Wong says that older HDB flats still have value while case studies show such owners are increasingly disadvantaged

Speaking in Parliament on Thursday (17 May), Minister for National Development Lawrence Wong said that there is still value in older HDB flats which can be unlocked for retirement.

The 4G leader acknowledged that there “are people overly anxious about how much their older flats can fetch in the resale market”. His comments come as Singaporeans are increasingly worried that the value of their HDB flats would sharply depreciate as they age.

Minister Wong said that the value of flats would depend on several other factors besides the remaining lease on the property: “For flats in more popular locations, prices can be significantly higher. So the transacted price depends not just on length of remaining lease, clearly, but also many other attributes.” Such examples include the floor it is on and condition.

Citing data from the last 12 months, an older 4-room flat in a mature location with less than 60 years of lease has sold for around S$300,000. This would be “more than sufficient” to purchase a smaller retirement home and cover one retirement expenses.

He gave the example of one 67 year-old who sold his 3-room flat in Marsling for $250,000 and moved into a studio with a 30-year lease, which he purchased for “more” than $100,000*. The remaining proceeds provided excess in cash and CPF proceeds, thereby supplementing his retirement savings.

Wong rejected calls to allow a lease top-up as Singapore’s land mass is scarce. He said that there is “duty is not just to the current generation who already own homes, but also to the future generations – those not yet voting, and those not yet born, whose lives and future depend on us making the right decisions on their behalf”. The also said that there is still time to work through the issue.

Cases reported by the mainstream media paint a different picture to what Minister Wong has said

Despite the speech of the Millionaire Minister, the reality may paint to be a different picture.

Last Sunday (13 May), Channel NewAsia painted a bleak picture for the owners of older flats who were trying to cash out. One Mrs. Y L Dong has moved into an Ang Mo Kio resale flat 20 years ago. Even though the flat was 17 years-old then, the age did not bother her as it the location and amenities were convenient and the neighbourhood was friendly.

When she tried to cash out recently, the response was poor.  She said that even though “the flat is spacious and opposite Bishan Park and near prestigious schools, no one wanted to buy… after realising that the lease of the house was reaching its 40-year mark” She attributed this to the fear factor that “they might not be able to sell it off in the future”.

Mrs. Dong may not be alone.

According to an earlier article, one Madam Chai had received several offers for an old 3-room flat in Bukit Merah in January this year.  After Minister Wong revealed in a March blog post that the value of flats will hit zero upon the expiry of its lease - Madam Chai saw offers drying up. Eventually, she sold the flat for $288,000 – some $54,000 less than her asking price of $340,000.

About 70,000 flats, or 7 per cent of the total stock of around one million, are over 40 years old. Property analyst Ku Swee Yong was quoted to have said that, by 2030, more than 400,000 HDB flats will be left with a remaining lease of 59 years or less.

Singapore's third largest property agency, OrangeTee said to local papers that the price gap between those over and below 40 years old can be as high as 65 per cent.

Taken as a whole, this may have an impact on the ability to retire for many Singaporeans.

Former NTUC chief Tan Kin Lian has said that the CPF interest rate of 2.5% was “inadequate” since the long-term interest rate was 2% and retirees have escalating medical bills. Thus, “most people rely on the appreciation of their HDB flats to compensate for the low rate of interest paid by CPF”. They would sell their flats for retirement and downgrade to a smaller flat.

Given the above cases, are you convinced by what the divorcee has said?


*Editor's note - This is possible for those who brought their flats at around 10,000 forty years ago, but will this be possible for house owners who brought their flats at $200,000 above and counting?

This entry was posted in Opinion.
This entry was posted in Opinion.