Leasehold Properties as Inflation-Linked Assets: Forecasting Singapore’s Property Market Through Ho Ching’s Lens

Imagine having an asset that naturally keeps pace with inflation while providing both shelter and potential capital appreciation. In Singapore’s unique property landscape, leasehold properties represent exactly this opportunity. When former Temasek CEO Ho Ching recently shared her insights on leasehold properties as inflation-linked assets, she highlighted a perspective that many investors overlook. Unlike money sitting in low-interest savings accounts, leasehold properties offer a tangible hedge against the eroding effects of inflation – but with important caveats that every investor should understand.

Understanding Ho Ching’s Core Perspective on Leasehold Properties

Ho Ching’s analysis offers a refreshing framework for evaluating leasehold properties across Singapore’s diverse real estate landscape. Whether industrial facilities, commercial spaces, private condominiums, or HDB apartments, she emphasizes that all leasehold properties share a fundamental characteristic: a definitive shelf life ranging from 9 to 999 years.

This predetermined lifespan creates a unique investment proposition. During the lease period, property owners can benefit from economic growth and rising purchasing power, particularly in the earlier stages of the lease. This positions leasehold properties as effective inflation-linked assets that maintain and potentially increase their real value over time.

Ho Ching draws a critical distinction between leasehold properties and traditional savings vehicles: “These can be regarded over the longer term as inflation-linked assets, unlike say money in a savings account that pays interest below the inflation level because of its instant withdrawal flexibility.” This observation highlights how leasehold properties can preserve purchasing power in ways that liquid cash investments often cannot.

The key advantage lies in the owner’s ability to sell the property and capture capital appreciation – a fundamental difference from rental arrangements where tenants have no ownership stake. As Ho Ching notes, “A leasehold owner can sell and enjoy the capital upside from asset value appreciation, whereas a simple rental tenant has no right to on-sell the asset for capital gain.”

Comparing Leasehold Ownership: Beyond Traditional Investments

To fully appreciate leasehold properties as inflation-linked assets, we must understand how they compare to other investment vehicles. Ho Ching provides an illuminating framework by contrasting leaseholds with traditional rentals, bonds, and fixed deposits.

Ho Ching illustrates the time value concept with a practical example: “$10 in 10 years’ time is less than $10 now and today.” She elaborates with the Singapore Savings Bond analogy: “Imagine we keep our money in a 10-year deposit like the special SG savings bond or buy a 10-year bond – that $1000 initial purchase will compound and grow to about $1500 in 10 years if we have an interest or coupon rate of about mid 3+%.”

This net present value (NPV) framework becomes increasingly relevant as leases approach expiration. While early-stage leaseholds derive value primarily from capital appreciation tied to economic growth, properties with shorter remaining leases are valued differently: “But closer to the end of the leasehold ownership, the benchmark will more likely be the alternative rentals, in net present value terms.”

Forecasting Valuation Trends: Short vs. Long Leaseholds

The relationship between lease duration and property valuation follows predictable patterns that investors can leverage for strategic decision-making. Understanding these dynamics is essential for positioning leasehold properties effectively within an inflation-hedging portfolio strategy.

For the 2025-2030 period, we forecast that Singapore’s property market will experience divergent valuation trends based on remaining lease duration:

This forecast aligns with Ho Ching’s observation that “folks who buy 30 or 40 year balance leasehold properties clearly know that” they’re purchasing a wasting asset with different valuation dynamics than longer-term leases.

The Political and Social Dynamics of Leasehold Properties

Beyond pure economics, leasehold properties in Singapore exist within a complex political and social ecosystem that influences their performance as inflation-linked assets. Ho Ching addresses these dynamics with characteristic directness.

The VERS Debate: Politics vs. Economics

Ho Ching offers a pointed critique of what she terms “wailing about leaseholds running out or about VERS,” characterizing such concerns as primarily political rather than economic: “It’s just politics, because government is the owner of HDB, and government is sensitive to votes, right?”

This perspective highlights an important consideration for investors: policy interventions driven by political considerations may alter the pure economic trajectory of leasehold properties. For the 2025-2030 period, we anticipate increasing political pressure regarding aging HDB estates, potentially leading to enhanced VERS terms that could affect valuation models for both public and private leasehold properties.

Intergenerational Equity and Original Ownership

Ho Ching introduces an important distinction between original property owners and subsequent purchasers: “The original owners, if they had bought at age 30, would be 100 years old, mostly dead, by the time VERS comes along.” This observation underpins her argument that “willing buyer willing seller who really have no right to ask for special goodies.”

This intergenerational perspective has significant implications for how leasehold properties function as inflation-linked assets. Original owners who purchase new properties benefit from the full inflation-hedging cycle, while subsequent buyers must carefully evaluate remaining lease duration against inflation protection needs.

Actionable Insights for Stakeholders

Ho Ching’s analysis provides valuable guidance for various stakeholders navigating Singapore’s leasehold property landscape. Here we translate her perspectives into practical strategies for investors, policymakers, and families.

Ho Ching’s proposal for weighted voting rights in VERS decisions merits particular attention: “The original owner can have 10 votes out of a block of flats with 100 units, and that unmarried child who had been registered as staying with the original owner can have 2 votes, and all others are given 1 vote.” This approach acknowledges the special status of original owners and caregivers while maintaining democratic principles.

Singapore Property Market Forecast: 2025-2030

Synthesizing Ho Ching’s framework with current economic indicators, we project the following trends for Singapore’s leasehold property market through 2030:

The transition from asset-value to rental-based benchmarks will accelerate for properties crossing the 30-year remaining threshold during this period. As Ho Ching notes, “We will look at the rentals as a benchmark to price short leasehold properties of say 10 years. This means taking a view on how the remaining 10 years will look like, knowing that the leasehold will run out at the end of the 10 years’ balance.”

For investors specifically seeking inflation protection, leasehold properties with 50+ years remaining will continue to offer the strongest hedge characteristics. However, even properties with shorter remaining leases can play a valuable role in a diversified portfolio when acquired at appropriate valuations reflecting their transitional nature.

Conclusion: Leasehold Properties in an Inflationary Future

Ho Ching’s analysis provides a valuable framework for understanding leasehold properties as inflation-linked assets within Singapore’s unique property ecosystem. While these properties do offer significant inflation-hedging characteristics, their effectiveness varies dramatically based on remaining lease duration, economic conditions, and policy interventions.

The transition from growth-based to rental-based valuation as leases approach expiration represents a fundamental shift that investors must navigate carefully. As Ho Ching succinctly puts it: “If no such pathway can be found, we just wait for the leasehold to run out, kan?”

For the 2025-2030 period, Singapore’s property market will likely continue offering effective inflation protection through leasehold properties, particularly those with substantial remaining lease periods. However, investors must increasingly differentiate between lease durations and property types to optimize their inflation-hedging strategies in an environment where policy considerations may increasingly influence market dynamics.

By understanding the fundamental principles outlined by Ho Ching – from NPV calculations to intergenerational equity considerations – stakeholders can make informed decisions that balance short-term needs with long-term economic realities in Singapore’s evolving property landscape.