What if I outlive the lease of my HDB flat?

Ms Janet Ow, 41, and her husband Allen Wee, 39, in their five-room Telok Blangah Crescent flat. The property agents paid $580,000 for it in 2010 and started marketing it in 2016 at $680,000 to $690,000. Bids are coming in at $620,000 and $630,000, and offers have slowed to a trickle. ST PHOTO: LIM YAOHUI

Two generations of the Wee family bought two five-room flats and a three-room flat in the same estate in Telok Blangah several years ago because they wanted to be close to one another.

But now, Ms Janet Ow, 41, a property agent who bought her five-room flat with her husband Allen Wee, 39, in Telok Blangah Crescent eight years ago, feels insecure about the future. The market value for her flat, which has 56 years left on its lease, has dropped in recent years.

Ms Ow and Mr Wee, also a property agent, started marketing their flat in 2016 at $680,000 to $690,000. "I paid $580,000 in 2010. If I don't sell now and prices keep dropping, I will be making losses on my flat eventually," she said.

Bids are coming in at $620,000 and $630,000, and offers have slowed to a trickle, she said.

"Those who called asked about the balance of my lease first," Ms Ow said. "The flat's age has become a main concern after National Development Minister Lawrence Wong's reminder in March last year that not all HDB flats will be chosen for Sers and those flats which are not selected will eventually have to be returned to the state," she said, referring to the Selective En bloc Redevelopment Scheme (Sers), which compensates those whose flats are acquired for redevelopment.

"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."

To top her list of worries, there is a possibility she may outlive her lease. "My maternal great-grandmother was 100 when she passed on, and my paternal grandmother is now 102. If I have inherited their longevity genes, am I going to outlive my flat's lease?" she said.

Mr Wee's sister, 44, bought a five-room flat in a nearby block for around the same price in 2010. That flat also has 56 years left on the lease but she is still hoping it will be picked for Sers.

Mr Wee's parents bought a three-room flat in the same estate for around $200,000 over a decade ago. Their flat has 64 years left and is now worth $310,000. For now, they have no plans to sell, but in five years, the market value is likely to depreciate, Ms Ow said.

The Wees have a different strategy when it comes to buying their next home. "We don't want another HDB resale flat because the ageing lease problem will crop up again," Ms Ow said. "We are planning to get a condo with a fresh lease, at least we know we have a long lease ahead of us and can cash out."

Another factor dampening demand for older resale flats is restrictions on the use of Central Provident Fund (CPF) savings to finance units with a remaining lease of less than 60 years but which have at least 30 years, Ms Ow said.

Under the rules, one can use his CPF savings to pay for the property if his age plus the remaining lease of the property is at least 80 years. The maximum amount of Ordinary Account funds that can be used is capped at a percentage of the property purchase price, or the value of the property, whichever is lower.

For instance, a 30-year-old looking to buy a flat with 55 years left on the lease can finance only 55 per cent of the purchase with CPF funds. The remaining 45 per cent has to be paid in cash, and for many, that is a concern, Ms Ow said. But if the lease has more than 60 years left, buyers can use CPF funds fully to pay for the flat.

"Perhaps HDB could look into allowing buyers of flats with less than 60 years left on the lease to utilise their CPF fully instead of partially. That will help alleviate the worry of having to pay cash for part of the purchase. This will help buyers who need to buy flats in an older estate to be near their parents who may be there," Ms Ow said.

Join ST's WhatsApp Channel and get the latest news and must-reads.

A version of this article appeared in the print edition of The Sunday Times on April 15, 2018, with the headline What if I outlive the lease of my HDB flat?. Subscribe