Older flats can be 'retirement nest egg'
Lawrence Wong: Flat owners have options to realise asset value
Even as home values fall towards the tail-end of the lease, the Housing Board flat can still be a nest egg for retirement, wrote National Development Minister Lawrence Wong yesterday.
"They provide a good store of asset value, so long as you plan ahead and make prudent housing decisions," he wrote.
He was addressing concerns over the 99-year lease issue that surfaced after he cautioned on his blog last month against paying high prices for older leasehold flats. The post generated debate and discussion over the dwindling value of homes as they age.
Leasehold property will hit zero value at lease expiry, and the land it is on will have to be returned to the land owner, which in HDB's case is the state.
Mr Wong said the ageing home can still be seen as a retirement asset through monetisation options for the elderly.
He wrote: "The general point is that the HDB leasehold flat is not only a good home, but also a nest egg for future retirement needs."
Three options are available: downsizing with the Silver Housing Bonus (SHB) scheme, selling the remaining lease back to HDB with the Lease Buyback Scheme (LBS) or subletting the home.
Through the SHB scheme, a 65-year-old couple with a four-room flat can sell it and downsize to a smaller one, receiving a cash bonus of up to $20,000.
Mr Wong said: "They can also get quite a lot of money from the sale proceeds - around $100,000 upfront in cash, plus $500 per month of additional income for their retirement (on top of what they would get through CPF Life)."
If they want to continue living in the same flat, LBS allows homeowners of four-room flats or smaller to sell back the remaining lease to HDB for a cash bonus and a stream of retirement income.
The scheme has grown in popularity since it was launched in 2009.
A total of 952 households took up the scheme from April 2015 to December last year, when the LBS was extended to include four-room flats.
This is almost as many as the 965 households who signed up for it over a six-year period from 2009 to 2015, HDB said.
"The cash amount is not as much as if they were to right-size, but that is because they can continue to stay in the same flat," Mr Wong noted.
The owners can also rent out a room for additional income.
R'ST research director Ong Kah Seng said that while these schemes do help, more can be done to reach out to the elderly who might not know about them.
"While the response has improved significantly, generally the elderly are not thronging into applying for these options," he said.
International Property Advisor chief executive Ku Swee Yong said owners hoping to tap on the SHB scheme must be able to sell their current flat in order to be able to downsize.
He said: "With people now becoming more wary of buying older resale flats, it won't be easy for elderly couples to sell their old homes in future."