Even property agents can be hoodwinked by HDB’s asset enhancement promise

Image credit: Wikimedia Commons

A report published in the Straits Times showed how even property agents can be hoodwinked by the myth of HDB’s asset enhancement promise. On 15 April, the Straits Times (ST) in a report titled, “What if I outlive the lease of my HDB flat?”, revealed how a property agent had wrongly speculated that her aging flat will continue to appreciate in value. The agent Janet Ow bought her 5-room flat with her husband (also a property agent), in an older estate of Telok Blangah. They bought the flat for $580,000 in 2010, and now their flat has got 56 years left on its lease.

Believing in HDB’s asset enhancement myth, they started marketing their flat in 2016 at $680,000 to $690,000 and hoped to make at least a $100,000 in profits. At first, bids came in at between $620,000 and $630,000, but after the Minister for National Development’s announcement in March last year that not all aging flats will come under Selective En Bloc Redevelopment Scheme (SERS), all offers for her flat have all but dried up. She has been struggling to sell her flat for over a year.

“Those who called asked about the balance of my lease first,” Ms Ow said. “Upon knowing the age, sometimes they won’t even proceed with viewings. In 2016, when we put up an ad, we would get around 10 calls. Now, we don’t even get a single call for one to two weeks,” she added.

Ms Ow is worried that if she does not sell her aging flat now, and if the price keeps dropping, she will eventually make a loss on her flat. She hopes to sell their flat quickly so that they could get a condo with a fresh lease.

“At least we know we have a long lease ahead of us and can cash out,” she said. “We don’t want another HDB resale flat because the ageing lease problem will crop up again.”

Ms Ow and her husband are not the only ones affected by the depreciating value of aging HDB flats. ST, in a separate article published on the same date titled, “Owners worry older HDB flats a depreciating asset”, told the story of another flat owner in the aging estate of Bukit Merah.

HDB's asset enhancement
Image credit: Wikimedia Commons

The owner, Madam Chai received several offers when she first listed her 3-room HDB flat in January last year, after her mum passed away. She asked for $340,000, which was comparable to the market price of 3-room flats in that area at the time. But the myth of HDB’s asset enhancement quickly wore thin when she realised that her flat only had 54 years left on its lease.

She explained how the price of her flat plummeted drastically after the National Development Minister’s announcement. Madam Chai finally sold her flat in February this year, but at a price which was 15 per cent lower than the price she expected when she first listed the flat. She sold it for $288,000.

Writing for his Ministry’s blog in March last year, National Development Minister Lawrence Wong asked HDB flat owners to not assume that all old HDB flats will become eligible for SERS (Selective En bloc Redevelopment Scheme). He said that “only 4% of HDB flats have been identified for SERS since it was launched in 1995”, and that “it is only offered to HDB blocks located in sites with high redevelopment potential”.

About 70,000 flats (of the 1-million HDB flats) are more than 40 years old, and almost 10 percent of flats will face lease expiry in 50 years. The Minister’s announcement hits at the core of HDB’s asset enhancement scheme. It essentially means that such flats will have zero value once it reaches 99 years and owners will have to vacate their homes. Most owners will see the land their flat was on being returned to the State at the end of the 99-year-leasehold.


There are several government policy restrictions which suppresses the attractiveness of older HDB flats for buyers.

These are some restrictions:

  • From 1 July 2013, CPF (Central Provident Fund) usage and HDB loan was restricted for purchase of flats with remaining lease less than 60 years.
  • For flats that are 64 years old, banks are unwilling to extend loans to finance the purchase of these flats.
  • For flats which are 69 years old (or less than 30 years of lease remaining), CPF money cannot be used for down payment or to service the monthly mortgage.
  • From the 79th year onwards, the property has to be paid for in cash.

Some property agents are now proposing that the Government reconsiders its rule implemented in 2013 which restricts CPF usage for HDB loans. But such relaxation may incentivise household equity destruction, where one passes the liability of an aging HDB flat to another.

Greed built on the false promise of an ever-enhancing price seems to be the foundation of the HDB’s asset enhancement scheme. One writer described the Singapore Dream (or one version of it) as such:

“Buy a Housing Board flat and live there for a few years. Then, sell it for fat proceeds and upgrade to a private property. When the children have grown up and moved out, cash out and move back into an HDB flat to live out the golden years.”

With the aging HDB flats where value would quickly spiral downwards to zero, the Singapore dream for some may just turn out to be a frightening nightmare.

If you need expert help for financing the purchase of a HDB flat CONTACT US NOW.

Written by Ravi Chandran

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