Lease Decay Explained: Should You Still Buy a 40-Year-Old Flat?

If you’re eyeing a resale HDB flat or private apartment that’s over 40 years old, chances are you’ve heard the term “lease decay.” But what does it really mean and more importantly, should it stop you from buying that otherwise well-located, spacious flat?

Let’s break it down.

What is Lease Decay?

Lease decay refers to the diminishing value and appeal of a property as its lease shortens. In Singapore, most HDB flats come with a 99-year lease. Once a flat hits the 40- to 60-year mark, buyers and lenders become more cautious and for good reason.

From stricter financing rules to limitations on CPF usage, lease decay affects both the value of the home and your ability to sell it in future. While the lower price tag on a 40-year-old flat may seem tempting, understanding the implications can help you make a smarter decision.

What to Consider Before Buying a 40-Year-Old Flat

1. Financing May Be More Challenging

Banks are conservative when it comes to older properties. The remaining lease impacts how much they’re willing to lend. For flats with 60–30 years left, financing may drop to as low as 55% of the purchase price, requiring a larger cash down payment.

If the lease falls below 30 years, you might not be eligible for a bank loan at all. That means unless you’re sitting on a healthy reserve of cash, your options shrink significantly.

2. CPF Usage Is Restricted

While CPF can be used for resale flats, you’ll need the lease to last until the youngest buyer turns 95. For example, if you’re 45, the flat must have at least 50 years left to use your CPF fully. Anything less, and the usable CPF amount gets pro-rated. If the remaining lease is under 20 years, CPF cannot be used at all.

3. Resale and Exit Strategy Will Be Tougher

Even if you’re planning to live in the flat for the long haul, it’s wise to think about the resale potential. Life can be unpredictable: medical needs, family obligations, or financial shifts may prompt you to move.

Trying to sell a flat with 30–40 years left on its lease can be difficult. Fewer buyers, limited loan options, and CPF restrictions create a smaller pool of eligible buyers. If you’re forced to sell in a hurry, you may face significant losses.

4. Renovation Costs Could Be Higher

Older flats often come with aging infrastructure, outdated wiring, worn waterproofing, or plumbing that’s long overdue for replacement. That means your renovation costs could run higher than average.

A good renovation package can help manage these costs, but it’s important to factor this into your total investment.

5. Is the Location Worth the Risk?

In many cases, older flats are in mature estates: close to amenities, MRTs, schools, and green spaces. For some buyers, this unbeatable location outweighs concerns about lease decay. If you’re buying for long-term stay and don’t plan to sell, a well-maintained 40-year-old flat could still be a wise move.

Lease Decay Doesn’t Mean You Shouldn’t Buy - It Just Means You Need a Plan

A 40-year-old flat can still be a great buy if you’re financially prepared, have no plans to sell in the short term, and work with experienced professionals who can assess the condition of the unit before you renovate.

With a tailored renovation interior design plan, you can future-proof the space to suit your lifestyle even into retirement. Think wider bathrooms, step-free layouts, anti-slip flooring, and efficient use of natural light and ventilation.

Planning to Buy an Older Flat? Let’s Renovate Smart.

At Hamid and Sons Interior , we help homeowners transform older flats into safe, functional, and beautiful homes with over 50,000 projects completed since 1989. Our team understands the hidden challenges of aged properties and works closely with you to stretch every renovation dollar wisely.

Get in touch with Hamid and Sons today. From careful inspection to tailored renovation packages, we’re here to make your journey smooth and stress-free.