Minister for Transport Khaw Boon Wan debunked claims that Housing and Development Board (HDB) flats are not assets due to their 99-year lease tenure by saying that buyers of a 50-year-old HDB unit can still expect prices to increase over the next 10 years, reported The New Paper.
“If you buy a 70-year-old flat, there is still appreciation potential especially because this government is prepared to continue to invest in it through Home Improvement Programme (HIP) II and the Voluntary Early Redevelopment Scheme (Vers),” Khaw told over 200 youths at a grassroots event in Sembawang.
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In announcing various schemes to help older HDB flats retain their value for a longer period, Prime Minister Lee Hsien Loong revealed during the National Day Rally plans to expand HIP to cover more flats. Under HIP II scheme, each unit can expect to be upgraded twice, with the second round of upgrade to take place once the flats reach 60 to 70 years old. Vers, on the other hand, provide owners of older HDB units a chance to vote for their flats to be acquired back by the government prior to the expiry of their leases.
But while HDB flats are appreciating assets, there would come a time when its value would start to depreciate, noted Khaw.
“When will that turning point be? Year 80? Year 70? Year 90? I don’t know,” he said. “There are no market statistics for it.”
He explained that flat prices are increasing at slower rate now since economic growth is not as strong as it was in the past.
“In your parents’ and grandparents’ generation, we were lucky because we were transforming from third world to first world, so our economic growth was very strong. …That’s why you hear of your grandparents buying a flat for $30,000 to $35,000, and can now sell for about $400,000. So, it’s an asset that appreciated significantly,” said Khaw.
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“Your generation is less likely to enjoy that same sharp rate of growth because the economy is now growing at two-three percent, which is very good for a matured economy… We can expect appreciation but not as fast as the one experienced by your parents and grandparents.”
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