HDB terrace houses, a unique form of public housing, were constructed in the 1950s by the Singapore Improvement Trust (SIT), the predecessor to the Housing and Development Board (HDB). Established by the British colonial government, SIT aimed to meet Singapore’s early housing demands. During its tenure, SIT built a total of 285 HDB terrace houses in the Whampoa and Queenstown areas, each offering approximately 900 sq ft of living space across two storeys.
In the late 1960s and early 1970s, as HDB was established, it assumed responsibility for these terrace houses from SIT and renewed their leases for 99 years. Presently, the terrace houses in Queenstown, with leases starting in 1968, have about 46 years remaining, while those in Whampoa, with leases beginning in 1972, have about 50 years left.
HDB Terrace Houses: Key Differences from Landed Property and HDB Flats
All HDB terrace houses are on a 99-year leasehold, similar to other HDB properties, unlike private landed properties which can be freehold. This means that the government can reclaim the land after the lease expires.
Distinctive Features of HDB Terrace Houses:
- Block Numbers: HDB terrace houses are marked with block numbers similar to those on older HDB flats, which you can see on the side of the walls.
- No Private Parking: Unlike private landed homes that often include a car porch, HDB terrace house owners must use communal HDB carparks.
- Ownership Differences: Owners of HDB terrace houses own the building but not the land it stands on, whereas owners of private leasehold terrace houses own both the structure and the land (for the duration of the lease). This allows for greater flexibility with private properties, as owners can potentially demolish the building and use the land for other approved purposes, though legal consultation is necessary.
- Size: Typically, the larger the HDB terrace house, the higher its cost. Although HDB terrace houses are not the largest type of flat available, they are considered landed properties and include additional space such as a backyard, which contributes to a larger built-up area.
While these distinctions may not affect the functionality of the properties, they can be significant for those who place a high value on land ownership.
HDB Terrace Houses: Appeals and Considerations
The Allure of HDB Terrace Flats
HDB terrace flats offer a semblance of landed property living, complete with ample space and a private backyard or garden. These features appeal to those who value spacious living and the laid-back atmosphere of a terrace flat neighborhood. The private backyard, for instance, provides a perfect spot for hosting small gatherings, such as BBQs, which would be difficult in a high-rise HDB flat.
Ideal for Budget-Conscious Landed Home Seekers
For those aspiring to own a landed property but constrained by budget, HDB terrace flats present an affordable alternative. Their unique characteristics and locations in mature estates also draw interest from retirees, empty nesters, or those downsizing from larger private homes, who may find the declining lease less of a deterrent.
Investment Potential and Limitations
Prospective buyers considering HDB terrace flats as an investment should be cautious. The declining lease term makes these properties more suitable for owner-occupation rather than as an investment, particularly if considering resale post the 5-year Minimum Occupation Period.
Key Factors to Consider:
- Affordability of Landed Living: HDB terrace houses are among the most economical options for experiencing landed living.
- Lack of Private Parking: These units do not come with private parking, contrasting sharply with most private landed homes.
- Potential for SERS: There’s speculation about the possibility of Selective En-Bloc Redevelopment Scheme (SERS), especially given the desirable locations of Whampoa and Queenstown. However, the probability and implications of SERS remain uncertain.
- Ownership of Structure, Not Land: Owners have rights over the house but not the land, which can affect long-term value and flexibility.
- Location Advantage: The value of these properties may hinge more on their location than on the housing type itself. Proximity to amenities like MRT stations, malls, and essential services enhances their desirability compared to more isolated private landed properties.
Summary
Ultimately, HDB terrace houses are better suited for homeowners rather than investors.
The resale value of these properties is difficult to predict, particularly as they approach the latter half of their lease term. A notable concern is the accelerated depreciation during the final 20 to 30 years of the lease, which can complicate financing for potential buyers. For instance, financing options may be reduced to as low as 55 percent for properties with 40 years or less remaining on the lease. Furthermore, obtaining bank loans becomes challenging for leases under 30 years. Given the financial requirements, many buyers would likely need bank loans to purchase these homes.
Therefore, these properties are most appropriate for buyers planning to reside in them for the long term, without expectations of significant resale or legacy value.
In summary, while HDB terrace houses offer the perks of landed living and are located in mature, well-equipped neighbourhoods, they are primarily attractive to those not seeking to make a profit through resale.