HDB Properties in Singapore: What Happens After the 99 Year Lease is Up?

I have always wondered about what happens when you HDB lease is up, and here’s a detailed write-up about it by Alvin on a blog all about Tiong Bahru Estate. It made me wonder what would prompt young people to fork out hard earned money on properties with less than 60 years lease on them. In these cases, you’d pray you don’t outlive the lease. But what happens if you do? I am assuming these owners are probably rich enough to own more than one property considering that they have revealed paying six figure sums on renovation. But what if this is the couple’s only property, as in most cases? And most couples need the help of parents (our sad case of arrested development) or use their future earnings. They are basically tied to the loan and their jobs and it’s devastating when the company decides to retrench.

The article reveals that it is completely at the discretion of the government whether they decide to extend the lease and there’s zero value after the lease runs out. To me it just sounds scary, but this is the situation many young people in Singapore face. If you analyze it, you never quite own the piece of land, you’re just paying a rental. I am not surprised that this is a key root of unhappiness for many locals as a roof over your head is the very basic feeling of security.

Even if you do rent a place, what if one day you’re forced to retire and can’t pay the rent anymore. It’s all quite scary, especially in a country where costs are escalating and the future value of cash in your CPF savings seems to be falling. I don’t know about the subject in detail enough to comment about it, but thoughts like this do add to the anxiety of living here and the resulting frustrations. If the government wants to know why our birth rates are falling, to me this is the key reason.

This anxiety seems to be on many people’s minds are seen on the forum page of Reno Talk. More perspectives at the Expat Singapore forum page. And blogger Peng Toh who uses the analogy of the Singapore car’s Certificate of Entitlement (COE) as a comparison and talks about the huge financial risk.

About bookjunkie

Blogging about life in Singapore helps me survive the mid-life crisis
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8 Responses to HDB Properties in Singapore: What Happens After the 99 Year Lease is Up?

  1. I agree that in Singapore, you can’t be sure that the land you own will forever remain yours, much less an apartment. We do depend on the government to fulfill their part of the social compact, esp when it comes to HDB flats!

  2. Xmen says:

    It is really up to the government to decide what to do with the expiring leases. IMHO, no (elected) government will take people’s homes away. A home is not a car so you can’t compare HDB lease to COE. Removing people from their homes is against the key LKY policy – home ownership (for political and security reasons.) In due time, the governing party will find an affordable solution to this problem. The alternative is a new government.

  3. quzy says:

    You guys are naive.

    Leasehold is nothing new and is not limited to HDB flats. Private residential and commercial land are all subject to leases, except for the fortunate freehold ones sold in colonial times. Leasehold properties is very common throughout the world, esp in the Commonwealth.

    When the lease is up, the main landlord (in HDB’s case, the gov), takes back the land. That’s it.

    The issue of having a roof over one’s head is not the landlord’s problem, as the lease duration is public information. The buyer buys with his eyes open.

    The leasehold system is not as “unfair” as some make out to be. It’s actually a very good social equaliser. If land were to be freehold only, given our limited supply of land, it would one day be all sold out. The lucky ones who bought and own properties can sit back and enjoy life by collecting rent from the rest of us. Children born into families owning multiple properties don’t ever need to work anymore as there’d be lifelong supply of rental income.

    The 99 year lease common in Singapore allows for properties to be occupied by a max of 2-3 generations. After which inherited wealth in the form of property is reset. Land is recycled, giving everyone the chance to own a property in the future.

    For those who choose to buy properties with leases lower than 99 years, they will have to live with their own investment decision.

    The bigger problem of HDB flats now is the mismatch of supply and demand. That’s another topic altogether.

    • bookjunkie says:

      It was more a thinking out loud on my part. Your perspective is interesting and I like the social equalizer aspect you highlighted. Would like to hear more about your views on supply and demand.

    • Xmen says:

      quzy,

      Legally you are correct. But the landlord in this case is the government, which is elected by the people. I do not believe many (old) people living in these flats will have savings to buy new flats. Seriously, I don’t see any government reclaiming up to 10% of HDB flats between two GEs. Can you imagine investing your life saving on a “rental”?

  4. georgeyeo -not that guy says:

    quzy,

    You are essentially not wrong.
    The issue in Singapore is unfortunately not so straightforward as you make it out to be.

    There is the issue of the gvot changing its public housing social scheme to one of a money spinning one at the cost of funds (THE CPF) which were supposed to be for a person’s retirement.

    The aggravating factor is that the govt is not satisfied with making a reasonable profit, it manipulates the entire housing picture -both private and HDB – to boost prices of HDB flats. If the current prices of HDB are justified tell me one good reason why it has refused to be transparent about it to the public. This debate dates back from the time the MP Chiam See Tong had with the late Minister Teh Chiang Wan (who later committed suicide when found to be corrupted).

    You see definite pattern OF the PAP govt keeping ‘DAFT’ Singaporeans in the dark – the latest current example is of course the astronomic losses by the GIC and Temasek. The bleeding from our reserves is still happening to this day – for the latest just look at the UBS saga of 3 billion losses by a rogue trader. Singapore -through the GIC – is the single biggest shareholder. There are so many other examples of the monstrous losses from our reserve – not a month passes without more news of the latest. Temasek made the headlines recently from huge losses in an Australian company. The list goes on.

    Yet no accountability. The culprits are being protected because of the political damage to the PAP if acritions are taken against them or the culprits are publicly named. Can you imagine what that means going forward – IT WOULD BE MORE OF THE SAME COMMITTED WITH IMPUNITY AND PROTECTION FROM ACCOUNTABILITY.

  5. whitedusk says:

    Prices for new public housing is still pretty much affordable but its the supply and demand that need to be matched. In the past we used to have 3 generations staying in a 5-rm flat or even a family of 4-5 staying in 3-rm flats. Nowadays we have childless couples who occupy entire 5-rm flats.

    Imagine this, given the same plot of land can have at least 50% more 3-rm flats, 10000 married couples owning 5-rm flats vs 15000 married couples owning 3-rm flats. But do I blame them? Not at all~ Everyone would love to have a big house. And not everyone choose to be childless. And you plan for the future so given the buying power of the present generation and the price of a 5-rm flat everyone would choose them instead of a 3-rm flat. But these kind of statistics are uniquely Singaporean. One worrying sign is more and more of these people are not even trying for a kid so I guess their extra bedrooms are really there for their future maids and caregiver I guess..

    And then we have couples who try and try again for mature estates and will not settle for flats in Sengkang or Punggol. I guess we would all love to get a penthouse in district 10 for less than S$1mil…

    Many HK/Kowloon apartments have lease up till 2047 (50 years from 2047). What will happen when China “completes” the handover? Many suspect that they will allow for the extension of the landlease pegged to the market rate value with the cost to be borne by the occupants. I guess the same will be applied and can be applied in Singapore.

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