Homepage
PR Newswire
I'm not sure what you guys are discussing at bottom. This is the modern financial world, not the 15th century.
When you hold $100 of cash, do you own a piece of paper, or a promise? Or do you own 25 bowls of Bak Chor Mee?
When you hold $100k of a 100 year bond, do you not call it an asset? Or do you call it a promissary note?
When you pay 250k for a HDB flat (let's call it an asset).
- have you ever encountered a landlord who rents something out to you for 99 years with a gauranteed rental?
- are you not able to re-sell the asset? Potentially for profit?
- are you not able to rent the right to live in the flat to another party? (rules permitting).
- are you not able to will the proceeds of the flat in your will to your family?
You can call it "rental" if you like. But that's mere semantics. What ever it is, you are able to treat it like an asset.
Even freehold is not "forever". It can be acquired by the government, or perhaps a war, or drastic change of government might take away that property. At most, a freehold holds up its price better (and that's why freehold have higher prices than leasehold anyway).
If you have the ability to sell it, to rent it out, or to leave it to your family in a will, it qualifies as an asset (albeit with time decay in option terms).
Let's do a thought experiment. Let's assume 999 years is effectively "forever". Let's say you "rent" for 20,000 per year for 49, 99 and 999 years respectively. Discount all cashflows at 3%. What is your PV in all 3 cases? It is, respectively 255k, 315k and 333k. The difference between the 99 and 999 year case is just 18k. The difference between the 49 and 99 year case is much greater at 60k. The differences become much less when the discount rate is larger. At 7%, your 99 and 999 year PVs are within $200 of each other!
In other words, paying up front for your "lease" is an inflation trade! your HDB flat is an inflation protected asset (balanced against time decay). In the past (when our economy was growing), when thousands of Singaporeans could buy a HDB, then trade up to a private property by selling the HDB at a higher price, they were (A) benefiting from the inflation trade and (B) obviously treating their HDB flat as an asset. So I guess whether you call it a rental or an asset depends on whether you benefited from rising HDB prices? LOL
For a baby boomer, I don't think you have a right to turn around and blame the government for this situation. You can only manage it. Even if you never obviously benefited from rising HDB values during the go-go years, you did sit in a housing asset that you paid for and did not have to rent at increasingly higher rentals. If you are new to the housing market, then buyer beware.
When you hold $100 of cash, do you own a piece of paper, or a promise? Or do you own 25 bowls of Bak Chor Mee?
When you hold $100k of a 100 year bond, do you not call it an asset? Or do you call it a promissary note?
When you pay 250k for a HDB flat (let's call it an asset).
- have you ever encountered a landlord who rents something out to you for 99 years with a gauranteed rental?
- are you not able to re-sell the asset? Potentially for profit?
- are you not able to rent the right to live in the flat to another party? (rules permitting).
- are you not able to will the proceeds of the flat in your will to your family?
You can call it "rental" if you like. But that's mere semantics. What ever it is, you are able to treat it like an asset.
Even freehold is not "forever". It can be acquired by the government, or perhaps a war, or drastic change of government might take away that property. At most, a freehold holds up its price better (and that's why freehold have higher prices than leasehold anyway).
If you have the ability to sell it, to rent it out, or to leave it to your family in a will, it qualifies as an asset (albeit with time decay in option terms).
Let's do a thought experiment. Let's assume 999 years is effectively "forever". Let's say you "rent" for 20,000 per year for 49, 99 and 999 years respectively. Discount all cashflows at 3%. What is your PV in all 3 cases? It is, respectively 255k, 315k and 333k. The difference between the 99 and 999 year case is just 18k. The difference between the 49 and 99 year case is much greater at 60k. The differences become much less when the discount rate is larger. At 7%, your 99 and 999 year PVs are within $200 of each other!
In other words, paying up front for your "lease" is an inflation trade! your HDB flat is an inflation protected asset (balanced against time decay). In the past (when our economy was growing), when thousands of Singaporeans could buy a HDB, then trade up to a private property by selling the HDB at a higher price, they were (A) benefiting from the inflation trade and (B) obviously treating their HDB flat as an asset. So I guess whether you call it a rental or an asset depends on whether you benefited from rising HDB prices? LOL
For a baby boomer, I don't think you have a right to turn around and blame the government for this situation. You can only manage it. Even if you never obviously benefited from rising HDB values during the go-go years, you did sit in a housing asset that you paid for and did not have to rent at increasingly higher rentals. If you are new to the housing market, then buyer beware.
