The Government announced the introduction of the “2-room Flexi” scheme during the National Day Rally in 2015 to replace the previous housing schemes meant for studio apartments and 2-room flats.
While new “2-room Flexi” flats are also meant for low-income families and singles to have their own homes, we believe that one of the main driving reasons behind this revised scheme is to allow retirees in Singapore to better monetise their existing homes for retirement.
In the context of this article, a retiree is someone who is 55 years of age and above at the time of their 2-room Flexi flat application.
If you or your parents are considering this scheme for retirement planning or rightsizing to a smaller unit, then here are some things that you should know about the 2-room Flexi flats before deciding if the scheme meets your requirements.
What Is A 2-Room Flexi Flat?
The basic idea behind this “2-room Flexi” scheme is simple. Retirees who currently have an existing flat that is bigger than what they really need (e.g. their children have moved out of a 4-room flat that they currently own), can unlock the value of their bigger-sized flat by selling it in the open market and could purchase a new and cheaper 2-room flat directly from HDB.
The secondary idea behind the scheme is to give retirees an option for shorter leases of between 15 and 45 years in 5-year increments. This reduces the overall outlay on housing and allows retirees to retain more money for their retirement, rather than be asset-rich but cash-poor.
Those Who Have Bought 2 Flats Previously From HDB Are Still Eligible
Every Singaporean is allowed to purchase a maximum of 2 new flats (inclusive of DBSS and EC units) directly from HDB. The taking of any amount of housing grant when purchasing resale HDB flats from the open market is also considered as having used a chance.
For the 2-room Flexi scheme, Singaporeans are allowed to apply for it even if they have previously used up their two chances. However, they can only opt for the short-lease option offered under the scheme and have to pay a resale levy adjusted from $30,000 depending on the length of the lease. Do note they also have to meet the standard HDB monthly household income ceiling of $14,000.
The standard 99-year lease option for these 2-room flats is only available for those who have not used up their two chances. Singles can also choose to purchase these 2-room Flexi flats with the standard 99-year lease if they meet the monthly household income ceiling of $7,000.
Lease Period: Choosing Between 15 – 45 Years
To be eligible for the short-lease option, both you and your spouse will have to be at least 55 years old at the time of application. In addition, applicants will need to opt for a lease period that is sufficient to cover both of them till the age of 95.
For example, a couple that is both 60 years old will need to opt for a lease period of at least 35 years. The lease increments are in 5-year periods.
|Age Of Youngest Buyer||Minimum Lease Period|
|80 and above||15|
How Big Are 2-Room Flexi Flats?
HDB 2-room flats come in two sizes, 36 sqm (387 sq ft) and 45 sqm (484 sq ft).
For comparison purposes, 45 sqm is about half the size of a typical 4-room flat. It comes with a kitchen, a toilet, a living/dining area, a bedroom and a household shelter.
Size-wise, it is probably just right for an elderly couple who are living by themselves. The good news is that cleaning up the entire house should not take more than 30 minutes. However, the Saturday afternoon mahjong game may need to be moved elsewhere.
How Much Do The 2-Room Short Lease Flexi Flats Cost?
For short-lease 2-room Flexi flats, the selling prices of the flats will be discounted based on the price at which HDB is selling the standard 99-year lease 2-room flats. It goes without saying that the shorter the lease, the cheaper the flat will be. However, do note that the price reduction is not directly proportionate to the reduction in the lease.
For example, if a 2-room 99-year lease flat is selling at $110,000, a 40-year lease for the same flat bought from HDB would cost about $62,800.
For Illustration Purpose Only:
|99-Year Lease||40-Year Lease||15-Year Lease|
Remember, the cost of building a flat to HDB would be the same, regardless of the final selling price that HDB sells it to its buyer.
Payment Method & Selling Options
This final part is important and worth knowing before any decision is made.
Unlike regular homes, applicants will NOT be able to take out any form of housing loan for these short-lease 2-room Flexi flats. Full payment has to be made either by Cash or CPF, or a combination of both. In other words, you need to make sure you have enough money to pay for the price of the home in full.
The same CPF rules apply to the use of CPF monies for the purchase of 2-room Flexi flats.
However, those buying shorter lease 2-room Flexi flats will also need to have a gross monthly household income ceiling not exceeding $14,000. Whereas, those buying 2-room Flexi flats with a fresh 99-year lease must have a gross monthly household income not exceeding $7,000.
Potential buyers may also want to remember that short-lease 2-room flats cannot be sold on the open market. If buyers no longer wish to live in their flat, or have passed away, the flat must be returned to HDB. HDB will pay out a pro-rated sum of the original selling price based on the remaining lease of the flat to the buyers, or their next-of-kin.
Another option that is available should the sole owner of a short-lease 2-room Flexi flat pass away before the lease expiry is to transfer the flat to a named beneficiary, provided the latter fulfills the eligibility criteria to own the flat.
Senior Priority Scheme (SPS)
Singapore seniors may also qualify for the Senior Priority Scheme (SPS) that helps them to buy a 2-room Flexi flat to age-in-place in a familiar environment or to live near their parents/married child. The SPS improves their chances of securing a 2-room Flexi flat in the eligible location.
The new 2-room Flexi flat must be located within 4 km of your current flat or owner-occupied private property. For those who are applying to live near their parents/married child, it must be located within 4 km of their new flat. Your parents/ married child who has helped you qualify for the SPS must continue to live with you or within 4 km of your new flat throughout the minimum occupation period of the new flat.
At least 40% of the 2-room Flexi flats will be set aside for seniors. Within this, half will be set aside for eligible seniors under the SPS.
Retirement Planning Using The Short-Lease 2-Room Flexi Flat Scheme
As with all financial planning products, there are pros and cons to utilising this scheme for retirement planning.
If you are seriously considering this, we think it is worth finding out more details on this scheme from the HDB website. It is an important decision worth thinking, understanding and discussing with your spouse.
Editor’s Note: This article was originally published on 15 February 2016 and we have updated it to include the latest information.
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