There is still value in older HDB flats which can be unlocked for retirement, said Minister for National Development Lawrence Wong in Parliament on Thursday (May 17).
Speaking during the debate on the President's address, he said there have been concerns about the impact of lease expiry on HDB resale prices.
Quoting transaction data over the past year, he said that an older 4-room flat with less than 60 years remaining on its 99-year lease would sell for around S$300,000 and a 5-room would sell for around S$400,000 in non-mature estates.
For flats in more popular locations, prices can be significantly higher, he added. "So the transacted price depends not just on length of remaining lease, clearly, but also many other attributes," he said, adding that factors like location, storey height, and the condition of the flat are all relevant.
Whatever the price, the sales proceeds would be "more than sufficient" to purchase a smaller flat, he said.
He gave the example of 67-year-old Abdul Aziz Haji Hamdan, who owned a 3-room flat in Marsiling with around 60 years remaining on the lease, and moved to a studio apartment in Kampung Admiralty with a 30-year lease.
His S$250,000 sales proceeds were more than sufficient to cover the purchase price of more than $100,000, and provided excess in cash and CPF proceeds, supplementing his retirement savings, he said.
He harked back to the time when people were speculating in older HDB flats hoping to benefit from the Selective En bloc Redevelopment Scheme (SERS).
"Now the reverse has happened, and there are people overly anxious about how much their older flats can fetch in the resale market," he said.
Addressing calls by some to allow automatic lease extensions or lease top-ups by private developers for older HDB flats, which mostly have more than 60 years remaining on their leases, Mr Wong said: "It will be easy for me to give you a politically expedient answer now and try to wave away the problem, but there are serious trade-offs and ramifications to consider."
This is because Singapore is still severely constrained by space, despite the Government's best efforts at planning, he said. He questioned what would happen to Singapore's children and grandchildren if there is "no more land" to recycle for future public housing.
"How will they have access to subsidised housing in the future?" he asked.
"The Government must grapple with these questions, study the matter, and do the responsible thing," he said.
The issue of lease extension is also not so straightforward a matter, and it must not be assumed that everyone wants it, the minister said.
There is also the issue of maintenance.
"Much more maintenance is needed for older flats and this will be costly for residents," said Mr Wong.
He added that the Government made it clear from the HDB lease is 99 years, which is "a long time" covering two generations.
"Our duty is not just to the current generation who already own homes, but also to the future generations – those not yet voting, and those not yet born, whose lives and future depend on us making the right decisions on their behalf," he said.
There is still time to work through the issues, he added.
But for now, what's important is that people do not speculate or spread misinformation which can impact on the market, Mr Wong said.
One such example of misinformation was that the Government would stop the use of CPF entirely for the purchase of HDB flats.
Addressing this in his speech, Mr Wong said the Government has no such plans.
Even for older flats, CPF can still be used but under certain conditions to safeguard homebuyers' retirement adequacy, he said.
The speculation started from a media report highlighting a suggestion from an academic, who later clarified that his views were not fully reflected.
Still, the information continued to circulate online and through chat groups, Mr Wong said.
"What's important is that we do not speculate or spread misinformation which can impact on the market," he said.
Apart from the HDB resale portal, which was launched at the beginning of this year to make transactions faster, Mr Wong said more will be done to make the resale market work better.
The Government will provide more information on the available flats in the market, whether new or resale, to help buyers and sellers transact more smoothly and help Singaporeans make more informed housing decisions that best suit their needs.
"We will continue to monitor market trends closely and make use of various policy levers to ensure a stable and sustainable property market," he said, giving assurance that the Government will continue to provide affordable and quality homes for all Singaporeans, both now and in the future.
There is no sugar coating this. Once the lease hits the magic 60 years left, a whole bunch of restrictions kick in and it reduces the appeal of the flat.
The most restrictive rule is the max CPF. For a 30 year old, the calculation is as such: (59 - (55 - 30)) / 59 = 57.6%. He can only use 58% of the max allowed CPF. He won't feel it upfront, but he will need to use cash to pay his installment much earlier.
It'll take another 3 to 5 years before this fact sinks in.
The other rule that age + remaining lease >= 80 years will only be felt when the lease has 45 years left. It restricts buyers to 35 and older. :-O
Will prices come down much? Maybe not. Suppose you buy a 30 year old flat at $700k. Ignoring interest (which is substantial), it works out to be $10k a year, or $833/mth. It is much cheaper than rental.
When Mrs Y L Dong and her family moved into their resale five-room Housing Development Board (HDB) flat 20 years ago, she was certain they had found their ideal home. The Ang Mo Kio apartment may have been 17 years old, but its age did not bother her.
"We have all the necessary conveniences like coffee shops and wet markets nearby. It's a really friendly neighbourhood with a cosy feel and it is also really convenient to get to town from here," she said.
But last year, when she approached a property agent with the intention of selling her flat, the response was poor.
"After realising that the lease of the house was reaching its 40-year mark, most buyers weren't keen at all. They were afraid they might not be able to sell it off in the future," said the housewife who has two teenage children.
"Even though the flat is spacious and opposite Bishan Park and near prestigious schools, no one wanted to buy."
Mrs Dong is not alone. A growing number of HDB flat owners are holding on to properties nearing the halfway point of their 99-year leases, raising mounting uncertainties of depreciating values, which have run counter to long-held narratives that Singaporeans' HDB flats are not just homes, but also appreciating assets.
Today, with older flats in the spotlight, the notion of asset-enhancement, which has seen HDB flat prices rise in the past few decades, is under threat.
And the larger question of what will happen to people's HDB homes when leases actually end has become an issue of growing traction.
Experts like Dr Fu Yuming put it starkly. "I know what will happen to a private estate when the land lease expires: it will revert to the government," said the associate professor at the Department of Real Estate in National University of Singapore.
"But I don't know what the government is thinking about for the lease management of HDB estates, since there is no open discussion about the issue. In theory, the estates revert to HDB when their lease expires. But will there be any lease renewal policy or re-housing policy? The uncertainty needs to be resolved to protect the interest of HDB homebuyers."
The issue came under scrutiny last year after National Development Minister Lawrence Wong said in a blog post that the Selective En bloc Redevelopment Scheme (SERS) will apply only to a few flats, not all.
His comments came after reports of buyers forking out high prices for ageing flats, in the hope of cashing in through SERS, where residents are rehoused in new blocks and also receive compensation for their old homes.
But Mr Wong cautioned that SERS is a highly-selective scheme. Since it started in 1995, only 80 sites have been chosen. That makes up a mere 4 per cent of total HDB flats.
There are about 70,000 flats which are more than 40 years old, all facing lease expiry in about 50 years.
Among them, there will be owners who may have bought the new flats at a subsidised rate. But there will be a sizeable group who, like Mrs Dong, are resale flat owners and who bought these flats at a much higher price with the hope of making a profit.
Many could be disappointed. If properties have to be handed back to the Government at the end of the 99-year lease, some owners of old flats may have to sell at a loss, assuming any buyer can be found. And if there are no buyers, owners will eventually be left with an asset which has negligible value. This despite the fact that they may have spent many hundreds of thousands of dollars on it.
The first to cross the line will be the oldest HDB flats in Geylang, Jurong East and Queenstown, and property agents are reporting dips of up to 20 per cent for the prices of these flats, depending on the flat's and the buyer's age.
"We have to educate sellers of these older flats that with the Central Provident Fund (CPF) Withdrawal Limit imposed, younger buyers are no longer keen," said Ms Tracey Wong, chief executive officer at the Institute of Estate Agents, Singapore.
"We then ask the sellers to be more realistic in their sale price in order to attract buyers."
The CPF Withdrawal Limit places a cap on how much a buyer can tap on his CPF for property purchases. The shorter the lease of a flat, the less CPF can be used.
Mrs Charan Singh, 78, is one of those who worries about the future even though she is not looking to cash in on her five-room flat in Marine Parade, which is 45 years old.
She wants to bequeath the property to her children but wonders if she is passing on a worthless asset.
"I'm content for now but once I die, my flat will go to my children," she said. "If my house does not fall under the SERS policy what will happen to the value of my flat then? What will this mean for my children?"
Experts say there is no point in speculating. Instead, they suggest that the authorities be more transparent, in engaging people more in discussions on the fates of their ageing homes.
"The important question is how relevant policies should be debated and made," said Dr Fu, urging more dialogue on lease management and potential re-housing solutions.
On the part of Singaporeans, a shift in mindset would be useful, said analysts. Instead of seeing their flats as investments, they should view them primarily as homes.
"HDB flats are public housing, so it needs to serve the needs of the housing demand first. The decision of buying and selling a HDB flat for investment purposes should not be the end game," said Dr Tu Yong, associate professor at the Department of Real Estate in NUS.
In this regard, homeowners can be assured that the Government will not allow ageing flats to be neglected, said observers.
"The Government is committed to the upkeep of HDB estates regardless of SERS," said Dr Fu. "There has been no general degradation of old HDB estates and, I believe, it is unlikely that the Government will allow general degradation to happen in the future."
One homeowner who is happy with her older estate is Ms Tan Chia Chia, a 42-year-old PhD Student who lives with her 86-year-old mother in a four-room flat at Mei Ling Street in Queenstown.
"I've lived in this estate my whole life and all my memories have been built here," she said. "I'm completely happy with my estate and I hope they never tear it down. There's a lift on every floor and there are ramps around to help the elderly so I couldn't ask for more really."
While concerns are emerging about ageing flats, both experts and homeowners believe that many properties still retain some value, whether it's monetary or other qualities.
After all, the flats are still subsidised by the government, said Professor Sing Tien Foo, Director of Institute of Real Estate Studies in NUS.
They can still use their HDB flat as the starting house, and accumulate wealth to support their upgrading aspirations as they move onto the next phase of their lives," he added.
If an old flat is in a good location or has easy access to key amenities, there is still a demand, said Ms Wong.
It was this sort of demand that first attracted Mrs Keethanjali Prakaash, 27, to buy an executive maisonette at Serangoon North.
Having recently tied the knot, the first-time house buyer and her husband made the decision to buy the unit, which had reached its 35-year mark, in the region of S$600,000.
"We were looking around for quite a bit and we finally settled here because it's near my parents' house and it's also a really lovely neighbourhood with plenty of shops and other amenities nearby," she said.
When asked about her flat's future resale options, she said that given the rarity of executive maisonettes, it will always offer a premium for buyers especially for large families looking for bigger spaces. The government has stopped building executive maisonettes since 1995.
"The housing market in Singapore is always changing and you never know what to expect - what was relevant 10 years ago isn't now and the same goes for the next few years ahead. What's important is living in a house that is conducive and comfortable for your family, that's the only thing you can really control."
Oops. Lease expiry was never a problem until Lawrence Wong brought it up last year (Mar 24). Then suddenly it was.
Personally, I think HDB will have to extend the lease by 50 years at least due to the high number of expiring HDB lease within the same time frame. However, the Government is purposely quiet on this issue now because it fits in their agenda to force HDB prices down.
It is not well known, but there are loan restrictions once a HDB flat has less than 60 years lease remaining:
Wow.
Also, banks will typically loan until 35-years lease. In other words, no bank loan if the lease is shorter than that. Also, if the lease has 50 years left, you can only take a 15-year loan.
Let's see who still dare to buy old properties. :-O
What this means is that once a property has less 60 years lease left, it should (i) have a marked discount (maybe 20%?), (ii) start to depreciate (linearly?) yearly.
First transfer of power since Malaysia's independence (1957).
The people has spoken. Najib is too scandal-ridden.
Two other factors that greatly increase the opposition's chances:
Najib was still expecting the rural Malays to support him, but they did not. It was their swing that made the difference. I attribute it to cost-of-living (GST) and Dr Mahathir.
Mission accomplished?
PS: now is the best time for Najib to find out who are his real friends. :lol:
Country in ruins! I have duty, 9th of May, rest for a day.
The Pentax SMC XW eyepieces. Introduced in 2003. Designed for day-time spotter scopes, but are also excellent for astronomical use. 70 degrees FOV. 20mm eye-relief. Weatherproof body.
Minimize Rectilinear Distortion (RD) at the expanse of Angular Magnification Distortion (AMD) and Field Curvature (FC). 14mm onwards suffer from noticeable FC.
The 2" eyepieces — 30mm and 40mm — were discontinued in 2013. 3.5mm and 5mm EPs were discontinued in 2016.
We can see the common design pattern: a mostly identical main lens group with a smaller lens group for magnification and correction.
The 3.5mm and 5mm EPs have the same main lens group. The 7mm, 10mm and 14mm EPs are the same, but with different thickness and an additional corrector lens. 20mm EP has a yet thicker lens.
The 30mm and 40mm EPs have a totally different design. Both have the same basic design, but the proportions are different.
