How to Preserve the Value of your 99 years leasehold HDB or Private Property?

The 99 years leasehold expiry issue that was recently hotly debated due to the comments from the National Development Minister is actually not just restricted to HDB. Yes, it also affects private property owners who purchased their properties under a 99 years tenure. Simply put, all leasehold properties, whether public or private, will eventually go back to the state upon expiry.

The Singapore Land Authority official stance is that its general policy will be to recover the land upon lease expiry. For HDB, do not expect all aged flats to be eligible for Selective Enbloc Redevelopment Scheme ("SERS"). This thus creates a huge national problem as approximately 80% of the Singapore population stay in public housing.

For private property owners, this issue is less acute. Unlike HDB flats, private property owners can opt for collective enbloc sales to developers such as Far East Organization, City Development, Capitaland, Keppel Land, Oxley etc. However, this is on the assumption that there is a good residential association or management committee leading the estate. This means that there must be good leaders among the residents who are financially savvy and able to organize as well as rally support to complete the requirements to push for enbloc once an estate reaches between 30yrs old to 40yrs old. 

One shocking real life example of the dreadful impact of the leasehold expiry issue can be gleaned from the private estate in Geylang Lorong 3. The Geylang private estate has a 60 year leasehold from 1960 which means that it is expiring by 2020, that is, around 2 more years. It consists of 190 private landed homes. There are around 20-30 households still remaining and living in the estate. Some of the remaining owners regretted not selling off earlier when prices were still relatively high. The owners were surprised that once 2020 comes, their properties will be worth nothing. There are no buyers right now given the circumstances as it is.

The moral of the story here is that private property owners will not be impervious to the detrimental impact of a lease approaching the end of its tenure. Given the hundreds of thousands of dollars or even millions spent to purchase a private property, one should not clung on to sentiment and should go for enbloc once the properties become old. I would think between 30 yrs and 40 yrs is the best time for the estate to group together to call for enbloc to private developers in order to preserve their property value.

For freehold private property owners who are glad that they will have no such issue, that is, unfortunately not true. The Singapore government had a track record of invoking the Land Acquisition Act which means that freehold may not be so perpetual after all. I do not believe there is such a thing as “freehold” property in land scare Singapore. In addition, once a property reaches 30 yrs old, chances are there will be many property maintenance issues regardless of being HDB, private leasehold or private freehold. Common problems will be worn out electrical fittings, water pipes leaking, pneumatic disposal system problems etc.

The key point I guess to overcome the 99 years leasehold issue is not to stay at one place for more than 30 years to 40 years to avoid the sad fate of Geylang Lorong 3 private estate. The intrinsic value of our properties is further compounded by the CPF restriction imposed on subsequent purchaser buying old estates which certainly exacerbates the problem. The old adage that property is a retention of wealth no longer holds true in Singapore with the MND announcement. This can be seen in the current resales prices of old HDB estates as Singaporeans assess the recent statements being made by the government. Of course, letting go of sentiment of staying in one’s place is easier said than done. We are human beings after all. A home holds many sweet memories of the past and present for many of us.