The rise of the public flat as an asset

Janice HengThe Straits TimesWednesday, Apr 02, 2014SINGAPORE - Public housing in some countries often takes the form of rental homes for the less well-off, such as Britain's council estates or "the projects" in the United States. Although owning such property is an option, it is not seen as the default there - unlike in Singapore. Singapore's model of home ownership allows people to buy such property as an investment which they can sell or let out. As well as being an option for those on low incomes, the public flat here is also seen as a source of income too. Yet it was not always thus. The public flat's role as an asset is one that emerged gradually. When the Housing and Development Board (HDB) was set up in 1960, its role was to provide basic permanent housing for people previously living in slums and squatter settlements. Initially, rental housing was provided but within half a decade, the HDB moved to encourage home ownership instead. Having a nation of home owners, rather than tenants, opened up more possibilities. In 1971, public flats were allowed to be resold for the first time. Previously, they could only be sold back to the HDB at fixed prices. A resale market was created and, as property prices rose, selling one's HDB flat at a profit became a possibility. Another avenue for income opened up in 2003, when HDB home owners were allowed to sublet their whole flat. Residents could upgrade to private property while letting out their HDB flat for additional income. Previously, subletting was allowed only under special circumstances, or for those aged at least 65 who had lived in three-room or smaller flats for at least 25 years. Schemes have also been set up to let elderly flat owners tap the value of their homes for retirement income. Introduced in 2009, the Lease Buyback Scheme allows people over 63 to sell part of their flat's lease back to the HDB. The proceeds go towards topping up the owners' Central Provident Fund Retirement Accounts, with any excess up to $100,000 being paid to them in cash. The Government has made it clear that its top priority is providing homes. But the role of the public flat as an asset is inescapable. As Prime Minister Lee Hsien Loong put it in last year's National Day Rally speech: "The HDB programme is not just about the roof over our heads. It is also a valuable nest egg." Get a copy of The Straits Times or go to straitstimes.com for more stories. - See more at: http://business.asiaone.com/news/the-ris...d2nq0.dpuf

This is exactly how most of us make it.

First, we chop a new HDB flat.
When the flat is ready, we get married.
After staying for five years, we buy a private property and then rent out the flat.

A second possibility nowadays is thru EC.
First, you book a EC.
When the EC is ready, you get married.
After staying for five years, you got a condo.

Love Compassion

ya is a no brainer to get a such public housing as a first step, plus bank/hdb loans is so cheap cheap

if the govt is sincere to truly achieve its home ownership for its citizens, I think is timely to let people have a choice to convert leasehold to a freehold/999 leasehold flat.

(02-04-2014, 08:59 AM)chialc88 Wrote: This is exactly how most of us make it.

First, we chop a new HDB flat.
When the flat is ready, we get married.
After staying for five years, we buy a private property and then rent out the flat.

Love Compassion

I think this strategy has been overused. I think "tragedy of the commons" situation will kick in when more condos TOP over 2 next years.

opmi,
Definitely. I am quite sure you benefited from this too.
(directly or indirectly)

For us, we had jumped over...
Now, it's just the next generation...
Whether they have the right attitude and mindset to be resilience...

Lets pray for them...

Love Compassion


A Life not Reflected is a Life not Worth Living.

(02-04-2014, 09:23 AM)chialc88 Wrote: opmi,
Definitely. I am quite sure you benefited from this too.
(directly or indirectly)

For us, we had jumped over...
Now, it's just the next generation...
Whether they have the right attitude and mindset to be resilience...

Lets pray for them...

Love Compassion


A Life not Reflected is a Life not Worth Living.

Yes. Hope that the young (aka fresh meat) is wise enough NOT to play an overplayed strategy. They are the ones that dont have the savings or capital gains (not the parents') to buffer any mistakes.

(02-04-2014, 09:39 AM)opmi Wrote: They ... dont have the savings or capital gains (not the parents') to buffer any mistakes.

Ya law.
Have you heard about Kelly Clarkson song?
What ever don't kill you make you stronger!

This is how I thought we wanted our youth to be resilience.
Teaching is really a rewarding job. Love it!

Love Compassion

(02-04-2014, 09:50 AM)chialc88 Wrote:

(02-04-2014, 09:39 AM)opmi Wrote: They ... dont have the savings or capital gains (not the parents') to buffer any mistakes.

Ya law.
Have you heard about Kelly Clarkson song?
What ever don't kill you make you stronger!

This is how I thought we wanted our youth to be resilience.
Teaching is really a rewarding job. Love it!

Love Compassion

No one has the enough youth to make all mistakes on their own. 10-20 years of financial burden due to 1 property mistake is avoidable.

Since the government has boldly declared HDB to be a nest egg, I will be very interested to find out how they intend to deal with the older flats.

The oldest flats right now have remaining lease of 60-70 years. Going forward the depreciation is expected to accelerate. For the resale buyer who cleans out his CPF, I think that not only will he not get a satisfactory return on his money, he is likely to lose a significant amount too. Retirement will be very tough.

(02-04-2014, 10:48 AM)grubb Wrote: Since the government has boldly declared HDB to be a nest egg, I will be very interested to find out how they intend to deal with the older flats.

The oldest flats right now have remaining lease of 60-70 years. Going forward the depreciation is expected to accelerate. For the resale buyer who cleans out his CPF, I think that not only will he not get a satisfactory return on his money, he is likely to lose a significant amount too. Retirement will be very tough.

Govt already has in place policy to ensure people dont outlive their property tenure for CPF mortgage payment. Especially the younger one. See calculator below.

http://www.cpf.gov.sg/cpf_info/Calculato...P_Calc.asp

In a few years time, older L99 condos will see lesser buyers using CPF due to this limit.