Navigating HDB Resale Properties in Singapore: Decoding Lease Years
In the vibrant real estate landscape of Singapore, purchasing a Housing and Development Board (HDB) resale flat is a significant milestone for many homeowners. While various factors come into play when selecting the perfect property, one crucial consideration that often shapes decisions is the lease tenure. In this article, we delve into the significance of lease years when it comes to HDB resale properties and explore how it impacts the overall property landscape.
The lease tenure of an HDB flat refers to the number of years remaining on its leasehold. Unlike private properties which typically come with different lease durations, ranging from 99 years to freehold, HDB flats have a 99-year lease. It is important for potential buyers to understand the implications of lease years, as they can significantly influence the property’s value and financing options.
Financing Challenges:
One aspect to consider is the impact of lease years on financing options. HDB may have restrictions on the Loan-to-Value (LTV) limit based on the remaining lease of the property, limit the total amount of CPF savings that can be used for your flat purchase and/or paying monthly mortgage instalments. CPF Housing Grant may also be reduced or pro-rated.
CPF Savings Usage Tied to Flat Lease Duration
The total amount of CPF savings that can be used for your flat purchase and/ or paying monthly mortgage instalments will depend on the extent the remaining lease of the flat can cover the youngest buyer up to the age of 95. You can get the details of a flat’s lease at HDB Map Services. Details on the use of CPF savings and the applicable limits are shown in the table below:
Source: HDB| Mode of Financing
Loan-to-Value (LTV) Limit based on Flat Lease Duration
If the lease can cover the youngest core applicant and core occupier to the age of 95 and above, the Loan-to-Value (LTV) limit will be 80%^ of the lower of the resale price and value.
If the remaining lease is unable to do so, the LTV limit will be pro-rated from 80%.
^ For flat applications submitted on or after 30 Sep 2022.
Source: HDB| Mode of Financing
CPF Housing Grant based on Flat Lease Duration
For CPF Housing Grants for Resale Flats, Step-Up CPF Housing Grant for Resale Flats & Proximity Housing Grant , remaining lease of flat has to be more than 20 years. [Source for CPF Housing Grant]
For Enhanced CPF Housing Grant for Resale Flats, remaining lease of flat has to be more than 20 years and flat must have sufficient remaining lease to cover the youngest core applicant and/ or core occupier to the age of 95 to qualify for the full EHG amount. Otherwise, the EHG amount will be pro-rated. [Source]
Lease Buyback Scheme Eligibility
Through the Lease Buyback Scheme (LBS), you will be able to monetise your flat to receive a stream of income in your retirement years, while continuing to live in it.
You can sell part of your flat’s lease to HDB and choose to retain the length of lease based on the age of the youngest owner. The proceeds from selling part of your flat’s lease will be used to top up your CPF Retirement Account (RA). You can then use your CPF RA savings to join CPF LIFE, which will provide you with a monthly income for life.
Source: HDB| Lease Buyback Scheme
The Lease Buyback Scheme enables you to transform your flat’s remaining lease years into a steady stream of income during your retirement. This eliminates the need to downsize to a smaller property, allowing you to retire in the home where you raised your children, surrounded by the familiar neighborhood and cherished friends.
However, it requires you to have at least 20 years of lease to sell to HDB. If you were to purchase a HDB resale flat that does not cover the youngest core applicant and core occupier to the age of 95 and above, you may not have this option to exercise in your retirement years.
Calculate the oldest HDB resale flat eligibility
To calculate the Lease Commence Year of the HDB resale flat you can purchase to cover the youngest core applicant and core occupier to the age of 95 and above, use the following formula:
Youngest Core Applicant or Core Occupier Year of Birth — 4
Consider this scenario: two applicants, Mary at 24 and John at 26, are in the process of purchasing an HDB resale flat through the Fiancé/Fiancée scheme. To determine their eligibility, we calculate the youngest core applicant/ core occupier, Mary’s year of birth by subtracting four from the year of birth (1999–4 = 1995). This means that Mary and John’s property considerations are confined to those built in 1995 or later, ensuring coverage for Mary until the age of 95. This restriction ensures that they can fully utilize their CPF OA savings without pro-ration, and the Loan-to-Value (LTV) limit will not be subject to pro-rating either.
Impact on Property Value:
One of the primary considerations for buyers is how lease years affect the value of the HDB flat. As the lease dwindles, the property’s value tends to decrease. Buyers should be aware that HDB flats with shorter lease durations may experience a decline in demand and market value, impacting their potential return on investment in the future. This underscores the importance of striking a balance between affordability and long-term value when making a purchase.
The following dashboards will assist you in pinpointing the optimal lease years to purchase, tailored to your specific needs and preferences.
[Link to Dashboard. Click for an interactive experience]
Unlocking the intricacies of Singapore HDB Lease Years is made simple with this dashboard. Whether you’re curious about questions like “What is Lease Decay?” or pondering the rates at which it occurs, be it by town, storey, or flat type, this dashboard serves as your comprehensive guide to finding the answers you seek.
This diagram shows you the lease decay across all Town in Singapore, all Storey Range and from Year 2017–2023.
A clear trend emerges: resale prices rise for Multi-generation, Executive, and 1-Room Flats as the remaining lease years decreases.
Specific trends can be capture by adjusting the filters for Town, Year of Sale and Storey Range of the flats sold.
Clicking on a specific point on the line chart enables you to filter for Transaction Prices corresponding to the specific Remaining Lease Years and Resale Price, presented in the table below.
You can also view the location of the transacted flat on the map at the bottom of the dashboard. This visual representation aids in determining the geographical context, nearby amenities, and distance to MRT stations.
Strategic Location Exploration
[Link to Dashboard. Click for an interactive experience]
This dashboard displays HDB addresses with the oldest possible lease commence year flats, that would ensure coverage for the youngest core applicant and occupier up to the age of 95 and above.
To start, use the filters on the right hand side. Limit the range of lease commence year based on your profile.
The colors in the map tells you the age of the HDB flats. Orange would indicate older flats while blue would indicate newer flats.
As you hover over to any location on the map, you would see tooltips as shown in the picture.
In the example shown in the image,
BLK 475 SEMBAWANG DRIVE was build in Year 1998. It has a total of 15 floors. The nearest MRT station would be SEMBAWANG MRT STATION (NS11) at a distance of 0.3883km away. There are a total of 97 units in the block, with 59 five room units and 38 four room units.
You can further narrow down your options by filtering for preferred MRT stations, proximity to stations, maximum floor level for high-rise preferences, and exclude specific HDB types (e.g., multigen units, executive units, five-room units, four-room units) based on your preferences.
Once you’ve applied your filters, you can click on a specific location or choose a cluster of buildings by hovering over the top-left corner of the map.
Selecting a specific address or a cluster of buildings will show you the transaction prices in the table below the map.
In the provided example, the table indicates that the most recent transaction for Block 475 Sembawang Drive occurred in November 2022. The unit, situated on storey 01 to 03, was sold for $575,000. This executive apartment has a total area of 130 square meters.
The line graph presented illustrates the resale price trends for a specific address or a cluster of buildings over time. This visual aid helps the identification of both declines and increases in prices.
In conclusion, as you embark on the journey to find your dream home in the dynamic HDB resale market of Singapore, recognizing the significance of lease years is key. Armed with insights into property value and financing considerations, you’re well-equipped to make decisions that resonate with your financial objectives and lifestyle aspirations. I sincerely hope that the interactive dashboard and the valuable data insights shared throughout this exploration will serve as helpful tools, aiding you in narrowing down to your ideal home. Happy house hunting!
Disclaimer: The information provided in this article is for informational purposes only and should not be considered as professional advice. Decisions made based on the content of this article are at the reader’s discretion. It is advisable to consult with relevant professionals for personalized guidance concerning specific situations.
