Lease buyback for bigger flats: In the nick of time

By Cecilia Chow & Timothy Tay / EdgeProp | August 25, 2018 1:45 PM SGT
Minister for National Development Lawrence Wong announced on Aug 20 that the HDB lease buyback scheme would be expanded to five-room and bigger flats. This will help more ageing owners monetise their flats, thereby giving them more funds for their retirement, says Eugene Lim, ERA Realty Network key executive officer.
“For cash-strapped owners of larger flats, they now have this option of obtaining much-needed funds where they previously did not,” adds Lim. “This scheme allows them to raise the funds required for urgent needs without having to sell their flats; thus allowing them to age in place in a home and neighbourhood that they have lived most of their lives.”
The IKEA store at Tampines Regional Centre is one of the more vibrant regional centres and where many of the older flats are five-room and executive maisonettes (Picture: Samuel Isaac Chua/ The Edge Singapore)
Victor Ng, property investor and owner of investment consulting firm SAASH Capital, feels that the extension of the lease buyback scheme to five-room and bigger flats comes in the nick of time, as his parents live in a five-room flat. A few years ago, they had wanted to do the lease buyback scheme. “The pioneer-generation folks are typically cash-poor and asset-rich,” says Ng. “They hold the traditional mindset of wanting to give something to their children when they pass on. They also give more than they take, so they are less amenable to asking their children for handouts.”
Desmond Sim, CBRE head of research for Singapore and Southeast Asia, agrees. Many of the buyers of five-room and bigger flats that are now more than 30 years old are those in the pioneer generation, he says. “The sale and leaseback scheme works for those who bought a property with a relatively long lease.”
So far, only 2,500 households have taken up the scheme since it was introduced in 2009, says HDB. “Most people are not keen on the lease buyback scheme, as they want to pass their HDB flats to their children,” adds Sim. “But the lease buyback scheme will work for retirees in the pioneer and also Merdeka generation (those born in the 1950s).”
HDB flats in Woodlands. The lease buyback scheme has been extended to five-room and bigger HDB flats. (Picture: The Edge Singapore)
Another reason the lease buyback scheme has not proven to be popular is that the amount received is “very little”, says Ray Teo, associate district branch director of PropNex Realty. “Most people would rather sell their five-room flat and then downsize to a three-room flat or even a studio, which these days cater for those who want to age in place.”
A case in point is semi-retired, part-time university lecturer Mrs Irene Tay, who is in her late-50s. “Unless either my husband or I have unexpected health issues or one of us passes away, I don’t think I will want to sell the remainder of my lease back to the government,” she says. “If the HDB market is vibrant enough, I would rather sell it on the open market. I don’t think the compensation for the lease buyback is enough for our retirement. If we need the money quickly to cover healthcare cost, I would downsize and cash out.”