A week ago, Singapore permanent resident Ms Lew was just calculating the remaining lease on her 700 sq ft, three-room HDB flat in Marine Parade and wondering how much it could fetch in the resale market. “I’m just a couple of years from retirement,” she says. Lew’s flat, like the more than 7,000 in Marine Parade, was completed in 1975. According to HDB’s website, Marine Parade was the first housing estate to be built on reclaimed land. This means that the flats in Marine Parade have 57 years remaining on their 99-year leases.

Singaporean Ms Aw, who bought her 1,128 sq ft, five-room HDB flat in Marine Parade 17 years ago, says she now feels “a little unsettled”. Even though her flat is already fully paid for, the 56-year-old says, “My retirement is locked in this flat. If I want to make money from it, I will have to sell it and downgrade to a smaller BTO [built-to-order] flat so I won’t be saddled with a big home loan”.

The two HDB owners are representative of many others staying in ageing leasehold properties who became worried, following National Development Minister Lawrence Wong’s blog post on March 24. It was intended to caution buyers against paying high prices for older HDB flats on the assumption that their flats would automatically be eligible for the Selective En-bloc Redevelopment Scheme (SERS).

Marine Parade is the first HDB estate to be built on reclaimed land; more than 7,000 HDB flats were completed in 1975

Wong wrote, “In fact, for the vast majority of HDB flats, the leases will eventually run out, and the flats will be returned to HDB, which will in turn have to surrender the land to the State.” He added, “As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly.”

Wong subsequently tempered his point with an April 12 Facebook post that said, “Leasehold properties are still a good store of asset value, so long as you plan ahead and make prudent housing decisions.”

Rising uncertainty

Nevertheless, homeowners like Lew have started mulling over their options — whether to keep or sell their flat before the lease runs lower. “It’s unpleasant to have this uncertainty,” she says. “I’m not holding on to the hope for SERS, but I thought I could keep my flat until I’m 70. Now, I’ve to recalibrate and figure out the best time to sell and have enough cash for the next 20 years of my life.”

The main solution for owners of ageing leasehold private properties is a collective sale, but the success rate is not high.

According to Tan Hong Boon, JLL regional director of capital markets, over the past three years, five out of 25 collective sale sites put up for tender were successfully sold, which translates into a success rate of 20%.

Tan says, however, that the outlook for the collective sale market is decidedly brighter this year, with the success rate likely to be higher than 20%. “Those who didn’t succeed the first time around will attempt a second or a third time.”

While owners of units in privatised Housing and Urban Development Corp (HUDC) estates and private condos can decide whether they want to embark on a collective sale, HDB flat owners do not have that option. “This is unlike SERS, where the decision lies entirely with HDB,” says Tan. “As an HDB dweller, you have no say in initiating a SERS.”

Tan: As an HDB dweller, you have no choice even of initiating a SERS

Who owns your flat?

There is a fundamental difference between public housing and private, and that is in the ownership title. Nicholas Mak, SLP International executive director and head of research and consultancy, says: “In public housing, the relationship between HDB and the dweller is as lessor-lessee. It’s not like a private condominium, where upon completion — Temporary Occupation Permit and Certificate of Statutory Completion — the developer will transfer the strata titles over to the individual buyers.”

For public housing, the property title remains with HDB, says Mak. A group of HDB dwellers in three housing blocks discovered that the hard way when they banded together to attempt a collective sale on their own during the collective sale fever some 20 years ago. “That was when they woke up to the reality that they didn’t actually own the land,” he recounts. “As HDB dwellers, they own just the right to use that box in the sky.”

This is unlike HUDC estates, which have been privatised, explains Mak. “Once an HUDC estate is privatised, it is similar to the 99-year leasehold private condos, as the owners will get their strata title.”

There are 18 HUDC estates, with a total of 7,731 units. These HUDC flats, which come with a 99-year lease, were built in the 1970s and 1980s for the sandwiched class of that era — people who did not qualify for HDB flats but could not make that leap into private housing. HUDC estates are the predeces- sors of executive condos. When ECs were introduced in 1995, the government moved to privatise the HUDC estates.

Braddell Heights, the largest of all the HUDC estates, has 918 flats and two shops. It was the last of the HUDCs to be privatised, and that was in March this year.

“HUDC unit owners are among the first to feel what it’s like living in a private estate where the lease is running low,” says Mak.