HDB Depreciation – Why You Need To Be Aware and How To Monitor Your Own Flat Value

HDB depreciation has been dominating on our Singapore’s property headlines for the past few years. If you are staying in a HDB flat, this topic should be of concern to you.

What Is HDB Depreciation?

Ever since Minister Lawrence Wong’s remarks that old HDB flats are not automatically selected for SERS, there have been a huge impact on the HDB property market. His remarks were actually a reminder for people not to spend too much on their HDB flats – especially if it was an older flat.

As an agent who does of a lot of HDB transactions, the impact from his remarks was something I personally experienced.

“How old is the flat ah?”

“How many years left in the lease?”

“Do you have a flat that is less than 10 years old?”

And so on. You can see the common theme. The age of the flat is a primary reason why a buyer could be interested or not.

I am not even talking about buying the flat yet – we were still talking about making arrangements to do viewings.

<insert various whatsapp conversations where they ignore you after revealing age of flat>

This graph below appeared in The Straits Times with the headline “Will You Still Love Your HDB Flat When It’s Over 64” on 12 April 2017.

This graph first appeared in April 2017. Since then, there has been rising awareness on the impact of “decaying HDB leases” on both buyers and sellers.

Here are 3 reasons why you must be aware of HDB depreciation:

#1: Your retirement monies are locked within your HDB flat

You are likely to be paying for your monthly HDB installments via CPF – like the majority of Singaporeans. This means a portion of your CPF contributions instead of being channelled into your retirement accounts – is being channelled into your HDB flat.

Now if your HDB flat were to increase in value, this means good news for your retirement. You can choose to sell your HDB flat to extract your gains for your retirement purposes.

But if your HDB were depreciating fast, this means a significant impact on your retirement. You might not be able to extract out what you have put in.

This is when your retirement plans will start running into trouble – especially if you plan to retire by downgrading to a smaller HDB flat.

#2: HDB flats with shorter leases depreciates faster and will be difficult to re-sell

This can be seen illustrated clearly in the graph above for flats that are above 40 years old.

However, I have seen significant depreciation of HDB flat values for those that are crossing the 10 years mark.

Their peak prices are actually when reaching the 5-year MOP mark – this is when it is highly sought after by buyers who want a flat immediately.

But the downward depreciation after crossing the 5-year mark is significantly clear.

Here I like to compare 2 different HDB units located in Punggol. I am selecting these 2 units because they are at similar floor levels and floor area.

Both units were sold around the same period – April – May 2019.

Location-wise, both units are also within the same area.

As you can see, the price can vary by almost $200K.

This is the premium that buyers are willing to pay for a newer flat.

Here is another 2 units also in Punggol that was transacted in October 2018:

Again both are similar floor levels and floor area. Both are also located nearby to each other.

Again, the prices vary by almost $200K. Buyers are willing to pay much more for that newer flat.

Holding on to your flat beyond the MOP date might not be the smartest choice especially if you plan to extract the most value.

#3: A newer flat can retain its value better

No doubt, a newer flat can retain its value better. But it is also more expensive. My advice is not to overstretch yourself – go for a smaller flat first – then upgrade when the the time comes.

I have seen cases where a HDB flat with a short lease depreciating very fast and becoming very difficult to resell.

Older HDB flats are much cheaper but their depreciation is imminent which makes selling it in the future a huge challenge. The potential for losses or a negative sale is usually very common for older flats.

So if you are planning to sell your first flat after you hit the 5-year MOP – I recommend getting a newer flat which can retain its value better.

Ignorance Is Not Bliss

If you are HDB owner, this is one topic you cannot plead ignorance on. I urge you to educate yourself and check on the following:

• Your existing HDB valuation. There are a few free tools available. The basis of valuation will be based on transactions of nearby neighbouring units. You can check which tools to use further below.
• Your current CPF usage. Check how much CPF has been used and the accrued interest that has built up. This can be checked by logging into your CPF account.
• Potential Gains or Losses. If you were to sell your HDB flat based on neighbouring transactions – check out if it results in a negative cash sale.
• Your remaining HDB lease. If your flat has a remaining lease of at least 94 years – it means it is only 5 years old and relatively new. Depreciation might not be significant.

How To Monitor Your Own Flat Value

There are a few tools available. However majority would require a paid account for you to subscribe to the data. Here are the free tools below:

Free Tool #1: SRX X-Value Tool

This tool works best on desktop or laptop screen. You might be prompted to install the app if you use your mobile smartphone to access this tool.

After entering your address including property type (you will need to enter all fields) – click on “Calculate X-Value” to see the estimated valuation of your HDB flat.

Free Tool #2: EdgeProp Fair Value Tool 

For this tool, you will need to enter your block number, floor area and size of flat to pull out an estimated value.

The estimated valuation will then be shown on the next screen.

Free Tool #3: HDB Resale Flat Prices

The other free tool is from HDB’s website. It showcases past HDB transactions for up to 12 months ago.

You will need to enter the address and estate to pull out the data.

Once you entered the details, the data will be shown at the next screen. Here you will be able to see the various prices of transacted HDB flats in the vicinity of your area.

Free Tool #4: PropertyGuru HDB Listings

This is not really a tool but it does allow you to check on HDB resale property listings easily. However, I caution that the prices might not be as accurate because the majority are based on the seller’s asking prices – which might not reflect actual reality.

Conclusion

In the age where information and data is so easily available – you cannot pretend to be unaware of the issue of HDB depreciation of your flat.

Just like you go to the doctor regularly to check on the status of your health, you should also take the time to check on the status of your property.

For your health, you buy insurance to protect against the unforseen events.

But I like to argue that for your property especially for HDB flats – events such HDB depreciation can be seen clearly…. even though it might seem still “far away”.

Procrastinating and delaying taking action will just cost you more – not just financially but in terms of your future retirement.

If you have any questions or issues regarding your HDB flat, I invite you to contact me for a no-obligation consultation.