KHAW CONFIRMS VALUE OF HDB FLATS WILL BE ZERO AT END OF 99-YEAR LEASE

[BRT]

http://www.todayonline.com/world/hks-new...s522k-each

"""
HONG KONG — A real estate developer offering nano-sized flats in Mong Kok sold all the units on offer in one day despite the parking-space-sized apartments costing around HK$3 million (S$522,400), in another sign of their growing popularity.
...
After factoring in a discount of 9 per cent, the price will come down to HK$17,788 per sq ft (psf), or HK$2.79 million — the cheapest flat offered in the project.
"""

That's ~3k SGD psf.

[cif5000]

I thought this is a good summary.
https://lkyspp.nus.edu.sg/wp-content/upl...gapore.pdf

Agree with tanjm that the use of CPF was a key policy - first by allowing it for HDB and then for private housing.

However, "over consuming housing at the expense of retirement savings" isn't the real issue here since public housing can be monetised for retirement. The real issue here is the uncertainty of the monetisation dateline if the value will be zero at Year 99. Like in a bubble, when should one leave the party?

Monetisation is not that easy. Reverse Mortages and LBS (Lease Buyback Scheme) is not popular at all. In fact, both NTUC Income and OCBC, which offered reverse mortgages, stopped offering it in about 2009 I think. 

It's not that popular in other countries either. 

The problem is that RMs have 3 key risks. Property Price risk, interest rate risk, and longevity risk. This makes it a problem for a ordinary person to feel certain about borrowing money on the home he lives in. 

Now that Singapore's economy is slowing down, house inflation is going to be subdued. As I mentioned before, housing is an inflation trade. New prospective house buyers should probably think about renting or buying smaller to save money. In the past, when house inflation was higher, it may have made sense esp when using CPF money to pay for it.

Monetisation can simply be selling the flat in the open market and preferably before the price falls off the cliff at 12 midnight. The tough part is not in the selling, but at the time they sell.

[tanjm]

Monetisation can simply be selling the flat in the open market and preferably before the price falls off the cliff at 12 midnight. The tough part is not in the selling, but at the time they sell.

You might think so, but plenty of people prefer to "age in place". I will dig up a reference if required, but think about your friends and family. Does this not make sense? The community lurking in this forum are not representative.

They may only consider this only as a last resort, and by that time, they may have lost control over getting the best price for their flat, avoiding the stress from financial inadequacy (because a flat takes time to sell).

[CY09]

Hi cif5000,

Your comments just reminds me of another phrase in an article linked by another VB member:

"Those who leave early are saved, but the ball is so splendid no one wants to leave while there is still time. So everybody keeps asking - what time is it? But none of the clocks have hands."

The housing scene in Singapore might be an epitome of this

[funman168]

SGP ppty is still in the early stages. It is this type of mindset that make most keep missing chance after chance, until finally they cannot take it and take the plunge.

[funman168]

Most stock investors including gurus are actually quite lousy ppty investors. Better get ppty advice from the right channels

[CY09]

The recent enbloc trend got me thinking about the property process in Singapore. I notice whenever Enbloc happens, a fresh top up to a 99 year lease happens. This got me thinking of a scenario:

A couple buys a 99 year private 4 rm condo for $1 million. After staying for 50 years and following our Sg Govt's valuation of leasehold, the condo is worth 75.7% of its market price ($757,000), assuming no inflation happened during these 50 years. Should the gross plot ratio of their plot intensify or there are ways to improve the GFA of the project, developers would swoop in to enbloc.In a no inflation environment, developers would normally pay the couple about $500,000 (to offset their demolition/development cost) and pay the government $243,000 for a fresh top up. This means to a couple, they lose $500,000 for staying 50 years at a private condo.

However should we factor in appreciation in housing prices at an annual compound rate of 1.0%; 50 years from now, the couple's condo value will be: $1 milllion x 1.64 (future value after 50 years) x 0.757 = $1.24mil. Factoring in demolition and development cost, property developers may pay the couple only about $820,000 to $850,000 in an enbloc exercise. Hence to the couple who had purchased the private property, they would lose about $150,000 as cost for living 50 years in the condo. Is 1% per annum appreciation in housing prices justifiable? To me, it is; because we have to consider the power of inflation.

On the contrary, if a couple buys a 4rm HDB BTO flat at maybe $400,000, the only chance of them getting an "enbloc profit"is through SERS. In the event, that they stay till the end of the lease due to no SERS. The couple loses their entire $400,000.

Any opinions if this is a policy gap?

[brattzz]

CY09,

I would think we have not reached any hdb lease 99yrs run down yet... so we are not so sure what the gov will actually DO! of cos they will say, "NO" to ALL en-bloc anyhow...

as part of a country renewal, buildings that are 99yrs old, are usually old, too expensive to maintain, and fallen out of the new building codes in terms of safety and technological features (green/lean/mean..etc..)

housing is a continuous process in city state singapore, in other parts of the world, u can stay in your US$5k (1945's prices) attap house from birth till death... malaysia is one of the country which are afford the rural areas to do soo... however, land prices are revised annually, so prices DO go up from time to time, maybe just slower than city state singapore!

[yeokiwi]

A couple buys a 99 year private 4 rm condo for $1 million.

On the contrary, if a couple buys a 4rm HDB BTO flat at maybe $400,000

The $600k difference between the two properties is already a significant advantage to the HDB couple in financial planning.
Of course, the general perception is that the condo couple trades their $$$ with a higher quality of life.

And, assume the HDB couple bought the unit within a neighbourhood of a few thousand units having their leases expiring around the same time, it really needs lots of political will not to perform any enbloc or lease top up options to the residents.

Since 70 or 80 storeys flats are likely the norm in the next 20-30 years, the cost of enbloc is not really that high since the land cost has been taken out of the cost equation. The resident merely trades their unit for a likely smaller unit with an even smaller effective strata land area.

Tanglin halt SERS includes 3840 units and assume that there is an average of 2 votes per unit, the total no. of election votes = 7680. Since LKY is gone, a swing of 7680 votes is not trivial.

https://www.99.co/blog/singapore/sers-tanglin-halt/

It is better to raid the reserve than to antagonise the HDB folks.

For the 99 yrs condo folks, their fates will lie in the revision of the gross plot ratio or plot usage. Without it, I doubt the developers can turn on any magic if the HDB is still around.

[corydorus]

Considering more than 80% of the population stays in HDB, 60F/70F to make financial sense for enblock needs alot more people to support the higher plot ratio.This not going to work without population increase to share the cost.