Rilek1Corner

Tag: 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

  • Commentray: Help Madrasah Al Arabiah, Lease The Premise Of The Abandoned JCs

    Commentray: Help Madrasah Al Arabiah, Lease The Premise Of The Abandoned JCs

    In that case, i would like to suggest that MUIS and Madrasah Al Arabiah request that they be allowed to lease the premise of one of these abandoned JCs instead of wasting public money to build a new building for Madrasah Al Arabiah on a limited leasehold arrangement. For all the monies that the Government have spent on SAP schools, this should be a reasonable request to make on behalf of the Malay community. At last a Madrasah can have a full facility educational building which for many years the students of Madrasah could not enjoy. Thank you in advance. – from a concerned parent of Madrasah Al-Arabiah.

     

    Rilek1Corner

    Credit: Damanhuri Bin Abas

  • 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

  • Lenders Bypassing Car Loan Curbs

    Lenders Bypassing Car Loan Curbs

    The motor industry has found ways to get around car loan curbs – a development that is keeping vehicle demand and certificate of entitlement prices buoyant.

    Checks revealed that used car dealers, parallel importers and credit companies offer financing that is effectively 80 per cent to 90 per cent of a car’s purchase price, with repayment of up to 10 years.

    This exceeds the Monetary Authority of Singapore’s (MAS) 2013 curb, which restricts loan quantums to not more than 60 per cent of the purchase price and a repayment period of up to five years.

    The curb is breached by offering one or more of the following:

    • Overtrade – a practice of offering a buyer substantially more for his trade-in vehicle. This is practised mostly by authorised agents.

    • Disguised leases – in a lease agreement, the car is registered under the lessor’s name, and the monthly rental is substantially higher than instalments in a hire-purchase. But dealers are readily offering “leases” that allow the car to be registered under the end-user’s name and with relatively low monthly payments via a buyback offset.

    • Invoice inflation – if a car costs $170,000, the seller will inflate it to, say, $270,000, so as to secure an 80 per cent loan from the bank.

    • Balloon scheme – a seller subtracts the car’s scrap value from the instalment calculation, resulting in lower monthly payments. At the fifth year, the consumer “scraps” the car to settle the outstanding amount, or refinances the car.

    All the schemes come with higher interest rates, but consumers who cannot afford to fork out a hefty down payment under the MAS ruling have been snapping them up.

    An MAS spokesman said: “As part of MAS’ supervision of financial institutions (FIs), we check on their compliance with the rules. If an FI breaches the rules, MAS will not hesitate to take regulatory action.”

    The MAS, however, would not say if any lender has actually been taken to task for any of these schemes. It added that it expects lenders “to take reasonable steps to ascertain the veracity of the purchase prices of cars quoted in loan applications”.

    Mr Ron Lim, general manager of Nissan agent Tan Chong Motor, said the various schemes that bypass the loan curb show that “there is a lot of grey areas”.

    “We hope MAS can enforce it better,” he added. “Then we can have a more level playing field.”

    A businessman who bought a used Bentley Flying Spur recently told The Straits Times that the invoice for the car – which was selling for $400,000 – was inflated to $700,000. Mr Y.Z. Liu, 66, said: “It was blatant cheating. If the car was indeed $700,000, then the first owner should be compensated.”

    Mr Michael Lim, president of the Singapore Vehicle Traders Association, said the association of used car dealers and parallel importers has been appealing to the Finance Ministry for the loan limit to be raised.

    He played down the high financing deals and said: “Most of these are rental and leasing packages.”

    However, classified ads in The Straits Times and car portal sgCarMart are rife with offers of “low down payment”, “80 per cent loan” and repayment over 10 years.

    One credit company, Century Tokyo Leasing, has been advertising a balloon scheme that promises a monthly instalment of about $800 for a Honda Vezel – nearly 40 per cent lower than the $1,250 required for a normal hire-purchase deal.

    Mr Anthony Lim, a veteran car financier, said: “These companies are flush with foreign funds and they are eager to do business here. But… if a loan contract is in breach of the law, it is not binding. So the lender may have no recourse if the borrower decides to stop paying.”

     

    Source: www.straitstimes.com

  • Problems With Increasing Housing Grants

    Problems With Increasing Housing Grants

    I disagree with the calls to increase the Higher-Tier Central Provident Fund Housing Grant for young couples who wish to buy a resale flat in mature estates so as to live close to their parents (“Buy resale flat near parents? Financial help is key: Experts”; last Tuesday).

    There are problems with increasing the grant.

    First, it could lead to a mentality among the younger generation that living close to their parents is an entitlement, and if they cannot live near them, then that is an excuse to not look after them.

    Second, raising the grant would lead to an increase in property prices in mature estates, and could trigger a vicious circle where the Government constantly has to raise the grant for young couples as the property prices in mature estates keep rising.

    A better idea would be to give the seniors incentives – not limited to monetary ones – to move out of mature estates to live near their married children in new estates.

    When elderly couples move out of mature estates, it increases the supply of resale flats available in these estates, thus lowering the asking price of these units and making it more affordable for young couples who wish to live there.

    Ultimately, young couples should not be encouraged to buy a flat in a mature estate where decades of the lease have already expired.

    Singapore will face a major challenge in future when there are too many couples outliving their property lease because they bought a property with a shorter remaining lease.

    Chan Yeow Chuan

     

    Source: www.straitstimes.com