Holding A Fully Paid HDB Flat: Rental Income Vs Lease Decay

Hi Stacked!

We’re a couple in our early 40s and we currently live and work in Australia. But we also own a four-room HDB flat at Klang Lane near Little India that we lease out for $2,900 a month. It is a resale flat which has completed its minimum occupation period (MOP) and is fully paid up.

We have tried to keep the rent slightly below market to retain our existing tenants, especially since the conditions of the ethnic quota makes finding replacement tenants difficult. So, having stable long-term tenants has been valuable to us. The flat has been managed by a property agent, who is also a family friend.

We intend to return to Singapore to live, although we have also considered shuttling between the two countries when we retire. We love the space and outdoors that Australia offers, but we also value our family and friends in Singapore. Both my wife and I have retained our Singaporean citizenship.

Moreover, our HDB flat, which we estimate to be worth around $550,000 to $580,000, represents a significant portion of our net worth. We also have: 

• A freehold property in Australia with around S$150,000 in equity and a remaining mortgage of approximately S$350,000
• Combined CPF and Australian superannuation savings of more than S$200,000
• Other amounts in cash and stocks

If we sell the HDB flat, approximately $160,000 of the proceeds would need to be refunded to our CPF accounts. Our dilemma is whether we should keep or sell the HDB flat, but I also worry that holding it for too long will eventually see its value decline as the remaining lease gets shorter.

We considered selling the flat and investing the remaining cash proceeds in the stock market, but the recurring rental income seems more predictable than relying on the stock market. Alternatively, we could use some or all of the proceeds to pay down the mortgage on our Australian property. But I am reluctant to move our wealth into Australia and would prefer to retain a meaningful portion of our assets in Singapore.

When we do return to Singapore and have sold the flat, we would presumably need to buy a replacement home at prevailing prices. Would it make sense to continue holding the flat for its rental income and as a future home in Singapore, or sell it now and redeploy the capital elsewhere?

Your advice is much appreciated.

(This is part of an ongoing series where we answer reader questions about the property market. If you have one of your own, send it to stories@stackedhomes.com.)

Hi, and thanks for writing to us!

Based on what you’ve shared, it seems to me that the dilemma in front of you is one that many Singaporeans living overseas – and who continue to own a flat here – will eventually encounter.

An advantage that you have is that your four-room flat is fully paid off, and is currently cashflow positive. This means that even in the worst case scenario, you can be reassured that you’ll still have a home to return to.

But it is also reasonable to address the negative impact of lease decay on the value of your property in the long-term, especially since you say that it represents a sizeable portion of your current net worth.

So, while we can’t dispense specific personal finance advice, we can contribute our thoughts on whether the tied-up capital could be put to better use elsewhere in terms of your real estate.

As you’ve shared, maintaining flexibility is your main consideration here, since you don’t yet know exactly what your retirement will look like. You could return to Singapore permanently, or end up dividing your time between Singapore and Australia. Thus, we think that having options should take priority over purely investment-related concerns.

Let’s look at a range of options, and compare how each one could affect your finances.

First, would selling your property and reinvesting the proceeds lead you to a better financial position?

Before we dive into this, let’s try to establish how concerned you should be about lease decay eroding the value of your flat.

There are only a handful of HDB blocks along Klang Lane, and all of them were completed in either 2002 or 2003. This gives us a fairly consistent group of flats to examine, so let’s start by looking at how four-room flats along Klang Lane have fared over time.

According to the data compiled by Stacked, the flats there seem to be able to appreciate quite well, even as they age past 20 years old.

The data also suggests that while the average price of flats along Klang Lane appear to be about a single percentage point lower than the islandwide market, this is likely attributed to the fact that they started from a relatively higher base price.

For example, the average price of flats along Klang Lane were already averaging around $319,000 in 2005, compared to the average price of $252,000 for other similarly-aged flats across the island.

This leads us to conclude that the negative impact of lease decay has not significantly weighed on prices yet. Instead, we suggest that the more pressing concern is two-fold.

Firstly, you should consider if you want to continue dealing with the challenges of renting out the flat. The Ethnic Integration Policy (EIP) seems here to stay and as you’ve already experienced, it can make finding suitable tenants more difficult. Even if the $2,900 per month from the rental income leaves you cashflow positive, there’s the constant hassle of securing tenants.

The second consideration is more quantifiable: what could the money earn elsewhere?

We reiterate that we’re not financial advisors, so we won’t dispense personal financial advice. But it’s worth comparing the returns you’re currently getting from the flat, versus what the proceeds could potentially generate elsewhere.

Could upgrading to a private property lead to a more efficient deployment of your capital?

Since both of you are still in your early 40s and employed, there is the option of selling the flat to purchase a private property. This is worth considering sooner rather than later, as your age will eventually affect the loan tenure and amount of financing available. This is the current position:

To illustrate how this could work, let’s assume you purchase a resale two-bedroom unit for around $1.65 million, which is close to the average resale price for such units in 2025.

We’ll assume that you use both the $390,000 cash proceeds plus the $160,000 refunded to CPF toward the next purchase, giving you around $550,000 in available capital. From there, we can work out how much financing you might need:

Note that the actual interest rate on the mortgage is likely to be lower. However, 4% is the floor rate set by MAS, and also the rate used for calculations like the Total Debt Servicing Ratio (TDSR). In any case, it’s not a bad idea to use this floor rate as it prepares you for situations where the interest rate rises. 

Assuming a 3% rental yield, a $1.65 million property could generate around $4,125 in monthly rent. After allowing for an estimated $300 in monthly maintenance fees, your out-of-pocket mortgage cost would be approximately $1,742 per month based on today’s interest rates.

This assumes, however, that you comfortably meet the income requirements for the loan and are prepared to take on the additional monthly commitment.

This approach also gives you a good degree of flexibility. If you eventually return to live in Singapore , you could move into the property or sell it to purchase something more suitable. In the meantime, remaining invested in a property in Singapore provides some protection against having to re-enter the market at potentially higher prices later.

We also wouldn’t view this purely as an attempt to generate higher returns. You’re still in your early 40s – taking on a manageable mortgage now gives you time to gradually build equity, banking on a property here to form a part of your retirement plan.

The trade-off is that you lose the certainty and cashflow of a fully paid-off and leased flat, along with the usual risks that come with an ongoing mortgage.

To get a sense of how this alternative might have performed historically, we will compare flats at Klang Lane with similarly aged private properties.

We’re looking specifically at non-landed private homes which were completed in 2002 and 2003, the same time as the flats along Klang Lane. We will only look at resale and subsale transactions, avoiding developer sales.

According to our analysis, among non-landed projects completed in 2002 and 2003, the average resale prices increased from around $611 psf in 2005 to $1,551 psf in 2025. This works out to an annualised growth rate of 4.77%, compared to 3.86% for the Klang Lane flats over the same period.

Of course, there’s no guarantee this gap will persist. But it does show why replacing the HDB with a private property may be worth considering. The data suggests that you could potentially put your equity to work in a higher-value asset, while still retaining a home here.

Next, should you use the proceeds to pay off your mortgage in Australia?

Paying down your Australian mortgage is also an option. However, this is where the question starts to move into personal financial planning rather than property, so we’ll only touch briefly on it.

The main consideration we’d highlight is liquidity. There’s certainly an appeal to paying off a mortgage as quickly as possible, particularly as you approach retirement. But you also don’t want to end up asset-rich and cash-poor.

Property is relatively illiquid, almost anywhere in the world. Once a large portion of your available cash has been used to pay down the mortgage, accessing that money again isn’t straightforward. You may need to refinance or sell the property, both of which take time, and may depend on market and interest rates at the moment.

That said, if and when you return to Singapore, having sufficient liquid assets could give you considerably more flexibility versus having it tied up in a paid-off Australian property.

How much cash you should retain, versus use to repay the loan, is something we’d suggest discussing with a financial adviser – particularly in the context of your retirement plans.

Our final thoughts

Based on what you’ve shared, we don’t think lease decay alone is a compelling reason to sell your HDB. The flats along Klang Lane have continued to appreciate despite their age, and the flat that you own continues to provide you with a steady stream of rental income.

The main question is what you want the property to do for you over the next 15 to 20 years.

Since returning to Singapore remains a possibility, we’d be cautious about giving up your property assets here altogether. We’d be wary of the risk that, when you eventually return, you’ll have to buy back into the housing market at even higher prices.

If you do decide that the flat is no longer the best use of your capital, one alternative worth exploring is replacing it with a private property, rather than exiting the market entirely. At your age, it is likely that you still have time to gradually pay down a mortgage while building equity in a higher-value asset. This could ultimately support your long-term retirement prospects.

Moreover, given your age, we reckon that the both of you still enjoy the luxury of time. You don’t need to make any immediate decisions today, especially not out of fear of lease decay eroding the value of your flat. Rather, this is an opportunity to decide what role you want property to play in your retirement, and act accordingly.