Shorter Lease for First-time HDB Flat Buyers

Mr Seah Kian Peng asked  the Minister for National Development if the Ministry will consider offering first-time HDB flat buyers an option to choose a shorter lease of 70 years in addition to the current standard 99-year lease for new HDB flats.

Madam, buyers who prefer flats on a 70-year lease can buy them from the resale market and still be eligible for housing grants if they are first-time buyers.

As for new flats, HDB buys land from SLA for public housing on a 105-year lease. This has enabled HDB to build and sell new flats on a 99-year lease.

We do not think it necessary for HDB to sell new HDB flats with a 70-year lease, alongside 99-year flats. We do not think there will be strong demand for such an option. First, the upfront cost which HDB has to incur to offer a 70-year lease option is the same as that of a 99-year lease. Secondly, while a 70-year lease flat should be cheaper than a 99-year lease, the cost reduction is not directly proportionate to the reduction in lease. In other words, the market value of a property with 70-year lease does not equal to 70% of an identical property which has a 99-year lease. In fact, it is significantly higher. This is due to the time value of money and the fact that flats with a shorter lease tend to depreciate faster.

The fact is that we price new flats on a 99-year lease to be highly affordable for first-time buyers. With significant housing grants, first-timer families who today earn $1,000 per month can afford a 2-room BTO flat in a non-mature estate. Those who earn $2,000 can afford a 3-room BTO flat and those who earn $4,000 per month, a 4-room BTO flat. They can do so with little or no out-of-pocket cash.

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However, we do offer HDB flats with short leases where it serves specific buyers' needs. For example, Studio Apartments are sold on a 30-year lease to senior citizens as their retirement homes.

I thank the Minister for the reply. I want to assure him that I recognise that the current schemes in place have made it more affordable for first-time owners.

My supplementary question goes back to the underlying reason why I asked the question in the first place. I am not asking for this to replace the 99-year option but to offer this as an additional option primarily because while I recognise it would not be 70% of the cost of the new flat but it would lower the price and make it even more affordable.

I hope the Minister could continue to consider ways to make it more affordable to own new flats and that this be placed on the radar screen as something which you do not rule out, if not for the present, perhaps in the future then. Just as for industrial spaces – the lease used to be 60 years and, now, they are on 30-year leases. I hope we will continue to explore ways to make new flats more affordable.

Yes, Madam, I keep my options open and I am always open to good ideas and suggestions. My sense is that if you offer a parallel option – a 99-year lease and a 70-year option – I doubt there will be any takers for the shorter option, for the reasons I have given. But I will not rule out some future possibility when we may want to set aside an entire block, for whatever reasons, for 70-year leases without any parallel 99-year option. Then, there may be a possibility of such a scheme, as proposed by the Member. But only if we decide that it is attractive and necessary at that particular point in time. At the moment, I doubt it.