Property Update published an article on Monday (29 Oct) revealing that the value of old 3-room HDB flats in Toa Payoh has dropped by as much as 30 percent in the past few years. These are old flats with about 50 years of lease left.
The writer, Timothy Quek, is a property agent. He said, "As a property agent specializing selling HDB flats in Toa Payoh, I can tell you that it is very difficult to find buyers for these aging HDB flats which have undergone upgrading just a few years ago."
"Sellers who ask for unrealistic prices for their units, even at bank valuation, usually are unable to sell them. For those who need to offload their flats urgently, they will have to give steep discounts of sometimes more than $50,000 to entice buyers," he added.
He dug out transaction data from HDB website of units belonging to Blk 9 Lor 7 Toa Payoh to illustrate:
* Figure for Apr 2015 was the average value of 3 transactions in that month
Mr Quek shared that if the rate of decline continues at the same rate, the same flat will only sell for $154,000 in 10 years’ time and $107,800 twenty years later. Hopefully, VERS will be offered by the government then. But he feels that the government will not pay the market price of $107,800 for VERS at that point in time.
"Probably much less and those buyers above who paid more than $280,000 for these flats today will make a terrible loss," he said.
"If you intend to sell your HDB flat, you should consider selling it soon before its lease declines further. The prices of HDB flats usually face a sharp decline when they are more than 40 years old when restrictions of using CPF and bank loan to finance their purchase kick in, thereby severely limiting the pool of ready buyers," he advised.
Lawrence Wong: Vast majority of flats to return to HDB when leases run out with no compensation
In fact, from the transaction figures above, one can see that after National Development Minister Lawrence Wong told everyone about the hard truth of HDB flats in March last year, the value of old HDB flats literally nosedived.
He reminded everyone that only 4% of HDB flats were redeveloped through Sers since 1995. That is, these old flats, typically at very good locations, were bought back by HDB and the flat owners were compensated accordingly. HDB then knocked down the old flats and built new ones in the same land area for later sale to the public again.
But the vast majority of flats, he noted, will be returned to HDB when their 99-year lease run out without any compensation. "As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly," he said. "So buyers need to do their due diligence and be realistic when buying flats with short leases."
Citizens told by PAP Ministers in the past that HDB would grow in value as assets
Before Minister Wong's reminder, PAP ministers, including PM Lee himself kept talking about the value of HDB would grow in value over time.
At an international conference in 2010, PM Lee 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."
And just before 2011 General Election, then National Development Minister Mah Bow Tan even said, "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."
However, as seen in the chart, the value of old HDB flats is plummeting. It doesn't maintain nor grow over time anymore. As mentioned by Mr Quek, those who bought 3-room HDB flats in Toa Payoh at more than $280,000 would be making terrible losses if they were to sell their flats when they are more than 40 years old.
Perhaps these people can try asking PM Lee or Mah Bow Tan for compensation.