Does age affect property prices in Singapore?

Is it true that older property has no value as they age?

The Bala’s Table

To understand how does age affect property prices, we need to know Bala. Bala works for the land office during the British colonial times. He invented the Bala table, which is a powerful guide used by the Singapore Government. It plots the value of leasehold land relative to freehold. HDB uses this to calculate the value in the Lease Buyback Scheme. It also impacts what developers have to pay to top up the lease in an en-bloc case.

The essence of the Bala table is that leasehold value decreases more sharply after the property crosses 40 years mark. This is in line with the policy of banks and HDB, which do not approve full loan amounts for properties with less than a 60-year lease.

Government Announcements on En-Bloc

In 2017, Minister Lawrence Wong warned that not all old HDB flats would be offered en-bloc or Selective En-Block Relation Scheme (SERS). This created much commotion that affected older HDB prices.

In 2019, the Government allowed max CPF usage and HDB loan if the remaining lease can cover the youngest buyer till age 95. This shows that age does affect the value of old properties, mainly because of financing limitations.

However, there are exceptions.

En-bloc defy Bala’s rule. In Singapore, it is rare for private land to be returned to the Government because of lease expiry. Most ageing condos would have been put up for en-bloc when they hit 30 or 40 years. Some savvy investors monitor old condominiums with en-bloc potential.

Tips for En-Bloc Investors

The plan is simple. Buy cheap apartment units on a low floor and in original condition. They spend $10,000 to $20,000 to touch up and rent out the unit, then wait.

We have heard of people who made windfalls from successful en-bloc sales, but bear in mind there is always a risk that en-bloc is not guaranteed. For such en-bloc investors, the key is, “you must be ready to hold for long-term”.

To conclude, age affect property prices, especially when the development crosses 40 years. The exception is when there is en-bloc, especially older private condominiums.

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References:
A Closer Look at Bala’s Table – Centre for Liveable Cities Singapore