Little-known fact: HDB flats may be converted into dual-key homes

Little-known fact: HDB flats may be converted into dual-key homes

While such units are now few and far between, experts consider the potential effect.

Aug 15, 2024

Dual-key homes in private condos have been available for a long time, but many people are surprised to learn that HDB flats may also be converted into dual-key designs.

While this option allows owners of Housing and Development Board flats to modify their properties for rental, commentators are concerned about the possible effect on the public-housing market.

A dual-key residence is separated into two flats yet has a common foyer and main entrance. Typically, the homeowner resides in the bigger apartment and rents out the smaller studio space. Frasers Centrepoint residences introduced the Caspian condominium in 2009, marking the first time such residences appeared on the private property market.

However, in the HDB market, such flats have been rare.

Dan Ho, senior division associate director at OrangeTee, said that he had seen less than ten dual-key HDB residences in the last decade.

These apartments are well-liked by renters, particularly in older districts like Bedok, where rentals may vary from S$1,800 to S$2,500 per month. A bedroom in a standard apartment would cost between S$750 and S$1,200 to rent.

For a higher rent, the renter benefits from seclusion and about 350 square feet (sq ft) of space with the studio choice, as opposed to just 120 to 180 sq ft in a bedroom. "A private studio in the same location can easily set the tenant back by S$3,500 to S$4,000," according to him.

Depending on the contractor and materials utilised, Ho estimated that the cost of upgrading a flat into a dual-key one may begin at S$10,000 for the cheapest, "industrial-style" design.

Gaining interest

However, interest in this little-known alternative may be increasing.

"We have received many enquiries," said Dawn Tan, director of business development at Goodman Interior, which has rebuilt "a handful" of such HDB apartments into dual-key homes since 2017. "Many are surprised and excited that a HDB flat can be converted into a dual-key concept."

She said that homeowners who had intended to downsize to smaller HDB apartments found the alternative appealing. With a dual-key apartment, senior flat owners may age in situ while keeping privacy and earning passive income from their renter.

According to her experience, flat owners interested in the notion include singles in their forties who want to rent out a portion of their property and elderly homeowners living with their adult children who want to rent out the whole apartment to two renters. Renting out both dual-key halves of the property might result in a greater aggregate rental than renting out the whole flat.

In answer to our inquiry on the laws and regulations governing the conversion of HDB flats into dual keys, HDB said that "Generally, flat owners are allowed to install partitions or partition walls within their flat, to meet their lifestyle needs and preferences."

However, unit owners must guarantee that renovations carried out by their designated contractors follow HDB requirements. They must also seek for the necessary permissions and licenses.

Furthermore, people who want to rent out their apartment or bedrooms must seek HDB's prior permission and follow certain requirements, such as the minimum occupancy term and the number of tenants for their flat type.

Khai Toh of design firm Ktarch believes that "jumbo" apartments, which are enormous flats constructed by joining two neighbouring three- or four-room flats, are the simplest to convert into dual-key homes.

In Ho's experience, however, the majority of dual-key HDB flats he has seen are smaller, three-room kinds that have been converted into two studio apartments.

The new "white flats" being piloted in Kallang-Whampoa, which lack walls and beams, may also be suited for dual-key designs.

Possible implications

While dual-key apartments may enhance housing availability and cut HDB rates for renters, Christine Sun, chief researcher and strategist at OrangeTee Group, believes there may be additional implications.

For example, owners who lease out both apartments in a dual-key flat are doing it as an investment. "This may encourage homeowners to own multiple properties since HDB flat owners can already own private homes; now they can effectively lease out two HDB flats in a dual-key," she argues.

It may also encourage others to buy bigger apartments with the goal of dividing them into two independent residences. She predicted that this may lead to an increase in million-dollar flat deals in the future. "And because many of these large flats are older, there will be a rise in the number of old flats being sold for a million dollars."

Nicholas Mak, Mogul.sg's chief research officer, noted that HDB flat owners may have an unduly optimistic perspective of studio unit rental demand, resulting in an excessive number of flat owners transforming their flats into dual-key models.

He cited the low demand for two-key residences in the private housing sector, where few developments have dual keys. And those that do account for less than ten percent of the development's total units.

"The reason is that every square foot is valuable, and dual keys are less space-efficient because there is always a foyer where the entrance leads to two doors," he told me. "You also need two kitchens or kitchenettes, which represents another loss of efficiency."

Then there are the utilities.

"There is only a single bill for gas, water and electricity," he told me. "What if the tenant is an irresponsible user?"

Dual keys are also more prevalent in places with high rental demand, such as the city and its outskirts near MRT stations. Owner-occupiers make up the majority of suburban condo purchasers. "And since most HDB flats are in the suburbs, this means there is even lower demand for dual-key HDB flats," according to him.

Finally, dual-key apartment owners may struggle to sell their properties later.

“You’ll need a buyer who doesn’t require all the space in the unit and not everyone wants to give that up in order to collect rent,” said OrangeTee’s Ho. This implies that sellers must be willing to cover the costs of converting their dual-key apartments to a single unit.