Shorter Leases for HDB Flats: Why They’re a Bad Idea

Ryan Ong



Mr. Gan Thiam Poh (Pasir Ris – Punggol GRC) mentioned that HDB flat prices should be lowered by reducing the lease. This idea has immediate appeal, but in the same way smacking a rude driver in the mouth does. As tempting as it is, it remains a dangerous knee-jerk reaction. In this article, I explore the consequences of a shorter lease, and how it isn’t a good long term solution:


Where This Proposal is Coming From

Despite cooling measures, property prices remain stubbornly high. For low income families, there’s a constant threat that “shut the door” might mean closing a lid on a dumpster. Mr. Gan’s proposed solution?

Lower the 99 year lease on most HDB flats. With a shorter lease (60 or 30 years), the value of the flat will drop. Hopefully, to the point where the flat is within the budget of a low income family. It’s affordability through inflicted worthlessness: Your budget is limited, so they’ll devalue the flat until it fits your budget.

There are four problems that this would cause:

  • Rising prices for 99 year leaseholds
  • Cost efficiency for HDB
  • Resale difficulties
  • Avoidance of the root problem


Two old guys sleeping outside
“Eh, Ah Tan, remember when Singaporeans used to sleep indoors?”


1. Rising Prices for 99 Year Leaseholds

As it is, freehold property costs 10 – 15% more than leasehold. By reducing the lease on some flats, HDB will create the same relationship between the 99 year leaseholds and the 60 or 30 year leaseholds. Premiums on existing 99 year leaseholds will then rise, contributing to a price inflation in the property market.

Correct me if I’m wrong, but isn’t this what HDB has been struggling to control all this time?


2. Cost Efficiency for HDB

It would be interesting to see how upgrading works for a 60 or 30 year leasehold. If a block of flats is built for such short term habitation, is it really worth upgrading the facilities? My guess is no. If we’re talking about a 30 year leasehold, how would we justify the cost of, say, lift upgrading? That would be like buying designer furniture for a tree house.

That aside, maintenance of the flats is also an issue. Replacing a damaged riser or jammed pipe costs money, and that cost doesn’t change because of the lease. The cost to maintain a 60 or 30 year leasehold is the same as any other building. If it’s our tax dollars at work, HDB is better off using the money to subsidise existing 99 year leaseholds.


Cup of kopi
Good news is, we had a budget surplus. Bad news is, you’re drinking it.


3. Resale Difficulties

If the Silver Housing Bonus proves one thing, it’s that property is a long term provision. This housing bonus currently compensates for a lack of CPF, through the resale of HDB flats.

But if elderly Singaporeans didn’t have their flats right now, this scheme would be deader than Jessica Simpson’s career. And by encouraging the sale of 60 or 30 year leaseholds, that’s the exact future scenario we’re creating: Low income earners who, after a lifetime of home loan repayments, end up without a property to sell or even live in.

A 30 year leasehold will have the resale value of yesterday’s newspaper, and that after I’ve lined my dog’s toilet with it. Buying property with negligible resale value isn’t much better than renting.


Buying ice-cream in Singapore
“Alamak, I got no change. I give you my 30 year leasehold can?”


4. Avoids Addressing the Root Problem

The root problems, as I see them, are out of control cash over valuation (COV) and the supply crunch. The creation of 60 and 30 year leaseholds is like slapping a band aid on a gunshot wound. It’s a distraction, not a solution.

The COV can’t be covered by a bank loan, isn’t regulated, and is by definition a form of artificial inflation: That’s why it’s called cash over valuation. I gather that Mr. Gan wants a solution which won’t interfere with free market economics. But public housing isn’t a privilege of citizens, it’s a basic right; and some government intervention is desperately needed here.

As for the supply crunch, how do 60 or 30 year leaseholds help? It takes the same time and cost to erect the flats, regardless of the lease. And I’ve already pointed out a core demand for housing, which can’t be siphoned off into new flats. Building a lot of “short term” flats does nothing for that.


Man sleeping in car
“30 year lease? Nah, I found a better solution to my housing problem. It’s called a back-seat.”


In short, Mr. Gan’s had some great ideas in his time; but this just isn’t one of them. Apart from the problems I’ve mentioned, HDB is going have a hard time selling flats with such short leases. Anyone with more foresight than the average goldfish is going to pass.

Image Credits:
yeowatzup, Akuppa, goosmurf, preetamrai, stewart yu

Do you think a 60 or 30 year leasehold is a good idea? Comment and tell us why!

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Ryan Ong

I was a freelance writer for over a decade, and covered topics from music to super-contagious foot diseases. I took this job because I believe financial news should be accessible and fun to read. Also, because the assignments don't involve shouting teenagers and debilitating plagues.