In the resale market, there have been a fair number of transactions involving flats that are over 30-40 years old, proving that there is still demand for executive maisonettes, jumbo and DBSS flats as long as Singaporeans are willing to pay for location and more living space. But the real question remains: What are the financial implications for homeowners looking to invest in an older resale with less than 60 years left on the lease?
Should I buy a mature resale flat with less than 60 years on the lease?
Image credit: Linear Space Concepts
When it comes to determining the value of an HDB flat, one important term to know is lease decay. This refers to the gradual decline of an HDB’s value as it ages and its remaining lease shortens. Of course, flats don’t normally decay from the onset; in fact, their value tends to climb up after it crosses its 5-year Minimum Occupation Period (MOP), as seen by some BTOs in Bidadari, which appreciate extremely well and net their owners a decent profit.
Here’s a scenario: Tom and Jasmine, who are both in their early twenties who have viewed a number of HDB flats and have set their sights on a gorgeous executive maisonette in Lorong Ah Soo. The flat is priced at $1.2M with 50 years left on the lease, but comes well renovated, which saves them some money. All-in-all, the asking price seems reasonable as the flat checks most of their boxes.
As both of them are 28 years old, to be able to get the maximum loan amount from HBD or a bank for the flat, they’ll need to buy a flat that has at least 67 years left on the lease. As this unit only has 50 remaining years on the lease, here are the calculations:
Pro-rated LTV = 50 years/67 years x 75%* = 55.97%
Now let’s calculate the maximum loan the couple can take based on this pro-rated LTV and the asking price of their resale flat:
1,200,000 x 55.97% = $671,640
*Taking into consideration that HDB lowered the loan-to-value (LTV) limit for HDB housing loans from 80% to 75% in the cooling measures announced in August 2024.
This means that the pair will still have to finance the other $538.360 on their own. Whether they’re taking an HDB or bank loan, they’ll have to pay 25% of the lower of the resale price or the value of the flat upfront. For this example, we’ll be going with a $900,000 valuation.
Resale price: $1,200,000
HDB’s valuation: $900,000
Upfront payment needed in cash or CPF: 25% of $900,000 = $225,000
If you’re thinking that amount is huge, let’s not forget the remaining amount that the HDB loan doesn’t cover: Remaining amount = $1,200,000 – $671,640 – $225,000 = $303,360
If they’ve both been working in relatively decent-paying jobs since their graduation, they can choose to finance the remaining amount with a mixture of CPF savings and cash. Ultimately, if you look at the calculations, that’s still over $500,000 that will need to come out of their combined savings, which is a lot.
Verdict: Unless you’re blessed to be born with a golden spoon from birth, we wouldn’t recommend mature HDB flats for new homeowners. It makes more financial sense to apply for a BTO, and then sell it after the 5-year MOP mark, and then work your way up the property ladder in time. We’ve seen quite a number of newly-MOPed BTOs being sold for over a million dollars, which is highly promising for homeowners who purchased their BTO flats for less than $600k.
Should I upgrade to an executive maisonette if I have sufficient savings from selling my BTO?
Let’s say you’re one of the lucky ones who managed to make a 100% profit on your BTO after it hit its 5-year MOP and have a couple of hundred thousand in spare cash on hand. Should you then make the jump to move to a coveted older and larger flat?
While it might seem like an easy purchase, it might have some implications for your future retirement plans. For instance, selling the property at a later date might not be able to finance your next upgrade—especially if owning a private property is on the cards for you.
As the flat’s value decreases over time, the equity that homeowners can draw from their property might be limited. In a worst-case scenario, you might have to downsize to a smaller property in the future or rely on government assistance if the flat reaches the end of its lease.
Verdict: For those buying with a long-term view, this might not be the best strategy unless they’re willing to downsize or rely on other sources of retirement savings.
It’s also interesting to note that we’ve seen the owners of older resale flats reaping the benefits of the HDB resale market at a high. So while DBSS flats, terrace HDB units and maisonettes might have made headlines for record-breaking sales, we don’t know exactly how long this trend is going to last before the market buckles.
I still want to buy an HDB flat with less than 60 years on the lease, how can I get a better price?
If you’re part of the minority who truly wants to buy an older flat because the location and its amenities are too good to pass up, here are some tips to help you haggle that asking price down.
Highlight the sunk costs that come with an older unit
The one thing you have in your favour if you’re gunning for an older flat is less competition. More homeowners are likely to go with a home with a longer lease as they make a sounder financial asset. But in any case, one negotiation strategy you can go for is to emphasise and remind the seller that with the lease running out, the flat will be less appealing to future buyers, justifying a price reduction.
Unless you buy a recently renovated resale flat, renovating is unavoidable, whether for general repairs or a major aesthetic overhaul. If the flat you’re buying has a dated interior that will require a lot of hacking, you can use this point as a negotiation chip to drop the price by perhaps $50,000.
In addition, buyers can also point out that financing options may be more limited for them, especially if the flat’s remaining lease is approaching 60 years or less. Most banks are less willing to offer large loans on properties with shorter leases, making it harder for buyers to get the same amount of financing they would for a newer flat. This could further justify a lower asking price from the seller.
Will the trend of million-dollar mature HDBs continue?
Image credit: PropertyGuru
At present, there are two Jalan Tenteram HDB terrace houses with all but 33 years left on the lease for sale. These 2 homes are priced at $899k and $929k, respectively. Whereas, homeowners of similar HDB terrace homes in Jalan Bahagia (46 years left) and along Stirling Road (42 years left) have listed their homes above a million dollars. The most expensive Terrace HDB is asking for $1,650,000. It’s interesting to note that while a record-breaking transaction for this home type was last made in July 2024, we’ve yet to see other million-dollar sales for these landed HDB homes since. There were also very few HDB terrace homes listed on the market in the last 2 years as compared to today. This might also be a sign that more HDB terrace home owners are seizing the opportunity to sell while the market is hot to purchase a home with a better lease.
Image credit: HDB
A quick search on recent HDB resale prices in the town of Queenstown showed that 5-room flats in Holland are still commanding a high value, even though these homes have only 48 years left on the lease. The most eye-opening transaction would be the Block 21 Holland Drive unit that sold for a million dollars on the dot just this month.
Image credit: HDB
Similarly, 3-room Marine Parade flats with only 48-49 years left on their leases have been transacting at healthy prices between 360k-555k.
Image credit: HDB
5-room Marine Parade flats, on the other hand, have still been transacting at strong prices, with some flats surpassing the one million dollar mark just this month. This is proof that while some home buyers might steer clear of homes with decaying leases, others prioritise location and their feelings toward the home over its age. These trends can also allude to homeowners believing that the government will intercede with the Selective En-bloc Redevelopment Scheme (SERS) when the homes near the end of their leases.
At the moment, we haven’t had to change to witness the effects on HDB’s Voluntary Early Redevelopment Scheme (VERS) on any blocks just yet, but this is the likely outcome for our ageing HDB projects in Queenstown, Toa Payoh and Ang Mo Kio. This is somewhat viable, though risky, because then Minister for National Development Lawrence Wong has cautioned that people should not assume all old HDB flats will be selected for en bloc.
What we can say, however, is that while we continue to see an increase in HDB resale prices, owners who own mature HDBs should capitalise on the opportunity to sell. Our advice for homebuyers interested in a mature home, it might be a good idea to give the market some time to cool before making your move. It does seem like homeowners of mature flats are starting to bring their prices down as their flats age, so we can only wish you the best of luck securing your dream home!
Read more articles here:
- Spending just $24k on our 4-room BRO renovation
- How to convert your reno costs into airline miles
- Biggest interior design trends of 2025
Cover image adapted from: Google Maps
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