TLDR
We delve into the challenges faced by Singaporeans with expiring 99-year housing leases. It explores the types of leases in Singapore, what happens when a lease ends, and options available to HDB flat and private property owners. For HDB flat owners, the Selective En bloc Redevelopment Scheme (SERS) and buying another 99-year lease flat are discussed. Private property owners can consider lease top-up or en bloc sales. Selling a house with a dwindling lease poses challenges due to CPF restrictions and bank loan limitations. The post also touches on the worth of 99-year lease properties and provides insights for buyers and sellers in the current real estate market.
For the unfamiliar, an apartment that has a high floor, spectacular views, and is within a reasonable distance of the local subway station is at the top of their list; however, they tend to overlook other equally important factors, such as the amount of time left on the housing lease.
Many may take their housing lease for granted and assume that a 99-year leasehold will be more than sufficient to last their lifetime. However, if you’re looking to buy a flat with less than 75 years remaining or to make a forever home for generations to come, you might be faced with a conundrum in the future. While 99 years may seem like a long time, it’s unfortunately not infinite.
If your lease is about to expire and you’re freaking out or simply curious, here’s what you need to understand about the 99-year lease and what happens when it finally runs out.
Before you jump to conclusions and start worrying about the eventual end of a 99-year lease, take a moment to check what type of leasehold your property has in Singapore.
As more than 75% of Singapore’s land is owned by the Singapore Land Authority (STA), and the remainder by statutory boards like HDB, JTC, PSA, and other private owners, there are three types of leasehold to consider: 99-year, 999-year and freehold.
HDB flats come with a 99-year lease, while private properties offer a variety of leasehold types. Sadly, 999-year leases are no longer offered by the government, so the most popular option is a 99-year lease. As 999 years is an incredibly long period of time, homes with a 999-year lease or freehold lease are highly desirable.
From one perspective, 99 years may appear like an eternity – however, in actuality, it only covers two generations. As a result, resale home-buyers often consider the length of the lease when searching for a house, as they tend to favor ones with a long lease remaining (75 years or more).
Once your lease is up, the house returns to its rightful owner, whether it be HDB, SLA or any other. You no longer own the home, as its value practically becomes zero and you are no longer allowed to stay in the apartment.
Although no HDB flats have yet reached the end of their 99-year lease, it is likely to happen soon. So if you decide to purchase a BTO flat, chances are you won’t outlive the lease, unless you plan to pass it on to your heirs.
As a consequence, these HDB flats will become valueless when their time is up and will have to be handed back to the State. Ultimately, the flat will be recycled and reconstructed into newer HDB flats for future generations of Singaporeans, and you won’t be able to keep your beloved home.
It’s no secret that selling an HDB flat before the lease expires can be a challenge – your property might not even be desirable enough for someone to take off your hands.
Unless you’re lucky enough to own a flat with a high floor, proximity to MRT stations, schools, or shopping malls, finding a buyer can be difficult.
And once your HDB reaches 39 years with 60 left; CPF usage is restricted and bank loans are tightened, so sellers might not even consider your unit.
When the lease on a private property expires, the homeowner’s rights are no longer in effect – meaning that you can no longer claim residency there. Refusal to vacate the premises would result in being charged with trespassing, as the property is no longer legally yours.
If you were hoping to gain a big payout from SLA, be prepared to be disappointed – they won’t provide compensation unless your property is selected for en bloc.
Avoid being trapped in a tricky situation by putting your home up for sale before you’re left with no other choice!
If you are about to finish your lease, SERS could be your life saver. Its HDB equivalent of en bloc, old properties are usually chosen to undergo a SERS.
This happens when the government deems your plot of land is not being used efficiently or is located in a strategic location, and compensates you for giving up your home so that it can be reused.
Don’t get too excited just yet – the chances of your flat being chosen for SERS are quite slim, as only 5% of flats are suitable, according to PM Lee’s 2018 National Day Rally. All you can do is be hopeful, as it’s ultimately up to the government to decide whether your block is selected or not.
Before your lease is up, you can always choose to sell your flat early and opt for a brand new 99-year lease. Just be aware that if you decide to switch to a BTO flat or Executive Condominium, there will be a resale levy that needs to be paid; fortunately, if you are single, the amount will be halved.
When booking your second subsidised flat, you will have to pay a resale levy; this can be paid in cash or with the proceeds of the flat sale.
If the amount of the resale levy is too steep for you, there is always the option of a resale flat, which may cost less when you take the levy into account – though it won’t have the full 99-year lease.
On the other hand, if you are able to afford it, you may prefer a private property with a 999-year lease or a freehold lease.
For private property owners, the game changes. You can pay the Singapore Land Authority directly to ‘top up’ your lease and renew it for 99 years – so if you have 50 years left, an additional sum will restore it to 99.
SLA’s Chief Valuer will assess the top-up amount for each case, taking into account the years of the leasehold remaining.
You may not always be successful in asking for an extension of your lease – the outcome entirely depends on the decision of the SLA. Various factors such as how the extension fits into the government’s plan for the area, and whether the space is optimised, will be taken into account.
A successful outcome means you can stay in your home, but if rejected, you’ll need to move out before the lease expires, or sell your home before its value depreciates.
Given that most homeowners would find the total amount payable going into the millions of dollars too hefty an expense, it would be a wiser move to look for alternative home, unless of course the sentimental value of the house is worth the extra millions.
Private owners have the opportunity to make an en bloc happen – if a majority of the homeowners in their development agree. This can be done with either a private developer or the government.
Once approved, you can expect to receive a substantial sum in exchange for leaving your property. Though you won’t be able to remain, you’re receiving something in return instead of just having to move out when the lease expires.
Nevertheless, due to the collective nature of the decision, and it’s dependence on the developer’s approval based on the property’s location and its potential for monetary profit, the endeavor could prove to be quite the challenge.
The straightforward response to selling a house with a ticking lease-time bomb is a resounding yes – yet the difficulty involved is clear.
With the buyer not wanting to buy and lose out on the sale, and CPF restrictions prohibiting use of funds if the remaining lease is less than 30 years or if the buyer’s age plus the remaining lease is less than 80 years, the challenge of this task will be immense.
Obtaining a bank loan for a property with less than 35 years remaining on the lease is nearly impossible due to the stringent regulations of lenders.
Therefore, it’s important to start preparing for the sale of your house before it reaches the 60 year mark. By doing this, you won’t be left at a dead end – as a general rule, when a house has just 20 years left on the lease, it can no longer be taken advantage of through the Lease Buyback Scheme (which is only available for HDB flats).
Plan ahead to ensure a successful sale!
If you are considering purchasing an HDB flat, you must accept the 99-year lease. However, you have control over the remaining years of lease that your next flat has.
BTO flats can be a safe long-term investment if you don’t plan on passing them down to your children. You can also choose to sell your BTO flat after the five-year occupancy period and make sure that you get a good price for it, even with a lengthy lease period (which many homeowners are doing).
When looking for a resale flat, it’s wise to choose one that still has a lot of years left on its lease, as this will give you peace of mind that it will mature with you over time.
However, if you’re looking for a property to invest in, then a 99-year lease is more than sufficient. But if you wish to make a generational home, then investing in a private property with either a 999-year lease or freehold title is the way to go; provided that your finances allow it, of course!
If you’re reading this, you must be trying to figure out the best course of action right now: is it the right time to buy or sell?
It’s difficult to give an exact answer since everyone’s situation is unique and what works for one person may not necessarily work for you.
I can bring you a wealth of on-the-ground experience and a data-driven approach to provide clarity and direction. From beginners to experienced investors, our top-down, objective approach will help you on your real estate journey.
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