Is Your HDB Really An Asset?

Is your HDB really an asset in the long run? It’s worrying to hold that thought, that you can cash out on your flat when u are old. Recent news about the government taking back all 191 plots of landed houses in Geylang when their leases run out in 2020 serves as a reminder. This came as a shock to many and more so for the people still living in those houses. Many of them have nowhere to go and are not prepared for such things.

So how does it relate to HDB? Let us take a look at how your HDB might depreciate over time.

Take a look at the article from Straits Times which hows possible HDB depreciation over time.

Adapted from The Straits Times

The Straits Times has a very good chart to show the value of a HDB flat depreciating as the lease expires. There are a few critical points before the value of the flat goes to zero. If your HDB flat or any leasehold property has 45 years or less lease currently or reaching the 45 years mark, its time to take note of what is going to happen should you still decide to hold it.

Home owners may also wish to take into consideration on CPF usage for properties less than 60 years lease left. As CPF board states that;

The following rules apply:
(1) No CPF can be used if the remaining lease of a property is less than 30 years.
(2) A property owner is eligible to use his CPF for the property if his age plus the remaining
lease of the property is at least 80 years.
(3) The maximum amount of CPF that can be used is capped at a percentage of the lower of the
purchase price and the value of the property at the time of purchase. The percentage is
computed based on the remaining lease of the property when the youngest eligible member
using CPF reaches age 55, as shown below:

Flats with leases expiring in Singapore

National development minister Lawrence Wong said in a blogpost in March 2017 cautioning people that “As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly, So buyers need to do their due diligence and be realistic when buying flats with short leases. This is especially important for young couples, who have to plan for a much longer future.” He said.

For young people, it is especially important to plan ahead when buying a house especially if you’re considering a resale flat. If you buy a BTO, it won’t be a cause of concern as BTOs start with 99 year lease.

What about the Selective En bloc Redevelopment Scheme (Sers)?

Most people are still willing to pay a high price for a low lease flat because of the hope that their old flats will be redeveloped under the SERS scheme. If you’re hoping your old flat will go under this scheme, it is timely to take note that it may not happen.

Since the Sers was launched in 1995, only 4% of HDB flats have been identified for Sers and the government will continue to maintain the strict selection criteria for blocks eligible for Sers. Read it below here