Choosing a Home for Life

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I read a recent Lianhe Zaobao article (15 Mar) which highlighted the high prices of several short-lease HDB flats in the resale market.

While resale flats are transacted on a willing buyer-willing seller basis, I was concerned by the suggestion that some buyers are forking out high prices for older flats, in anticipation of the benefits of the Selective En bloc Redevelopment Scheme, or SERS.

But SERS, as the name implies, is on a selective basis.

It is only offered to HDB blocks located in sites with high redevelopment potential. These are typically sites where the land has not been well utilised. It is also subject to the availability of suitable replacement sites for residents and the Government’s financial resources.

This is why only 4% of HDB flats have been identified for SERS since it was launched in 1995.

We will continue to maintain this strict selection criteria.

So please do not assume that all old HDB flats will be automatically eligible for SERS.

In fact for the vast majority of HDB flats, the leases will eventually run out, and the flats will be returned to HDB, who will in turn have to surrender the land to the State.

As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly.

So buyers need to do their due diligence and be realistic when buying flats with short leases. This is especially important for young couples, who have to plan for a much longer future.

Hence, when we enhanced the CPF Housing Grant at the recent Budget, I had advised first-time home-buyers to choose a resale flat with a sufficiently long lease to cover their needs.

How long should the lease be?

Our average life expectancy today is close to 85 years.

One possible guide is to buy a flat that covers you and your spouse to age 95. This would cover most of us for life and give us peace of mind in our golden years.

So a 30-year-old couple could consider resale units with leases that are 65 years or longer. And there are many such options in the resale market today.

With a longer lease, you can benefit from the appreciation in property value in the medium-term, especially after factoring in the Government’s housing grants and subsidies.

Later, when your life circumstances change, such as when your children have grown up and moved into their own homes, you have the option of unlocking the value of your flat by right-sizing to a smaller flat. You can then consider a new 2-room Flexi flat (with leases varying from 15 to 45 years) or a flat in the resale market.

Besides seniors, there may also be other buyers who are interested in cheaper, shorter-lease resale flats. This could include those who are going through a transition in their lives, and are not ready to commit to a longer lease just yet.

Over time, we can expect a more diverse HDB resale market, with flats of varying leases to cater to the different life-cycle needs of Singaporeans.

So I encourage potential homebuyers to sit down with your loved ones, work out your budget and needs, and choose a home wisely.

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