Length of loan is not the issue: Mah Bow Tan

[WolfT]

The song best describe MBT and his policy
http://www.youtube.com/watch?v=_TNC7vNHl...r_embedded

[Blackjack]

You certainly own something - because you can sell it. Whether you call it owning the home or owning the lease is a matter of terminology in today's world.

30 year mortages are common in the US and elsewhere. It is not unique to Singapore. In some places in Europe and Japan, it gets even worse. People are just hungry for property ownership (or lease ownership if you prefer) and do not necessarily want to do the sums that lets them choose a house appropriate for their income level and accounting for interest rate risk.

I certainly will not choose to call it home ownership. Home Ownership and lease ownership are vastly dissimilar. Unlike the former, I have no liberty to modify, rent or mortgage it without requiring some approvals one way or another. I have no say over what enhancements or installations that might take place within my home, or even around it. I definitely have no say in demolishing my house if one day I suddenly do not like the sight of it, or decide to do some "major enhancements". To call bluff by saying I have real, practical ownership simply because I can sell it is ridiculous, no offence intended. The only ownership I have is over the bills and repairs that I need to make. In the same manner, if we cannot define this as real ownership, then it already invalidates the entire exercise of even trying to compare home ownership rate across countries.

My stand towards public housing policy is that it cannot be constituted as a revenue making machine. This contradicts the whole spirit of social policy making. If I draw a simple analogy to how I perceive the existing housing climate, it is like a contractual lease thinly veiled as "ownership", where a tenant is forced to accept "enhancements" to the existing lease so as to have an artifical impression of feeling asset-richer. Since basic housing is a requirement and not an encashable asset, the whole argument of selling it at a profit is invalidated as well. One would still need to buy another at the same prevailing marked-up prices.

Btw, there is also an "accrued interest" to be restituted when one sells his HDB flat. This interest is the "interest that one would have earned IF the money was left inside the CPF account." 'Brilliant' way of forced savings eh?

[tanjm]

Even if you own a freehold condo, you also have limited rights to enhancements or installations in your home. Or even to demolish it. This is related to living in an apartment building, whether HDB or private.

So if you sell your HDB at a profit, you are going to give the money back to the Government?

[Nick]

The price of the HDB flat is merely a reflection of the cost of 'leasing' the flat till the expiry date of the lease. Subsequently, sale and purchase agreements reflects this. When you sell your flat, you are trading this 99 year leasing contract (and not the home). You are the owner of this contract. You are not the owner of the flat. If you choose to keep the flat, once the lease expires, your contract becomes worthless and you cease to be the owner of anything.

This is how I understand leasehold properties. Industrial REITs also have very short lease life-span hence the higher yield. Not to certain whether we can top up the lease ?

Please correct me if I am wrong.

(Not Vested in any Political Parties)

[tanjm]

My stand towards public housing policy is that it cannot be constituted as a revenue making machine.

The government acquired the land cheaply - that is true. This land can be construed as belonging to all Singaporeans. If you sell new HDB flats, you are only benefiting those who queue up for the flats. People who do not or can not buy new HDB flats are basically subsidizing those who do.

I don't know if you remember this or not, but in the early to mid 1990s, the queue for new HDB flats was very long. Whether or not you needed the flat, you queued up to get a bite of the cherry. I know of people who bought new HDB flats but continued to say with parents, just waiting for the 5 year waiting period to be up, sell off and make a profit. Not to mention the people who bought Pinnacle flats (huat ah!) and just round the corner from where I live there HDB built new flats in old airport road (very little activity - doesn't seem like people really living there).

---

The price of the HDB flat is merely a reflection of the cost of 'leasing' the flat till the expiry date of the lease. Subsequently, sale and purchase agreements reflects this. When you sell your flat, you are trading this 99 year leasing contract (and not the home). You are the owner of this contract. You are not the owner of the flat. If you choose to keep the flat, once the lease expires, your contract becomes worthless and you cease to be the owner of anything.

This is how I understand leasehold properties. Industrial REITs also have very short lease life-span hence the higher yield. Not to certain whether we can top up the lease ?

Please correct me if I am wrong.

(Not Vested in any Political Parties)

In today's world, you should be able to understand just because its a contract/piece of paper, it doesn't mean its not a real asset. If you can buy/sell it at a profit, its an asset.

To take it to its logical extreme, paper/electronic money cannot be an asset. It is after all an IOU by a government.

PS. Not vested in any political parties either.

[Nick]

I never said leasehold land (or BOT projects) are not assets.

I said that we only own the right to use the land (or home, water plant, highway etc) for a very specified period of time.

The SPA deals with this 'right'. The valuation deals with this 'right'. Is it possible to make a profit from such deals - obviously yes or else companies wouldn't be buying leasehold land to build their plants or investing in BOT projects for the stable cash-flow.

With regard to HDB flats, I feel ultimately, this is merely semantics. No one is going to live past 99 years after buying it so it doesn't really matter. Home owners or flat lessors - does it really matter ? We are still staying it for a very long period of time (and possibly till our death) if we don't move out. What happens after that is immaterial haha.

Clarifications from more senior forummers will be helpful. I am not well versed with property law/investment haha !

[Jared Seah]

For couples and singles who die die must get a HDB unit to stay this year (private properties out of question due to affordability), I've written a light-hearted post to put things in practicial perspective:

http://singaporemanofleisure.blogspot.co...dable.html

[Jared Seah]

Hello,

I've written a follow-up on my above post to shed more light on why I think it's OK to stretch our HBD loans to 30 years - from my personal experience:

http://singaporemanofleisure.blogspot.co...on-my.html

But that only works for me for my own circumstance. It's not an inducement to follow. Just for sharing.

[snowcap]

Perverse Logic!

Length of loan is not the issue: Mah Bow Tan
by Ansley Ng
04:46 AM May 01, 2011

It is not the length of the loan but the percentage of monthly income repayable to the housing loan that matters, said Minister for National Development Mah Bow Tan in response to an Opposition point that paying for a HDB flat on a 30-year loan makes it unaffordable.

The length of the loan varies and is up to the home buyer, Mr Mah said. They are free to take up 30-year loans, or even 25- or 20-year loans, he added.

To ensure that the length of the tenure, the interest rates and loan repayment are within the means of young people to buy their flats, his guidance to the HDB "is usually 30 to 35 per cent (of monthly income)".

For a 30-year loan, the instalment payment is about 25 per cent of monthly income, depending on the type of house, Mr Mah said.

"But if people are not happy with the 30-year loan for whatever reason, they can always take a smaller loan," said Mr Mah, speaking to reporters during a walkabout at the Tampines Round Market yesterday.

Calling it "election rhetoric", Mr Mah said the Opposition always warned people about getting "stuck for 30 years".

But a longer loan actually helps people to pay less, he added.

"Most people who do that, for cash flow reasons (and) never really go the whole 30 years. After 10 years, 15 years, they sell off, and that's it. They make a profit ... keep the profit, and then they use that to upgrade." Ansley Ng

What a difference 17 months and a new Minister MND makes!

[Temperament]

Of course Length of loan is not the issue: Mah Bow Tan
by Ansley Ng
Of course, if the price of a 3RM HDB reach $1,000,000.00 then 2 or 3 generations to service the loan is not an issue. PAPYs just allow the length of loan to stretch to the next generation.....next generation.....
What's the matter with you people? Can't you think like me, a genius, says MR. Horse. Don't horse around with me O. K. i am a $Millionaire paid minister with $millionaire brains. That's me.