Property agents monitor the news closely – especially when it relates to government rulings, property cooling measures and updates on URA masterplans.
These past few weeks, I have to say that they has been a LOT of news regarding HDB prices and the 99-year leasehold.
HDB flats – being public housing – will always be on top of the government agenda.
Let me compile the list of articles that has appeared with regards to this limited leasehold issue.
This issue is currently appearing because alot of flats in Singapore are starting to cross the 30-years-old mark.
It began with Minister Lawrence Wong’s blog post here: Choosing A Home For Life (24 March 2017)
After that the articles started to pour in:
Don’t Assume All Old HDB Flats Will Be Eligible for SERS, cautions Lawrence Wong (ST, 24 March 2017)
Not All HDB Flats Are Eligible For En-bloc: Lawrence Wong (TODAY, 24 March 2017)
HDB Leases: Buyers’ Short Term Focus May Lead To Future Woes (TODAY, 28 March 2017)
Buyers Who Pay High Prices for Old Flats Face Reality Check (ST, 29 March 2017)
How To Figure Out If An Old HDB Flat Is Worth Its Asking Price? (ST, Opinion, 8 April 2017)
Home Worries Surface As Lease Expiry Looms (ST, 9 April 2017)
Will You Still Love Your Old HDB Flat When It’s Over 64 (ST, Opinion, 12 April 2017)
HDB flats ‘good store of asset value’ for those who plan ahead: Lawrence Wong (CNA, 12 April 2017)
MND calling 99-year leases “good store of asset value”, but there’s a catch (TMG, Commentary, 15 April 2017)
How HDB Flats Might Depreciate Over Time
Reading the various articles, there seems to be a lot of reminders to not be too emotionally attached to your HDB flat.
One of the articles – written by a journalist – even offered a way to calculate the “value” of the property.
As for buyers shopping for a resale flat now, I have a simple word of advice: Don’t be seduced by the spacious layouts and convenient amenities of old resale flats into paying too much for them.
How do you know what is too much? You can try a simple formula. Many property transactions are already priced with a psf measure: price per square foot.
Add another indicator: number of years of lease remaining.
Take the example of a Bukit Timah flat of 1,345 sq ft that sold for $950,000, reported in The Straits Times recently. That is $706 psf.
That flat was built in 1974 on a 99-year lease. It thus has 56 years of lease remaining. The price psf on a per annum of balance lease basis is $12.60.
Is that a good price?
This was followed with another counter-example:
Beyond leasehold issues, the truth is wage growth is also starting to slow down. With lower wage growth, the price increase of properties will start to stagnate.
For many years, the price of property grew in tandem with the growth of wages. Unfortunately, in this age of technological disruption – even Singapore is not immune to the effects.
As a property agent, my advice will be simple especially to homeowners – buy what you can afford. Be clear that the HDB you purchase is:
- Not considered as an asset – banks do not offer refinancing for HDB flats as it is public housing
- Do not hope for SERS to give you a fresh 99-year lease
- The “Asset Enhancement” policy was a windfall only for the earlier generations
- Simply a roof over your head. Being overly sentimental might not be useful in the future. If a suitable buyer’s offer come along, you might want to consider selling it.
If you already own a HDB flat, you might not be sure of what should be your next choice. I currently offer a free property review for you to discover what is the next step for you & your family – based on your current financial standing.