Should HDB home be viewed as an investment tool or pure accommodation?

by GC

Singapore HDB housings are 99 years leasehold. From an economic view, we expect the value of our HDB units to appreciate over the initial years; it is a result of improvements to estate facilities, livability and many others. But simple theory on demand and supply explains the depreciation in value after its peak.

HDB leases units to us for 99 years; this retains her ownership. She may or may not extend the lease period after the 99th year. She may (ought to, in my opinion) analyse the buildings’ conditions, demolish older ones which are deemed unsafe for occupancy, and rebuild new buildings. Buildings have life-span, although some may argue that buildings can last infinitely, but take a look at centurial buildings and their conditions, many are unsafe for occupancy and are aesthetically horrifying; maintenance is extremely challenging and costly too.

Land in Singapore is scarce – We have limited land to build new buildings, and it is only a matter of time we exhaust the space. Our buildings and estates have to reflect modernity, only then we can upkeep our image and engine of a first-world country, and keep our construction industry and other related industries alive.

I’d opine that it’d be inevitable that some buildings had to be demolished and new buildings constructed on that same plot of land, but doing so only significantly reduce the value of older estates.

So should we then forgo value of our HDB home and just purely live in one until end of our natural life?

For sure, as the building gets older, unit owners have to lighten the burden of higher maintenance cost.

The average life-span of Singaporeans is 82.60 years old. The average age of young adults buying a new flat is between 18 to 35 years old. That gives an average living period in your HDB home about 47.6 years, and a remaining 51.4 years out of 99 years lease period. This leaves the next generation in most families with 2 HDB houses in the future, both in 99 years lease or extended lease period after 99 years. Some may sell them (at a lower profit or maybe loss). Some may rent out for passive income. Some may use them as vacation homes.

The units we live in, the neighbours we talk to, and the precinct we embrace ourselves in, give us our community identity (Tampines is a really nice place to stay btw, just saying).

HDB buildings in precincts were built at about the same period. Reconstruction of buildings (or worst, relocation or only demolition) may rob us from these associations. If such works were to be carried out, it seemed that it would only be a matter of time when we would eventually lose our community identity.

When individuals hit an eligible age and sustainable income, they purchase new houses, depart from the ones they grew up in, and rebuild new community identify in the new estate. It becomes “just another home I had lived in”.

So really, should HDB home be viewed as an investment tool or pure accommodation?