. On paper, they are wealthy. In reality, that wealth is often "trapped."

Financing Constraints: As you age, your loan tenure shortens. A 35-year-old can take a 30-year loan, but a 55-year-old is often capped at a 15-year tenure to meet the age-75 limit.
The TDSR Hurdle: Shorter tenures mean higher monthly installments. Even if your income is stable, the Total Debt Servicing Ratio (TDSR) might prevent you from taking an equity term loan or upgrading because the "stress-test" math no longer works in your favor.

The Lesson: If you wait too long to "right-size" or decouple, you may find yourself with a high-value asset but zero ability to use that equity for retirement or further investment.

2. The Unavoidable Reality of Lease Decay

In Singapore, 99-year leasehold properties are the norm. While values tend to rise in the first 20–30 years, they eventually hit a "cliff" known as Bala’s Curve.

The 40-Year Mark: Once a property has less than 60 years remaining, bank loan limits tighten, and CPF usage for buyers becomes pro-rated.
The Pool of Buyers Shrinks: As a property nears its 40th year, the pool of eligible buyers drops significantly because younger families cannot get full loans. This quietly suppresses your capital gains compared to newer developments.

Property Age	Impact on Marketability	Loan-to-Value (LTV)
0–20 Years	High demand; easy to exit.	Standard (75%)
21–40 Years	Growth begins to stabilize.	Standard
Over 40 Years	Harder for buyers to get full loans.	Restrictions kick in

3. Rising Holding Costs vs. Stagnant Yields

Doing nothing doesn't mean zero cost. Holding an older property in 2026 comes with increasing friction:

Property Tax Hikes: With the progressive tax rates implemented since 2024, high-Annual Value (AV) homes face significantly higher annual bills.
Maintenance "Creep": Older condos often face rising MCST sinking fund contributions as aging infrastructure (lifts, swimming pools, piping) requires major overhauls.
Opportunity Cost: If your property is appreciating at 2% while the S&P 500 or Singapore REITs are yielding 5–8%, you are effectively losing 3% of your wealth every year by staying put.

Strategy: From Passive Holding to Active Management

To avoid the "cost of doing nothing," homeowners should transition to a more active review of their portfolio every 3 to 5 years.

Review the "Exit Window": If your property is approaching the 20-year mark, evaluate if a "swop" into a newer development or a freehold asset would better preserve your legacy.
Optimize Before Retirement: If you plan to extract equity for retirement, do it while your income is at its peak and your loan tenure is still flexible.
Monitor the Rental Gap: If your rental yield is being eaten up by property taxes and maintenance, it may be time to redeploy that capital into higher-yielding financial instruments.

Insight: In 2026, wealth is not just about what you own, but how liquid and efficient that asset is.

Hypothetical "Hold vs. Sell" Scenario

To illustrate the "Cost of Doing Nothing," let's look at a common 2026 scenario for a middle-aged homeowner.

In this hypothetical, you own a 99-year leasehold 3-bedroom condo in the Rest of Central Region (RCR), currently aged 20 years. You are considering whether to hold it for another 10 years or sell now to "recycle" your capital into a newer asset.

The Scenario: 10-Year Outlook (2026–2036)

Variable	Current Status (2026)
Current Market Value	$1,800,000
Outstanding Loan	$600,000 (at 1.5% interest)
Remaining Lease	79 years
Annual Value (AV)	$48,000

Option A: The "Buy and Hold" Path

You decide to stay put until 2036. By then, the property is 30 years old with 69 years left.

Capital Appreciation (Slowed): While the market grows at 2–3%, older leasehold assets often underperform. If it grows at an average of 1.5% p.a. due to lease decay, the 2036 value is approx. $2,088,000.
Maintenance & Sinking Fund: As the condo hits 30 years, MCST fees often rise to cover aging lifts and facades. Expect ~$600/month → $72,000 over 10 years.
Property Tax: At an AV of $48k, your tax (after 2026 rebates) is roughly $1,800/year → $18,000 over 10 years.
Major Repairs: Air-con overhauls, toilet waterproofing, and flooring wear-and-tear → ~$30,000.

Net Equity Gain after 10 years (estimated): ~$288,000 minus ~$120k costs = +$168,000.

Option B: The "Active Management" Path

You sell in 2026, realize your $1.2M in home equity, and reinvest into a newer RCR/OCR property or a diversified portfolio.

Selling Costs (2026): 2% Agent Fee + Legal fees ≈ $39,000.
Growth Potential: Reinvesting into a newer "growth" asset or a property with 90+ years lease typically yields higher appreciation (target 3% p.a.).
New Asset Value (2036): Reinvesting $1.8M at 3% growth = $2,419,000.
Maintenance: Newer buildings have lower MCST and repair costs for the first 10 years (avg. $350/month) → $42,000.

Net Equity Gain after 10 years (estimated): ~$619,000 minus ~$81k (costs/tax) = +$538,000.

Comparison: The Financial "Gap"

Metric (10-Year Horizon)	Option A: Hold	Option B: Reinvest	The Difference
Asset Value (2036)	$2.08M	$2.42M	+$340,000
Total Holding Costs	$120,000	$81,000	-$39,000
Estimated Net Gain	$168,000	$538,000	+$370,000

The Verdict: By "doing nothing," you potentially leave $370,000 on the table over the next decade. This is the "quiet" cost of lease decay and rising maintenance in aging leasehold properties.