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Unlocking the value of our homes in retirement

04 Dec, 2017

A Housing Board flat means different things to different people - a home, of course; an investment; a source of income; and for couples, an application for a flat can even mean an informal proposal.

People are now far more financially savvy and would consider long and hard the long-term financial impact of buying their first home, but things were simpler in my time.

Other than considering whether my husband and I could afford the HDB executive maisonette that we had successfully balloted for in 1988, the possibility of profiting from it was furthest from our minds.

Yet the potential investment value of an HDB flat is not to be sniffed at, especially when you factor in the location and amenities surrounding it.

As the years go by, the flat may become an alternative source of income if the couple rent it out either partially or completely. Or they may choose to sell it for a tidy sum, as was my case after we'd lived in it for seven years.

It can be a viable source of income for seniors in their golden years, especially for those who are asset-heavy and cash-poor and with limited options.

Seniors here would be better prepared for retirement if they could monetise their homes, according to data from the Singapore Life Panel (SLP), a project of the Singapore Management University's (SMU) Centre for Research on the Economics of Ageing.

The SLP has been collecting detailed data from nearly 12,500 Singaporeans aged 50 to 70 every month.

Not surprisingly, the analysis by overall wealth distribution shows that most Singaporeans have far more of their wealth wrapped up in property.

For the 30th percentile on the wealth distribution, more than 80 per cent of their wealth is in the form of housing.

The average ratio of housing to non-housing equity is significantly larger than that of other countries, says Assistant Professor Li Jing of SMU's School of Economics.

However, the situation is quite different for the bottom 10 per cent of the population. These low-income households have most of their wealth in the Central Provident Fund; only 6 per cent of them have their wealth in the form of housing equity.

This is most likely because most people in this segment do not own their own homes, Ms Li adds.

This goes to show that for those in the 30th to 50th percentile, they should be encouraged to monetise their homes to finance their retirement, Ms Li says.

As I have mentioned in previous articles, there are three income options available to home owners.

Let's take a look at them.


The scheme allows elderly low-income Singaporeans living in four-room and smaller flats to monetise their property to meet their retirement needs.

Under LBS, you can sell part of your flat's lease to the HDB and choose to retain the length of lease based on the age of the youngest owner.

Let us assume the HDB buys back a portion of a flat's 99-year lease at market valuation, leaving, say, a 30-year lease for the owner. So if a flat has 70 years left, HDB buys 40 years of the lease from the owner. It pays the market rate for the 40-year lease.

The proceeds from selling part of your flat's lease will be used to top up your CPF Retirement Account (RA). You can then use your full CPF RA savings to buy a CPF Life national annuity plan, if you have at least $60,000 in your RA after the top-up. CPF Life provides a monthly income for life. Note that you will not be eligible to join CPF Life if you are over 80.

If the owner dies before his lease runs out, his family gets the refund of the balance.

One key advantage of the LBS is that owners get to live in their homes and at the same time receive a lifelong income.

The downside is that when the retiree dies, he may not leave behind anything for his loved ones. He would also have to forgo any gains if the flat had appreciated in value.


Another viable option is for elderly people to sublet their rooms. This option is suitable for a senior who wants to grow old in his own flat and still have some rental income.

Of course, some people may not feel comfortable having strangers in their home. It may also be inconvenient if they are still living in their flats while subletting. The owner will have to contend with losing some degree of privacy as well as putting up with tenants who may have different lifestyle habits.

The retiree can also opt to sublet his entire flat by moving in with his children.

For instance, my auntie Mary rents out her five-room flat for $3,000 a month while she and her husband live at their only son's flat to be closer to his family of three young children, and to lend a helping hand.

One key advantage of this is that the appreciating equity of the flat is retained by auntie Mary and her husband.


Another option is for elderly people to sell their flats and downgrade to smaller flats such as the flats under the two-room Flexi Scheme.

Under this scheme, elderly citizens can choose the length of lease on their two-room flat, based on their age, needs and preferences.

So if you are over 55, you can take up a lease of between 15 and 45 years in five-year increments, as long as it covers you and your spouse up to the age of at least 95. First-and second-timer families, as well as first-timer singles, can buy new two-room flats on a 99-year lease.

A 2009 National University of Singapore study found that significant sums would be cashed out if elderly people downgrade to smaller units. These amounts can be placed in an annuity for monthly payouts for life. For annuities, note that monthly payouts for women are lower than for men because of the longer life expectancy of women, on average.

So if the senior opts to downgrade to a short-lease two-room Flexi Flat as compared with a 99-year leasehold one, the cash proceeds would be even higher.

Most financial experts agree that downsizing seems to be the best financial option out of these three. After all, most retirees would conclude that they do not need to live in a big flat on retiring.

Some people prefer this option because it can help to reduce their debt if there is a mortgage. You can also clear your debt and use the proceeds to buy a smaller home and be debt-free.

Adapted from: The Straits Times, 3 December 2017