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Heng Swee Keat claims there is still value in HDB flats with less than 40 years left on the lease

Using a fictitious example of a 25-year-old Singaporean buying a brand new HDB flat that is on a 99-year lease, Heng pointed out that there will be more than 30 years left on the lease when the Singaporean hits the average life expectancy of age 85




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Finance Minister Heng Swee Keat asserted that there is still value in HDB flats with less than 40 years left on the lease, at the annual PropNex conference on Tuesday (19 Mar).

Heng – who is widely expected to become Singapore’s next Prime Minister – made this claim as he responded to a question by PropNex Realty CEO Ismail Gafoor who asked him about the lease decay issue of HDB flats, which has become “very much political”.

The ruling party politician asserted that Government-built flats “absolutely” retain value even when there is less than 40 years left on the 99-year lease.

Using a fictitious example of a 25-year-old Singaporean buying a brand new HDB flat that is on a 99-year lease, Heng pointed out that there will be more than 30 years left on the lease when the Singaporean hits the average life expectancy of age 85.

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Heng said: “Is there still value in the flat? Absolutely.”

He added: “At the age of 85, you decide whether you want to pass on the property to your children. You decide what you want to do with it. There is still value in the property. It is not going to go to zero when you are 85.” 

Heng Swee Keat’s claim that the flat will not go to zero value when the Singaporean becomes 85 is only under the assumption that the Singaporean is able to purchase a brand new HDB flat at the age of 25. If he purchases a resale flat, which is more affordable, the value of his property may plummet significantly by the time he turns 85.

The Minister also fails to mention is that there are several government policy restrictions which suppresses the attractiveness and value of older HDB flats to buyers. These are some restrictions:

  • From 1 July 2013, CPF (Central Provident Fund) usage and HDB loan was restricted for purchase of flats with remaining lease less than 60 years;
  • Banks are unwilling to extend loans to finance the purchase of flats that have 35 years left on the lease;
  • CPF money cannot be used for down payment or to service the monthly mortgage for flats which have less than 30 years of lease remaining; and
  • From the 79th year onwards, the property has to be paid for in cash.

In 2017, the hopes of many Singaporeans, who were counting on their flats to continue appreciating in value, came crashing down when National Development Minister Lawrence Wong confirmed that the vast majority of flats will be returned to HDB, without any compensation for homeowners, when the 99-year-lease runs out.

Wong warned that not all old flats will be automatically eligible for the Selective En bloc Redevelopment Scheme (Sers) and that only 4 per cent of HDB flats have been identified for Sers since it was launched in 1995.

The Minister’s warning was followed by HDB chief executive Dr Cheong Koon Hean’s comments in April this year that the value of aging HDB flats will indeed decline over time. Dr Cheong’s comments sparked a massive uproar among Singaporeans, with many likening the housing scheme to a “ticking time bomb,” “political big bazooka,” and a “scam”.

Then in October last year, Prime Minister Lee Hsien Loong asserted that it is fair that the value of HDB flats will decline to zero at the end of its 99-year lease, despite the Government’s past promises that HDB flats are “nest-eggs” that keep growing in value over time.

PM Lee added that he thinks “it’s fair!” that the value of HDB flats will plummet to zero.  value and will likely have to return to the Government with zero compensation.

His latest views, however, contradict his advice to Singaporeans in 2010 as he responded to criticism over the high prices of housing in 2010. Exhorting that HDB flats are an appreciating asset, PM Lee had said:

“The HDB flat is not just a shelter but also a key investment asset…over the long term, the value of HDB flats depends on the strength of the Singapore economy.  Provided Singapore continues to do well, our flats will maintain their value, and Singaporeans can enjoy an appreciating asset.”

That same year, PM Lee’s father and Singapore’s founding Prime Minister Lee Kuan Yew warned Singaporeans not to cast a protest vote against the PAP over the affordability of HDB flats and scolded that Singaporeans must be “daft” if they find fault with the housing policy:

“We give our buyer an asset which is below market price the moment he buys it. So there is no profit, it’s a loss, but there’s a strategy behind that loss,” he said. “That loss is to give the man an asset which he will value, which will grow in price as the country develops, as his surroundings become better.
“This is a social responsibility which we have undertaken and that’s the reason why we are re-elected… No country in the world has given its citizens an asset as valuable as what we’ve given every family here. And if you say that policy is at fault, you must be daft.”

Just before the General Election in 2011, then-National Development Minister Mah Bow Tan told Singaporeans: “We’re proud of the asset enhancement policy. (It) has given almost all Singaporeans a home of their own…that grows in value over time.”

In 2013, Lee Kuan Yew promised again, “We intend to keep the value of these homes up, it will never go down. Because it will be renewed, the surroundings will improve, and as Singapore prospers, GDP goes up, the value of homes will go up.”

Lee Kuan Yew urged Singaporeans not to sell their flats, and assured them that they assets that would grow in value; but the reality is, flat owners with less than 60 years left in their leasehold, will find it hard for them to sell their flats if they decide to cash out.


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