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Tag: 99 year lease

  • SDP: Here’s How You Resolve The HDB 99-Year Lease Problem

    SDP: Here’s How You Resolve The HDB 99-Year Lease Problem

    Singaporeans have been concerned about the recent announcement by Minister for National Development Lawrence Wong that the value of older HDB flats will decline and, eventually, be worth nothing at the end of their 99-year lease.

    HDB owners go into heavy debt and spend their retirement savings paying off this debt only to find that their flats decrease in value and have to be returned to the government at the end of the lease.

    This doesn’t make sense.

    To overcome this problem, the SDP has proposed the Non-Open Market (NOM) scheme for flats. Under this scheme, HDB will base flat prices solely on labour, materials and administrative costs. They will not contain a land cost component as State land does not cost the government any money.

    Currently, the HDB factors in the cost of land which jacks up the prices of the flats making them unaffordable for Singaporeans.

    Excluding the cost of State land will substantially reduce prices for HDB flats. We estimate that the prices for NOM flats will be effectively halved or more, ranging from $70,000 for 2-room flats to $240,000 for 5-room ones.

    But as the name suggests, NOM flats may not be sold on the open market. Owners wanting to sell their flats will have to sell them back to the HDB at a price that will be the original purchase price less the consumed lease.

    Current HDB owners will have the option of converting their flats to NOM ones. When they do this, the government will refund the amount of money based on the original purchase price from the HDB and the price of the same type of NOM flat, subject to a cap.

    The difference between the current system and the SDP’s NOM scheme is that Singaporeans won’t have to spend so much of their CPF savings and income to buy their homes. This will leave them enough funds for retirement and other pursuits.

    Buyers who choose to stay with the current system can continue to buy and sell their flats on the open market. They are, however, subject to the vagaries of the market and face the prospect of depleting their retirement funds by buying hugely over-priced flats.

    Experts have reacted positively to the SDP’s proposal (see here, here, and here).

    The current system ties up the people’s wealth in government property which, ultimately, becomes zero in value. It increases debt while reducing consumer spending and investment. This is not good for the overall economy.

    The SDP believes that housing, in particular public housing, should not be a tradeable commodity. Our flats are our homes where our loved ones live in security and comfort, not profit-making ventures. The NOM scheme is consistent with this principle.

    More important, it frees Singaporeans from the crushing debt burden and overcomes the unthinkable problem that our expensive flats for which we spend a lifetime paying become worthless at the end of 99 years.

    For more information on this subject, please read our alternative housing policy Housing A Nation: Holistic Policies for Affordable Homes here.

     

    Source: http://yoursdp.org

  • Chee Soon Juan: Goh’s Folly – Commodification Of Public Housing

    Chee Soon Juan: Goh’s Folly – Commodification Of Public Housing

    IT IS SAID that a politician thinks of the next elections but it takes a real leader to think of the next generation.

    And so it is with Mr Goh Chok Tong who may, having bolstered the PAP’s grip in politics through his asset enhancement and HDB upgrading schemes, lay claim to being a brilliant politician but, through these same policies, demonstrated utter failure as a leader.

    In 1991, under pressure to deliver a good result to secure his mandate as the new prime minister after taking over from Lee Kuan Yew, Mr Goh introduced the asset enhancement programme which, for all intents and purposes, cajoled (or threatened, as some saw it) Singaporeans into voting for his party in return for enhancing the prices of their HDB flats.

    The plan worked brilliantly, securing for the prime minister and his party mates a healthy victory. But it also started the pernicious mentality among Singaporeans that one’s flat was a commodity whose price stood to appreciate markedly over a short span of time.

    As a consequence, few thought little of shelling out huge sums of money, mainly by using their retirement funds, to finance HDB purchases. The motivation was that one could monetise the asset and realise robust capital gains at a later stage.

    Such a trend had two unfortunate effects: The first was that using CPF savings to service HDB mortgages would leave many financially wanting in their retirement years.

    The second is that as prices rose, young entrants into the public housing market would find it prohibitive to start a home. As a result, many young couples put off having children as their finances come under pressure.

    The propaganda, pushed by a media that act more like cheerleaders than vehicles for thoughtful deliberation, compounded the public’s exuberance for asset enhancement. Duly stoked, homeowners devised ways of using their flats to turn a profit.

    Some have even resorted to buying older flats at high prices with the view to reaping the benefits of redevelopment through the Selective En bloc Redevelopment Scheme (SERS).

    (The SERS selects older blocks of flats for demolition and replaces them with new ones. Displaced occupants stand to gain from a fresh 99-year lease of their new flats and are, in some cases, compensated financially or given subsidised prices for their new flats.)

    Related article: SDP proposes Non-Open Market flats

    This prompted the National Development Minister to step in and point out that SERS, as the name suggests, is selective – extremely selective, in fact – of blocks earmarked for redevelopment; only four percent have come under the scheme since it was launched in 1995.

    In addition, the Minister reminded, when the 99-year lease is up, a flat would have to be returned to the state. In other words, it becomes worthless.

    How does this square with Mr Goh Chok Tong’s vaunted promise to enhance one’s asset in return for voting for the PAP?

    A cynical ploy

    It was the height of irresponsibility to make a promise that the government is ill-equipped to deliver. For one thing, property prices are not determined by fiat. Much of it relies on the state of the economy. With an increasing number of workers being retrenched (or if they remain employed, having their wages frozen) and the young finding it more difficult to find jobs, how are Singaporeans going to afford bigger and more expensive flats or, for that matter, even their first one? And if they can’t, how is value of HDB property going to go up?

    With the global economy showing little appetite for the kind of exploitative trade seen over the past few decades, Singapore’s economic fortunes have dimmed considerably. The inexorable march of automation also means that more and more Singaporeans will be out of jobs, replaced by robots. Add to these China’s determination to by-pass Singapore (a staunch US ally) as a trading centre in order to secure its own shipping interests, our economic future looks shaky.

    In the face of such uncertainty, how is the PAP going to make good on its asset enhancement promise? It was, to begin with, unrealistic to expect prices to appreciate indefinitely. Yet, Mr Goh and company chose to ignore the pitfalls in a cynical bid to buttress its political hegemony.

    The policy also has ramifications at the macro level. With a significant portion of income tied up in property, consumer spending and other forms of domestic investment are necessarily curtailed. Investments in higher education or to start-up businesses are also reduced. All these have serious implications for our economy as we move ahead.

    In the final analysis, housing – in particular public housing – should not be a tradeable commodity. It is our home in which we bring up our children, that roof over our heads when ill-winds blow. It should never have been turned into a commercial entity.

    ​Therein lies Goh Chok Tong’s ultimate folly.

     

    Source:www.cheesoonjuan.com