By Timothy Quek
The value of 3 room HDB flats in Toa Payoh which are more than 50 years old has declined by as much as 30 percent in the past 4 years!
As a property agent specializing selling HDB flats in Toa Payoh, I can tell you that it is very difficult to find buyers for these aging HDB flats which have undergone upgrading just a few years ago.
Sellers who ask for unrealistic prices for their units, even at bank valuation, usually are unable to sell them. For those who need to offload their flats urgently, they will have to give steep discounts of sometimes more than $50,000 to entice buyers.
File photo: Old HDB flats at Lorong 7 Toa Payoh
For the purpose of comparison, let us use the recent sales transactions of 2 room HDB flats at the same size of 710 square feet at Block 9 Toa Payoh Lorong 7.
The block was built in 1970 and has only 50 years of lease left:
Sales transaction of a 2 room HDB flat in Toa Payoh Lorong 7 from 2014 to 2018:
As we can see from the above figure, a four level unit was sold at $318,000 in May 2014. However in August 2018, a much higher level unit was sold at only $220,000, a decrease in of more than 30 percent!
If we observe the trend, we can notice the selling prices of the flats have been steadily declining in the past four years. If the rate of decline continues at the same rate, the same flat will only sell for $154,000 in 10 years’ time and $107,800 twenty years later when theoretically speaking, VERS will be offered. The government will not pay the flat dwellers the market price of $107,800, probably much less and those buyers above who paid more than $280,000 for these flats today will make a terrible loss.
Another look at recent transactions at a block in Lorong 5 reveals the same trend:
From my years of experience in Toa Payoh, I think the resale market has reached its peak ten years ago and from 2011 onward, prices kind of stagnate and experience a steady decline starting from 2014.
With much negative publicity surrounding the “lease decay” issue in recent years, I expect prices to take a steeper dip in the coming months ahead.
If you intend to sell your HDB flat, you should consider selling it soon before its lease decline further. The prices of HDB flats usually take face a sharp decline when they are more than 40 years old when restrictions of using CPF and bank loan to finance their purchase kicks in, thereby severely limiting the pool of ready buyers.
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About the Author
Timothy is a guest contributor to Singapore Property Update. He has been a property agent for the past ten years.