NDR 2018: Why are HDB leases 99 years long? PM Lee explains
The prime minister said that HDB flats must be returned to the state after 99 years for the sake of future generations and for social and practical reasons.
File photo. (Photo: Jeremy Long)
SINGAPORE: The ongoing discussions surrounding Singapore’s public housing shelf life were tackled by Prime Minister Lee Hsien Loong during his National Day Rally speech on Sunday (Aug 19).
Over 80 per cent of the population reside in Housing and Development Board (HDB) flats - of which an increasing number are nearing the halfway mark of their 99-year leases, sparking both public and parliamentary questions about issues such as depreciating value and notions of home ownership.
“There is one fundamental reason why,” said PM Lee on the issue of 99 year leases. “We need to be fair to future generations …  After (99 years), the flat comes back to the state, the Government redevelops the land, and builds new flats for future generations. This is the only way to recycle the land, to ensure all our descendants can buy new BTO (Build-To-Order) flats of their own.
“If instead the Government sold you the flat on freehold … Sooner or later we would run out of land to build new flats.”
He continued: “The owners would pass down the flat to some of their descendants ... Those not lucky enough to inherit a property would get nothing. Our society would be split into property owners and those who cannot afford a property. That would be most unequal, and socially divisive.”
This is why 99-year leases extend to private housing as well, said PM Lee.
“There is also a practical reason why we can't extend the leases,” he added. “If you look at older buildings today, some look rather worn, even before they are 50 years old. After a century, I am sure the mechanical and electrical systems will be obsolete. The concrete will have deteriorated in our tropical climate.
“And even if we could fix all that, the recurrent maintenance costs would be very high.”
“So it is better to let the leases expire, take the blocks back, demolish, rebuild afresh ... newer, better, more liveable flats, blocks, townships - more suited to what our grandchildren and great-grandchildren will want to live in,” PM Lee said.
“VERY FEW OF TODAY'S HDB OWNERS WILL OUTLIVE THEIR LEASES”
Earlier, he also said that “actually, 99 years is a very long time”.
“Let’s say you buy a new flat from HDB in your early 30s. After 99 years, you will be 130-plus years old - and I would guess you probably won’t need this flat anymore. If you have children, they will also be very old, almost as old as the flat itself, in their 80s or 90s. And if you have grandchildren, by then, your grandchildren will be grandparents.” said PM Lee.
“When you retire after living in your flat for 30 or 40 years, the flat will still have a good 60 plus years of lease left. And that's long enough for it to retain substantial value, and be a good retirement nest egg.”
He said retirees in such a situation could explore options such as to continue living in the flat, rent out a room for income if needed, and one day pass it down to their children. They could also “right-size” by selling the flat and moving to a smaller unit, or tap into the Lease Buyback scheme by returning the remaining lease to HDB.
The Ministry of National Development is also working on helping residents monetise their older flats by expanding the Lease Buyback scheme or improving the liquidity of the resale market, said PM Lee.
“Very few of today’s HDB owners will outlive their leases. HDB estimates that it will happen to less than two per cent of households,” he noted. “So it's not likely to happen to you.
"It could happen to your children if they inherit your flat. But this shouldn't be a problem if your children buy their own BTO flat, with its own 99-year lease, as many do. Because then an inheritance for them would be a gift and a bonus.”
As for resale flats, with Singapore's oldest flats at most 52 years old, it leaves at least another 47 years on the lease - “still quite a long time”, PM Lee reiterated.
He then said not to worry over exactly what will happen when a flat’s lease is up and it has to be returned to the state.
“The Government will help you to get another flat to live in,” PM Lee promised. “It may be a BTO flat from HDB with a fresh 99-year lease … It may be a resale flat on a shorter and cheaper lease. Or it may be a two-room Flexi flat for retirement - different options depending on your needs and what you can afford.”
“But whichever option you choose, you will have to pay for the lease,” he warned. “This is only fair, because you bought the original flat knowing when the lease would run out, and knowing that the flat would then have to be returned to HDB.”
