Lease extensions also unlikely, but units’ rarity may cushion depreciation effect
Two-storey terraced houses with spacious living areas and mini front porches complete with gates – these sound like private landed properties, but the Housing Board block sign gives them away.
HDB terraced houses – a rarity in Singapore’s public housing – have come under the spotlight after a record sale of a 210 sq m unit in Whampoa for $1.268 million this month, the most expensive HDB resale property to change hands so far.
There are only 285 HDB terraced units, and they are located in Jalan Ma’mor, Jalan Bahagia and Jalan Tenteram in Whampoa and Stirling Road in Queenstown – both sought-after mature estates.
Like all HDB properties, these terraced units have 99-year leases. Those in Whampoa have 50 years left, while those in Queenstown have 46 years left.
However, compared with HDB flats, the lease depreciation effect on HDB terraced units may be cushioned by the limited supply in the market, said Dr Sing Tien Foo, director of the Institute of Real Estate and Urban Studies at the National University of Singapore (NUS).
“Compared with private landed housing, an HDB terraced house at $1.268 million is still an attractive deal for some buyers who can enjoy the exclusiveness of landed housing for the next 50 years, although the upside may be limited as time passes,” he said.
The median price for a private leasehold terraced house in the Whampoa area is about $2.1 million, while a freehold property is about $3 million, based on caveats lodged in the past 18 months.
One difference, though, is that HDB terrace owners do not own the land the house sits on.
Associate Professor Yu Shi Ming at NUS’ department of real estate said that in theory, “if the house collapses, the HDB lessee will have nothing left while the private 99-year lessee will still have the land for the remaining lease period”.
Nine HDB terraced units – seven in Whampoa and two in Queenstown – have changed hands this year, compared with 15 such transactions in the whole of last year.
Resale prices have been rising, with the average price of a three-room terraced unit at $941,150 this year, compared with $822,000 last year, according to HDB data. The average price of a four-room unit rose to $975,000 this year, from $928,000 last year.
However, not all HDB terraced houses are built equal.
The smallest units are 78 sq m, slightly bigger than a three-room Build-To-Order (BTO) flat. The largest is a 307 sq m three-room unit, close to three times the size of a five-room BTO flat.
HDB terraced houses were built in the 1950s by the Singapore Improvement Trust (SIT), the predecessor of the HDB. Owners were issued a fresh 99-year lease when the HDB took over from SIT in the late 1960s and early 1970s.
The dwindling leases on these terraced units have inevitably sparked talk about the possibility of them being picked for the Selective En Bloc Redevelopment Scheme (Sers), in which the HDB buys back old units and owners are offered a replacement unit in the vicinity.
Most of the analysts interviewed said the chances of that are not high at the moment, although some do not rule out a small possibility of it in the future.
Ms Christine Sun, senior vice-president of research and analytics at real estate firm OrangeTee & Tie, said the Government has previously cautioned that not all old flats will become eligible for Sers.
Ms Sun noted that Sers is typically offered to housing estates that are not well utilised and have good redevelopment potential.
“These terraces may fall into this category as they are situated in a good location and are low-rise,” she said.
Even so, the lack of land in both mature estates to serve as replacement sites is a big hindrance.
Mr Tony Koe, chief executive of real estate agency Singapore Realtors Inc, said: “It’s highly unlikely that HDB can offer a similar lifestyle of landed living for these owners, so it may not be a smooth Sers process.”
The last Sers project was in May 2018 for blocks 81 to 83 MacPherson Lane.
ERA Realty head of research and consultancy Nicholas Mak said: “While the future of these HDB terraced units is uncertain, one thing is for sure: The current Government will definitely not extend the lease.”
He cited the example of the HDB terraced houses in Lorong 3 Geylang that were returned to the state last December when their 60-year leases expired.
He said: “HDB may treat these two terraced clusters as land banks for now. If they need the land, they may take it back through Sers but for now, there is enough land for new housing in Tengah and Woodlands.”
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