SINGAPORE - First-time buyers of new Housing Board (HDB) flats will not have the option to purchase a home with a shorter lease, National Development Minister Khaw Boon Wan said in Parliament on Monday.
The reason: these first-timers who prefer shorter leases can turn to the resale market, where they are still eligible for housing grants, he added.
Mr Khaw was replying to Mr Seah Kian Peng (Marine Parade GRC), who had asked if the ministry would consider offering shorter leases of 70 years for new HDB flats, in addition to the current 99-year lease.
Mr Khaw gave two reasons demand for new HDB flats on a 70-year lease would not be strong.
First, the upfront cost the HDB would incur for a 70-year lease would be the same as that for a 99-year lease.
Second, owing to the time value of money and the fact that flats with shorter leases tend to depreciate faster, the reduced price of a flat would not be directly proportional to the shortened lease.
"The fact is that we price new flats on a 99-year lease to be highly affordable for first-time buyers," Mr Khaw said.
With significant housing grants, first-timers with a monthly household income of $1,000 can afford a new two-room flat in a non-mature estate, while those who earn $4,000 a month should be able to afford a four-room home. "They can do so with little or no out-of-pocket cash," he added.
The HDB, however, offers flats with shorter leases where it serves the needs of specific buyers, he said, citing studio apartments, which are sold on a 30-year lease to senior citizens as their retirement homes.