SINGAPORE — It may serve as a “wake-up call” to buyers that not all old flats will be eligible for the Selective En bloc Redevelopment Scheme (Sers), as National Development Minister Lawrence Wong reminded Singaporeans last week in a blog post.
But analysts believe the warning may go unheeded for the time being because the mindset of buyers is different today: They are looking to buy a Housing and Development Board (HDB) flat and sell it off within five to 10 years, in contrast to the previous generation which generally bought flats with the intention of living in them for decades. Upcoming executive condo launches include Hundred Palms Residences EC, Yio Chu Kang EC, Inz Residence EC, Anchorvale Lane EC, while existing ones include The Terrace EC, Brownstone EC, The Vales EC, Parc Life , Sol Acres EC, The Visionaire, Bellewoods EC, Signature at Yishun, The Criterion EC and Northwave. Hundred Palms Residences , Hundred Palms floor plans and Hundred Palms EC show flat will be available shortly.
Such a mindset could account for why buyers are paying high prices for resale flats in mature estates. After all, most, if not all, the older HDB flats have at least 40 years of the 99-year lease remaining, and there is still a resale value. However, it could become a problem if the trend continues in the years ahead, the analysts said.
When it comes to the prices of properties nearing the end of their lease, it is not a straight-line depreciation, the analysts cautioned. In fact, once the lease of a property — be it a HDB resale flat or a condominium unit — falls below 30 years, prices which they could command would go down drastically, they noted.
In response to queries, the HDB said that as of December last year, there were a total of about one million flats in Singapore. Among these, about 7 per cent were at least 40 years old. Another 29 per cent were between 30 and 40 years old.
In his blog post, Mr Wong noted that only 4 per cent of HDB flats have been earmarked for Sers since its launch in 1995. “For the vast majority of HDB flats, the leases will eventually run out, and the flats will be returned to HDB, who will in turn have to surrender the land to the State,” he wrote.
Public servant Mavis Lim, 29, who has been looking for a resale flat in Bishan, told TODAY that the remaining lease of a flat has little influence on her decision. “Units in mature estates have more amenities nearby, and I would definitely prefer them even though they are older,” she said.
Mr Yosua Ng, a 29-year-old operations manager, said that while the lease of the flat would not be a deal breaker, it would factor into his price negotiations.
Singapore’s oldest estates include Queenstown, Tanjong Pagar and Bedok South, said Mr Chris Koh, director of property firm Chris International. He said that many young couples pay top dollar for older flats in the mature estates because of the amenities nearby and the relatively larger size, compared to new flats.
“(The buyers) are not thinking long-term. They buy it today … But they have plans to upgrade further,” he said. In light of the country’s ageing population, many couples also end up moving after a few years in order to stay near their parents, he added.
Director of International Property Advisor Ku Swee Yong reiterated that the market value of older flats will fall in tandem with the lease duration. HDB loans and the use of Central Provident Fund are restricted for buying flats with less than 60 years left on their lease. “In the last 30 years (of the lease), only buyers with enough cash will be willing to buy. Then the value (of the flat) drops very quickly,” he said.
The analysts stressed that buyers cannot expect the Government to “save” them using taxpayers’ money through Sers, and the situation is no different from the private property market. For condominiums, it is already a given that the Government will not renew the lease “for free”, said SLP International Property Consultants’ head of research and consultancy Nicholas Mak. “What Mr Wong said is a wake-up call … to get people to not overpay for a flat,” he said.
Mr Wong’s comments triggered a spirited discussion online, with some expressing concern that flat owners whose leases are running out will have their homes taken back and be left in the lurch. Mr Mak suggested that when the time comes, these owners could be offered new units in a scheme that is similar to Sers, except that the owners will have to pay more for their new homes.