What Happens when a HDB flat reaches 99 years

Singapore has the most impressive and successful public housing system in the world. No other nations, developed or developing come close to Singapore’s Housing Development Board (HDB) program that has been the dwelling norm for over 40 years. Today more than 70% of the population are proud owners of a government-subsidized HDB flat, ranging from 2-room to spacious double-storey apartment known as maisonette.

All HDB flats come with a life span of 99 years. So theoretically, when a unit reaches 99 years of age, it will be returned to the government. As of now, this has yet to happen as the oldest flats in Singapore are less than 60 years.

In land scarce Singapore, taking away economic downturns, properties have always appreciated in value, including HDB flats. For example, a well-located 5-room unit bought 20 year ago could easily fetch 3 to 4 times its initial price.

A critical question confronting a flat owner is – Given a favorable situation, when is the best time to sell the unit? The obvious answer would be, when the price is good!

However, simple as it seems, selling a HDB may not be that straight forward. For example, what happens when a family buys a 25-year flat in the open market and lives for another 25 years? Simple calculation tells us that this flat is now left with 49 years of lease. Would this family expect to sell its flat 3 to 4 times of their purchase price of 25 years ago? Maybe yes, but probably not. Why? Because it would be very difficult to attract potential buyers willing to pay a hefty sum for a flat that is only left with 49 years of lease. Which means in order to offload this unit, chances are the owner will need to lower the price quite a bit. Also, the potential buyer is subject to limitation on his CPF usage for a flat this old. Read up more at Use of CPF Funds for Homes With Less Than 60 Years Lease as no potential buyer will want to be caught in a situation where he runs short on CPF along the way and has to use cash to fund the HDB unit that he bought.

So, the above family now decides to stay put, and waits for SERS to come into effect, and hopes for a handsome compensation from the HDB. But, is it a sure thing that SERS be exercised? Not necessarily. It really is anybody’s guess.

Based on the above discussion, it makes a whole lot of sense to sell a HDB unit when it is relatively young, say anything between 5 to 25 years of age in order to fully enjoy the healthy appreciation. With the sizable money cashed out, you can then decide to upgrade to a condo; be it a new condo launch, an executive condo (EC) or a resale unit. Or to purchase another new HDB unit if you decide to be more prudent and keep the cash.

For more insight as well as your buying and selling needs, please feel free to call new condo launch online at 61002500.
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