SINGAPORE — Demand for older Housing and Development Board (HDB) flats has spiked, based on public data compiled by property firm OrangeTee. The increase is linked to the Central Provident Fund (CPF) rule changes introduced by the Government in May, it said. 

In a report released on Tuesday (Aug 6), OrangeTee said that the sales of HDB flats aged 40 years and above increased by 40 per cent in May and June, compared with the same period a year ago.

The transaction volume of flats aged between 30 and 40 years also went up by 10.4 per cent.

In May and June, older flats aged 30 years and above made up 44.9 per cent of total resale transactions, compared with 40.6 per cent over the same two months last year.

Conversely, the proportion of flats between 10 and 30 years old being re-sold declined from 43.4 per cent to 35.8 per cent.

OrangeTee's head of research and consultancy Christine Sun, who authored the report, said: “The year-on-year increase is commendable and could signal that the recent policy changes may have started to take effect in helping to spur demand for older flats.”

HDB flash estimates released two weeks ago showed that resale transactions in the second quarter of this year soared 29.8 per cent compared with the previous quarter.

While there is usually an uptick in sales activity in the second quarter of each year compared with the previous quarter, due to seasonal effects, Ms Sun noted that resale transactions went up by 5.6 per cent between April and June year-on-year.

In May, the Ministry of National Development announced that older buyers will be able to draw more from their CPF and get a larger HDB loan for older resale flats, as long as the youngest buyer turns 95 before the lease of the flat expires.

Conversely, younger buyers looking to buy older flats with leases that expire before they turn 95 will be able to use less of their CPF savings and are only eligible for a smaller HDB loan.

National Development Minister Lawrence Wong first announced in August last year that his ministry is looking to adjust CPF rules to make it easier for people to buy and sell old flats.

There has been much public debate and concern over the depleting leases of older HDB flats, after Mr Wong cautioned in 2017 that not all old flats will be eligible for the Selective En Bloc Redevelopment Scheme.

At the National Day Rally last year, Prime Minister Lee Hsien Loong spoke on the issue and announced several measures for older precincts, such as the new Home Improvement Programme II for ageing units where leases are at the 60- to 70-year mark, and the Voluntary Early Redevelopment Scheme, which will be rolled out in about 20 years.

Still, HDB resale prices have been stagnating and owners are generally finding it difficult to sell their older flats. 

On the back of the healthier resale volumes in May and June, Ms Sun said that going forward, the CPF rule changes may continue to help breathe new life into the HDB resale market.

OrangeTee’s report also found that the new rules may have benefitted bigger flats in particular.

In May and June, resale transactions of four-room flats rose 53.5 per cent compared with the same period last year. The sale of five-room flats also went up 54.5 per cent. 

Matures estates, such as Bukit Batok, Geylang and Bedok, saw the highest year-on-year increase in resale transactions for flats that are 30 years old and above.

The report also found that more owners who have collected their proceeds from en-bloc sales are buying older flats. These buyers may be drawn to older flats given their lower price quantum and larger living spaces, Ms Sun said.

She also said that OrangeTee has been getting more sales inquiries about older flats after the rule changes.

“With more public education, concerns surrounding the lease decay issue may start focusing on a new narrative that emphasises the importance of financial and retirement planning when a buyer makes a property purchase,” she added.