How do you monetise an aged HDB apartment?

Oh, so now everyone is freaking out over forking out too much money for the HDB apartments at Tiong Bahru, Tanjong Pagar and Bishan because they think that with SERs, there’s nothing they need to be worried about!

Well, now that the reality check is here – the likelihood of HDBs hitting million dollar prices again is going to be moderated. Unless one really, really, really wants to make a home of the place, one wouldn’t want to pay too much for a property that could devalue.

But it doesn’t mean that you’ll be stuck with no money back at all. Here are 4 ways you can manually unlock the value of your HDB apartment.


Depreciating properties are nothing new in the world of property investment. If you do a search on a portal, you will find some beautiful landed houses going for as low as $200k. The only catch is that they have very short leases left, perhaps 10 to 15 years. There are investors who want this type of assets because they can capitalise on it in the short term.

Depending on market conditions, one can rent the apartment out at a premium, enough to pay for the rental of your existing accommodation, pay the mortgage (if any) and have a bit of pocket money all at one go.

 Reverse mortgage

Just one caveat; the only banks that were doing this for HDB property have stopped offering the service due to a lack of interest. Both NTUC Income and OCBC bank launched reverse mortgages for HDB apartments in 1997 and 2006 respectively. However, due to low uptake and other reasons, both companies withdrew from the market in mid-2009.

In a reverse mortgage, the bank loans you money of up to 80% of your property’s value. When 80% has reached, or if you have died or moved to a nursing home, the bank will trigger a sale of the house to reimburse the bank.

The service still exists for private property (under different names). The URA is studying the feasibility and potential government assistance for HDB reverse mortgage to continue.
Lease buy back

The HDB introduced the Lease Buyback Scheme (LBS) in 2009. Here’s how it works: households would sell the tail-end portion of their property lease back to the HDB.

To be eligible for the LBS, homeowners have to be of retirement age, live in HDB flats with three or fewer rooms, and have a gross monthly household income of S$10,000 or less. Homeowners receive a bonus of S$20,000 for participating in the LBS.

In April 2015, “Enhanced LBS” extended the eligibility for the LBS to households with a gross monthly income of up to S$12,000 and those living in four-room HDB flats. Three-room HDB flat owners still receive S$20,000 for participating in the LBS, while four-room HDB flat owners receive a bonus of S$10,000.

Here’s an example of how it works: Consider a family who bought a HDB apartment in 1990 on a 99-year lease. In 2015, the remaining lease on the property is 74 years. The family can retain 30 more years of the lease and sell the remaining 44 years of the lease to the HDB through the lease buyback scheme. The HDB determines the value of the remaining lease based on the property’s market value estimate and credits the amount to the family’s CPF account. Similar to a reverse mortgage, the LBS enables the elderly to remain in their current homes and communities while unlocking their home equity.

Sell it away
Just because a property has very short lease left, doesn’t mean that nobody on the market wants to touch it. There are many people who are specifically on the lookout for such houses. They could require an apartment only for the interim, looking to profit from rental or have specific business needs.

Singapore is progressively enabling elderly homeowners to monetize their housing assets. New schemes are being explored and existing ones adjusted to meet the context of a leasehold real estate environment and the changing needs of elderly households. Homeowners can use these schemes together with their CPF savings-funded annuity schemes to secure their standard of living in retirement.

There are many mechanisms in the making. Housing is the backbone of Singapore’s success and it is unlikely the Government is going to allow citizens becomes worse off.

For now, there is incentive for “right sizing”. The HDB provides a Silver Housing Bonus of up to S$20,000 to elderly households that sell their current flat and buy a smaller one. A flexi lease scheme with lease periods ranging from 15 to 45 years has also been recently introduced for two-room HDB flats.

The HDB will certainly find housing solutions for all Singaporeans, the apartments can still hold value, but it won’t make you rich. And shouldn’t, because you can only become rich at the expense of future generations.

If you’re not greedy for more, the basics are taken care of and there’s really nothing to worry about.




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