Old flats in Singapore are trending again. You would think “newer is better” when it comes to buying a resale flat. But there is an upward trend of Singaporeans buying old flats in Singapore, particularly those made in the 1990s to early 2010s.
In the first half of 2024, older HDB flats saw record sales with price growth outpacing younger flats. A record 3,042 transactions for older resale flats were made, as compared to the 2,412 units sold in the same period last year.
If there are some concerns for old HDB flats losing value, why are buyers still going for old flats in Singapore? In this article, we’ll explore why they’re doing so and if you should consider buying an older flat too.
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What HDB Flats Are Considered Old Flats in Singapore?
According to SLA’s Leasehold Table, the market value of a leasehold property peaks 33 to 39 years into its lease. That’s why HDB flats that are at least 40 years old are considered old flats.
For those buying a resale flat, it makes sense to purchase one with a longer lease especially if you intend to resell your home. There is concern of old HDB flats losing value which is why a younger property often fetches a higher price. Buying a home with a long remaining lease ups the chances of your property to retain its value after living in the home for a few decades.
Despite this worry for old HDB flats losing value, here are the reasons why many look to buying an old HDB flat.
1. Increased HDB Grants and Subsidies Make Old Flats in Singapore More Affordable
In a time of record-high HDB flat prices, a freshly MOP-ed flat in a desirable location can be out of reach for most buyers. Often, these newer homes command million-dollar prices. Old flats in Singapore are priced more affordably due to the effects of lease decay and the notion of old HDB flats losing value.
Currently, the CPF Housing Grants for Resale Flats (Families) is $50,000 for 5-room or larger flats and $80,000 for 2- to 4-room flats. Assuming you are living near (but not with) your parents, you can also get another $20,000 from the Proximity Housing Grant (Families). Depending on your income levels, you may also be eligible for the Enhanced CPF Housing Grant (Families).
The cumulative grant amounts plus the lower older HDB flat prices present an attractive option to affordably-priced, subsidised BTO flats.
What about CPF Usage for Old HDB Flats and Financing Older Homes?
Rules regarding CPF usage for old HDB flats is a little more complicated than if you buy newer flats.
If you opt for an HDB loan and want to obtain the maximum Loan-to-Value (LTV) limit of 75%, the remaining lease needs to cover the youngest buyer to the age of 95. Otherwise, the LTV limit will be pro-rated. Also, the amount of CPF usage for old HDB flats will be pro-rated if the HDB flat does not cover the youngest buyer till they’re 95.
Similarly for bank loans, banks are less inclined to loan the maximum LTV amount for flats with 60 years or less remaining on the lease. For flats that are 69 years or older, loans may even be no longer possible.
Which is why buyers make the calculated move to buy homes made in the 1990s to early 2010s. CPF usage for old HDB flats becomes less of a concern for those who have already factored in the liquidity needed for the purchase.
Even if they were in their mid-thirties or late twenties, they would still be able to finance a good part of their home with loans and their CPF savings. Retirees who are ‘right-sizing’ from larger homes or private property will already have the cash on hand to finance the shortfall; the CPF usage for old HDB flats will not play such a huge role.
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2. Older Flats in Singapore Tend to Be Larger
Have HDB flats become smaller over the years? While it’s true HDB flat sizes have remained unchanged since 1997, the answer is not so straightforward. According to Teoalida, average flat sizes have remained consistent over the past two decades. However, older HDB flats tend to be larger.
Let’s take the 4-room flat as an example. The most popular flat type in Singapore measured approximately 95 sqm in the mid-80s, with sizes reaching its peak in the mid-90s at just under 110 sqm, before falling to a little over 95 sqm in the mid-2010s. While it is true that flat sizes haven’t changed much, a more accurate statement would be a 4-room HDB flat built in the 2000s is the same size as one built in the 2010s.
In turn, that’s why more are buying an old HDB flat. The post-pandemic buying preference for larger homes has endured. Many prioritise a larger living space over a cramped home in a fantastic location.
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3. Old Flats in Singapore Tend to Have Good Location, Amenities
But that’s not to say location is not important. Old flats in Singapore are usually located in built-up mature estates. Schools, trendy cafes, dining options, shopping centres, sports and health facilities are already established. The Home Improvement Programme has made older neighbourhoods more livable.
Older HDB estates also have a certain charm and histories attached to them. There is a good chance younger buyers grew up in these neighbourhoods. Furthermore, residing in a mature estate could mean living near their parents. For those thinking of raising a family, having their parents closeby would translate to an additional pair of hands for childcare.
Another plus is these neighbourhoods are often near to the Central Business District (CBD) and Downtown Core. Aside from the MRT network, a large number of buses usually service these mature neighbourhoods. The connectivity offered and relatively shorter commuting time make travelling to the city centre more convenient.
4. Older Flats Allow for More Choices, Are Immediately Available
The main advantage of buying an HDB resale flat is you can get your home almost immediately and in a location you want.
When you purchase an HDB flat via a BTO launch, your choices are limited based on that launch’s offerings. But for HDB resale flats, you can browse listings to find a home across the island. If you prefer a home with an unconventional layout, you can look at resale flats with unique HDB floor plans too!
Once HDB accepts your resale flat application, you can collect your keys in about eight weeks. BTO waiting times range between three to four years, which is not ideal for those with urgent housing needs.
5. Buying an Old HDB Flat Is More Affordable than Renting in the Same Neighbourhood
Another way to look at the 99-year leasehold rule is that it’s similar to renting a property, which explains why buyers are less concerned with old HDB flats losing value.
Renting in Singapore is notoriously expensive. Renting a 1,000 sq ft home in Tiong Bahru will easily set you back $4,200 a month. But you buying an old HDB flat in the same area would start from $650,000.
Let’s say you’re looking at a home in Tiong Bahru built in 1983. The flat is 41 years old and has 58 years left on its lease. If you’re intending to get a 75% HDB loan and hit the maximum allowable CPF usage amount, the youngest buyer has to be 37 years old.
If you’re a couple in their early thirties, and assuming you get an HDB loan with a 65% LTV limit for a loan tenure of 25 years, your monthly mortgage repayment amount is only $1,916. Granted, your down payment will be $227,500, but this can be paid for with a combination of CPF savings and your HDB grant amount.
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Rather than renting a property in a neighbourhood you like, buying an old HDB flat in the area is a valid alternative. Which explains the push for many to buy old flats in Singapore in the Holland Village, Old Airport Road, Tiong Bahru, and Katong/Marine Parade neighbourhoods.
There is less concern with old HDB flats losing value as these homeowners are calculating the cost of monthly renting a property vs buying an old HDB flat.
With Singapore’s high homeownership rates and leasehold model, many who purchase old HDB flats do not think that their children will inherit their properties. So, they purchase homes that only last their lifetime. Hence, there is less concern with old HDB flats losing value.
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