VERS versus SERS

By Cecilia Chow & Timothy Tay / EdgeProp | August 24, 2018 1:45 PM SGT

Tackling the issue of ageing HDB flats and depleting leases

Earlier this year, semi-retired, part-time university lecturer Mrs Irene Tay sold her HDB double-storey terraced house on Jalan Bahagia for $685,000. She and her husband had purchased the 840 sq ft, three-room house for $420,000 in 1997 when their son was enrolled in St Andrew’s Junior School in nearby Potong Pasir.
However, the HDB terraced house has a 99-year lease from 1972, which translates into a remaining lease of 53 years. Tay was concerned that if they did not sell the property, the pool of buyers would shrink further as the lease runs low.
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The HDB terraced houses on Jalan Bahagia that once fetched close to $1 million are now priced around $700,000 (Picture: Albert Chua/The Edge Singapore)
This is because in 2013, the government made a few policy tweaks with regard to buying HDB flats with short leases. Buyers of HDB flats with less than 30 years on their remaining lease are not allowed to use their Central Provident Fund savings, said Ray Teo, PropNex Realty branch district director, at an EdgeProp homebuyers’ seminar on Aug 16. That applies to private residential property too.
Those buying HDB flats with a remaining lease of less than 60 years are subject to restrictions on their use of CPF. Teo calls it “the 80-year rule”, that is, the combined age of the homebuyer and the remaining lease on the property has to be at least 80 years. For instance, if a homebuyer is 40 years old, he will only be able to purchase an HDB flat with a remaining lease of at least 40 years.
CPF restrictions for ageing flats
The restrictions on CPF use for ageing HDB properties with less than 60 years on their leases “had a significant impact on property prices, especially the HDB terraced houses and flats on Jalan Bahagia”, notes Teo. “Before the policy came into effect in 2011, the terraced houses saw resale prices of close to $1 million,” he says. “Since the rule came into effect, prices have been hovering at around $700,000.”
It also affected the kind of buyer who would eventually be able to purchase HDB properties with shorter leases: those who are also older, notes Teo....