No 70-year lease for new HDB flats
THE Housing Board is not going to introduce the option of a shorter lease of 70 years for first-time buyers.
First-timers who want such flats can turn to the resale market, where they are still eligible for housing grants, National Development Minister Khaw Boon Wan said in Parliament yesterday.
He did not believe that demand for such flats would be strong.
Mr Khaw was replying to Marine Parade GRC MP Seah Kian Peng, who had asked the ministry to consider offering new flats with a 70-year lease alongside new ones with the current 99-year lease.
Mr Seah argued that home prices would be more affordable with shorter leases.
Disagreeing, Mr Khaw gave two reasons why demand would be weak.
First, the upfront cost HDB would incur for a 70-year lease would be the same as that for a 99-year lease.
Second, owing to the time value of money and the fact that flats with shorter leases tend to depreciate faster, the reduced price of a flat would not be directly proportional to the shortened lease.
"In fact, it is significantly higher," Mr Khaw said. "The fact is that we price new flats on a 99-year lease to be highly affordable for first-time buyers."
With significant housing grants, first-timers with a monthly household income of $1,000 can afford a new two-room flat in a non-mature estate, while those who earn $4,000 a month should be able to afford a four-room home.
"They can do so with little or no out-of-pocket cash," he said.
HDB buys land from the Singapore Land Authority on a 105-year lease, enabling the Board to build and sell new flats with a 99-year lease.
However, it offers flats with shorter leases to serve the needs of specific buyers, Mr Khaw said, citing studio apartments, which are sold on a 30-year lease to senior citizens as their retirement homes.
He also assured Mr Seah that he would "keep (his) options open", by perhaps offering an entire block of flats with a 70-year lease should the need arise.
"But at the moment, I doubt it," he said.