Older HDB resale flats depreciate slower than private condos: study

Romesh Navaratnarajah14 Feb 2019

PGNV 114

The rate of price decline for older HDB flats was 3.0 percent. In comparison, that for freehold private homes and leasehold private residences depreciated by over 10 percent and more than 30 percent respectively.

Prices of HDB resale flats depreciated slower than private non-landed homes (leasehold or freehold) when they reach 30 years and above, according to a study from the National University of Singapore (NUS).

During the first 10 years, the rate of price decline of the three kinds of properties were roughly similar, with HDB resale flats recording a slightly faster rate of depreciation by 1.0 percent compared to the other two types of homes.

After a decade, private freehold houses generally depreciated at a slower rate versus the other two, which saw a similar rate of decline until 20 years.

But when the properties are 21 years and above, the rate of price decline for HDB flats hits 3.0 percent. In comparison, that for freehold private homes and leasehold private residences depreciated by over 10 percent and more than 30 percent respectively.

Price change in residential properties as they age

Source: NUS

NUS associate professor Sing Tien Foo, who is one of the study’s authors, thinks HDB resale flats that are 30 years and above depreciate at a slower rate than the other two kinds of homes due to schemes introduced by the authorities.

“The increasing aging effects of private properties above 30 years old is probably due to lack of maintenance of the building and its surroundings. HDB flats enjoy the benefits of upgrading efforts such as the Singapore government’s Home Improvement Programme (HIP) that help reduce the aging effects more effectively than private properties.

“The problem seems more serious for leasehold private property owners who face both aging and lease decaying effects as aging can hasten economic obsoleteness of older buildings,” he noted.

Aside from the government’s programmes, maximum subsidy grants of $50,000 for first-time buyers of HDB resale flats further allays the price depreciation, added co-author professor Sumit Agarwal.

Other researchers include NUS Business School finance professor Low Tuck Kwong and PhD student Zhang Xiaoyu of the Department of Real Estate at the NUS School of Design and Environment.

The study analysed resale transaction prices of HDB flats and private non-landed homes, either leasehold or freehold, from 1997 to 2017. In particular, the research covered 72,006 freehold homes, 68,407 99-year leasehold residences and 477,665 HDB flats.

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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

David Lim
Feb 25, 2019
Through various upgrade schemes announced on public housing, it is not surprising to know that the rate of decline is slower than private which is paid by the owners themselves, Freehold or Leasehold. However, collective sales especially for some freehold sites can fetch prices which HDB owners can only dream of.
Feb 16, 2019
I wonder whether upgraded HDB flats bring about higher selling prices for HDB sellers. I sold my HDB with lift upgraded and accessible at every level but it did not fetch me a higher selling price but instead I have to pay HDB for the upgrading. So I really wonder how did NUS professor and PhD student arrive at this conclusion? The report claims private properties more than 30 years old "suffered" from lack of maintenance and upgrading. I disagree as non landed tend to have management committee to maintain those property (not Town Council) and most of these non landed private properties would already have facilities like swimming pool, gym, tennis court etc. which are not found in HDB flats. These private properties which were bought some 30 years ago would probably be sold at a price of less than $300 psf then and would have easily double or triple their selling price by today standard. Private properties depreciate more than HDB flats? I am scratching my head...
Andrew Ng
Feb 14, 2019
I sure like to see the data they have used for their analysis. Having been in and out of the market, I cannot believe that they have used accurate data and come to this conclusion especially when so many older apartments (both leasehold and freehold) have been enjoying collective sales etc etc. Something does not jive with the reality in the market place.

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