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

[pianist]

From what Mr Khaw commented (see below), can someone point out to me which part of his comments that he really confirms value of HDB flats will be zero at end of 99-year lease?

Mr Khaw said :-
"The Selective En bloc Redevelopment Scheme (SERS) is part of the Government’s estate renewal strategy for older estates. It allows intensification of land use and revitalises such estates through new developments. At the same time, it offers an opportunity for flat owners to buy a new replacement flat with a fresh 99 year lease.

In the last 10 years, SERS has benefitted the owners of about 18,000 flats. As the name suggests, the identification of suitable precincts for SERS is selective. The selection of sites and pace of SERS will depend on factors such as their redevelopment potential, and the availability of replacement sites for rehousing and other resources.

Currently, there are about 300 HDB blocks with 31,000 flats which are more than 40 years into their 99-year flat leases.

Like all leasehold properties, HDB flats will revert to HDB, the landowner, upon expiry of their leases. HDB will in turn surrender the land to the State."

so it a self-made theory made up by the writer who asked the minister?

[pianist]

I was looking at some mature estates (> 30 years), and can't find any that has a plot ratio < 2 on the URA plan. Correct me if I'm wrong, thx.

I think HDB estates plot ratios are all a min of 2.8 on the masterplan. This is regardless whether the estate is built up to that level of density. To identify these slackly built estates you have to manually identify them and do on the ground work. But in the past 15 years I think the govt has cleared out a lot of them.

Look at old master plans if u really want to know.
Can guess. GPR 2.8 types is what u see in Sengkang or new flats.
if u look at master plan, those flats will look like snowflake shape. Hahha
If want to buy SERS-able flats, look for those U shape blocks. Waste of
GFA. Point blocks are quite GFA efficient unless got big open space car parks.
Of course, better be near MRT or amenties. Govt won't SERS town fringe flats.

what do u mean by town fringe flats? punggol & sengkang?
what about city fringe say district 8? got chance?

[pianist]

if a 99 leasehold hdb flat costs 400k now, i have no idea what a freehold hdb flat will cost. But it will certainly cause more pain for young blokes getting their keys, hence causing more political/social problems.
From a national perspective, it is better to have people "own" their flats - it gives them a vested interest to defend the island.

using pte L99 vs pte FH as a reference, extra 10-20% premium only.

if just 20% premium only, I dun mind paying my spacious hdb flat into a freehold, the problem is do they have the heart to enable this 'truly home ownership' for the citizens?

[pianist]

the govt should consider converting all leasehold hdb flats into freehold flats..that will be truly called "home ownership" - the vision set by our mm lee, isn't it?

To steal a quote from an infamous ex minister, your idea is equivalent to raiding the nation reserves.

ya chenghu whatever they said is always rite cos they are chenghu and they are the law.
deep down - these all sounds like a grand plan financial engineering. get public lands (public consumption items) at a cheap and build at cost but lease out public housing (with high GPR & public consumption item) at market prices and now say zero value towards end of life.

[opmi]

Look at old master plans if u really want to know.

Unf, Master Plan 1958/1980 doesn't show plot ratio, while Master Plan 2003 shows pretty much the same plot ratios as 2008.
I agree with 'thefarside'. Think u can only get the info by doing the "ground work", unless u go for those super easy targets of 0.X plot ratio (aka HDB Terrace Houses).
Still, unless there's urgency in intensifying usage of a plot, the government can just let your lease run out. Low plot ratio + close to amenities might still not guarantee SERs, IMHO.

the older Master Plans have plot ratios. In term of people per hectare.
Of course, no guarantee for SERS. If look at HK, SG GPR can only goes up. It is cheaper to SERS near amenties than to build new infrastructure.

how to do "ground work" properly when u go there?
and is it cheaper to SERs near amenties than to build new infrastructure?
if govt build infrastructure at punggol, all are at cost with a bit of mark up..but sers at mature area involve tearing down the old flats and compensating the dwellers at market price

For example, one primary school PRIME upgrading already cost $20-30m. I guess new one will cost $40-60m. Thats fixed costs alone. New infrastructure more ex than tapping on SERS. Unless got scale like Punggol/Sengkang.

SERS covers the compensation by selling additional GFA to new buyers. Still profitable for HDB.

[opmi]

I was looking at some mature estates (> 30 years), and can't find any that has a plot ratio < 2 on the URA plan. Correct me if I'm wrong, thx.

I think HDB estates plot ratios are all a min of 2.8 on the masterplan. This is regardless whether the estate is built up to that level of density. To identify these slackly built estates you have to manually identify them and do on the ground work. But in the past 15 years I think the govt has cleared out a lot of them.

Look at old master plans if u really want to know.
Can guess. GPR 2.8 types is what u see in Sengkang or new flats.
if u look at master plan, those flats will look like snowflake shape. Hahha
If want to buy SERS-able flats, look for those U shape blocks. Waste of
GFA. Point blocks are quite GFA efficient unless got big open space car parks.
Of course, better be near MRT or amenties. Govt won't SERS town fringe flats.

what do u mean by town fringe flats? punggol & sengkang?
what about city fringe say district 8? got chance?

HDB New Town fringe. Away from Town central and MRT.

[Temperament]

if a 99 leasehold hdb flat costs 400k now, i have no idea what a freehold hdb flat will cost. But it will certainly cause more pain for young blokes getting their keys, hence causing more political/social problems.
From a national perspective, it is better to have people "own" their flats - it gives them a vested interest to defend the island.

using pte L99 vs pte FH as a reference, extra 10-20% premium only.

if just 20% premium only, I dun mind paying my spacious hdb flat into a freehold, the problem is do they have the heart to enable this 'truly home ownership' for the citizens?

Never! How to make you work for me (G) for your whole life if you do not need to pay the HDB mortgage for life? And what about the next , next Generations? We are the "Elites" and we want to be the "ELITES" for our own GEN to GEN.
But too bad no dynasty last forever as far as History is concerned.
Sorry! If you think i am at the extreme end of the market, i am lol!
This is only my opinion only.

[kbl]

Your HDB Flat Is No Longer the Asset You Think It Is


Since 2008, HDB flat owners have been enjoying steadily rising resale and Cash-over-Valuation (COV) prices. To look at a graph of the rise and fall of resale prices is to be reminded of the tracks of a roller coaster. No, I’m not talking about some “kiddie coaster” like the Shrek ride at Universal Studios Singapore – I’m talking about one of those coasters with a huge incline that’s both terrifying and exhilarating to ride on.

That was until the second quarter of 2013, when resale values suddenly began to fall rapidly. That’s the bad thing about roller coasters. Once you reach the peak, you’re left with is a horrifying drop that you can’t avoid – all you can do is go along for the ride.


Why You Shouldn’t Get Your Hopes Up About Using Your HDB Flat as an Asset
“Big deal, prices rise and fall, that’s completely normal!” some say. Surely we’ll eventually see prices rise up again so we can ride the roller coaster once more right? Well, not exactly. In the past, you could have expected prices to go up and down according to the market.

But things are different now, because of government intervention.

The reality is that government intervention is what’s keeping HDB property prices from becoming even more unaffordable than they already are. Think about it – according to the HDB resale price index, the value of resale flats increased by over 175% from Q1 1992 to Q1 2013!

That was until the government took the following actions:

Implemented Cooling Measures: The first few rounds of cooling measures didn’t seem to have much impact on resale prices. But once the government got serious and reduced the Mortgage Servicing Ratio (MSR), loan tenures, and restricted PRs from buying for 3 years – that pretty much did the trick.
Commenced Building New Flats: HDB released a record number of flats in 2013. In fact, according to the Minister of National Development, over the next three years we’ll see about 80K new flats being completed.
Long story short – after releasing 8 rounds of cooling measures and a deluge of BTO flats, MAS finally brought down skyrocketing HDB resale prices in 2013 the same way a .450 Nitro Express bullet brings down a charging rhino.

The proof can be seen in falling resale flat prices, which dropped almost 2% in the second half of 2013 and is expected to decrease by as much as 10%. Also, the median COV price has dropped by over 85% over the last 4 years, and continues to drop.



What Can You Expect In The Future?
In trying to make property “more affordable” for the average Singaporean, the government also created a painful Catch-22 situation for HDB flat owners. That situation is this – HDB owners now have to start dealing with the reality that their flat is no longer an asset; now it’s just public housing, with a value that’s no longer controlled by the market, but the government.
Changing the perception of HDB flats from a money making asset to a living space that you and your descendents can inhabit for 99 years will be a painful process. But the reality comes down to these important points:

HDB flats started out as “affordable public housing,” in the 1960s, turned into VERY profitable asset over the span of a few decades, and now the government wants to make them “affordable” again.
You don’t own your HDB flat, you’re only leasing it.
Your flat’s value ultimately becomes $0 at the end of your 99-year lease, because HDB flats all eventually return to their true owner – HDB.
But you don’t have to take my word for it. Worker’s Party MP Gerald Giam learned that tough truth from the Minister of National Development in an interview posted on his blog.

Sure, you’ll have outliers like the $1 Million dollar Bishan flat. But for the most part, HDB flats will rise and fall based off the government periodically tightening home buying restrictions when values get too high, and loosening them so prices go up just enough to make you forget about any decrease in your flat’s resale value. Then, the cycle will repeat itself ad infinitum. Almost sounds like a form of torture doesn’t it?

http://sg.finance.yahoo.com/news/hdb-fla...00570.html

[Temperament]

Your HDB Flat Is No Longer the Asset You Think It Is


Since 2008, HDB flat owners have been enjoying steadily rising resale and Cash-over-Valuation (COV) prices. To look at a graph of the rise and fall of resale prices is to be reminded of the tracks of a roller coaster. No, I’m not talking about some “kiddie coaster” like the Shrek ride at Universal Studios Singapore – I’m talking about one of those coasters with a huge incline that’s both terrifying and exhilarating to ride on.

That was until the second quarter of 2013, when resale values suddenly began to fall rapidly. That’s the bad thing about roller coasters. Once you reach the peak, you’re left with is a horrifying drop that you can’t avoid – all you can do is go along for the ride.


Why You Shouldn’t Get Your Hopes Up About Using Your HDB Flat as an Asset
“Big deal, prices rise and fall, that’s completely normal!” some say. Surely we’ll eventually see prices rise up again so we can ride the roller coaster once more right? Well, not exactly. In the past, you could have expected prices to go up and down according to the market.

But things are different now, because of government intervention.

The reality is that government intervention is what’s keeping HDB property prices from becoming even more unaffordable than they already are. Think about it – according to the HDB resale price index, the value of resale flats increased by over 175% from Q1 1992 to Q1 2013!

That was until the government took the following actions:

Implemented Cooling Measures: The first few rounds of cooling measures didn’t seem to have much impact on resale prices. But once the government got serious and reduced the Mortgage Servicing Ratio (MSR), loan tenures, and restricted PRs from buying for 3 years – that pretty much did the trick.
Commenced Building New Flats: HDB released a record number of flats in 2013. In fact, according to the Minister of National Development, over the next three years we’ll see about 80K new flats being completed.
Long story short – after releasing 8 rounds of cooling measures and a deluge of BTO flats, MAS finally brought down skyrocketing HDB resale prices in 2013 the same way a .450 Nitro Express bullet brings down a charging rhino.

The proof can be seen in falling resale flat prices, which dropped almost 2% in the second half of 2013 and is expected to decrease by as much as 10%. Also, the median COV price has dropped by over 85% over the last 4 years, and continues to drop.



What Can You Expect In The Future?
In trying to make property “more affordable” for the average Singaporean, the government also created a painful Catch-22 situation for HDB flat owners. That situation is this – HDB owners now have to start dealing with the reality that their flat is no longer an asset; now it’s just public housing, with a value that’s no longer controlled by the market, but the government.
Changing the perception of HDB flats from a money making asset to a living space that you and your descendents can inhabit for 99 years will be a painful process. But the reality comes down to these important points:

HDB flats started out as “affordable public housing,” in the 1960s, turned into VERY profitable asset over the span of a few decades, and now the government wants to make them “affordable” again.
You don’t own your HDB flat, you’re only leasing it.
Your flat’s value ultimately becomes $0 at the end of your 99-year lease, because HDB flats all eventually return to their true owner – HDB.
But you don’t have to take my word for it. Worker’s Party MP Gerald Giam learned that tough truth from the Minister of National Development in an interview posted on his blog.

Sure, you’ll have outliers like the $1 Million dollar Bishan flat. But for the most part, HDB flats will rise and fall based off the government periodically tightening home buying restrictions when values get too high, and loosening them so prices go up just enough to make you forget about any decrease in your flat’s resale value. Then, the cycle will repeat itself ad infinitum. Almost sounds like a form of torture doesn’t it?

http://sg.finance.yahoo.com/news/hdb-fla...00570.html

Singapore has to be Governed like that (See-Saw or Roller Coaster policies) because every 5 years there is a "GE". How nice if there is no more "GE" then prices can keep on going up up lol.

[specuvestor]

I disagree with the sensationalisation of this issue as it is very clear what L99 is. HDB didn't misrep. What Khaw stated was simply a matter of fact

What is simply a matter of opinion is the man on the street perception of this "prepaid expense" based on positive reinforcements in the past. Many of our parents became well to do from housing. Reality is people are willing to pay higher for the "prepaid expense" as cost of living rises, and of course coupled with speculation on how high it will cost in future. Issue I have is that government did not publicly correct this incorrect perception of wealth effect which as I described below can last for decades.

From accountant's point of view this is an asset. From policy maker and finance point of view it is an expense

This should be a warning to the PRs who are "investing" in HDB for rental/capital appreciation. Many bought with the idea that the HDB prices will never fall.

Man on the street thinks long term HDB prices will never fall.

I've posted this before: if u assume some 4% nominal appreciation annual, you will see prices start to stagnate around 60-70 years old and decline thereafter. We don't have flats that old YET.

So the key is whether govt will allow HDB flats to enter a structural declining phase. This will have huge impact on the population psyche and perception. Serious implications for the property market and political environment. A way to avoid the paradigmn shock is of course HDB to recover flats that are more than 60 years ago via SERS or otherwise.

But on a policy point of view, 99 years make a lot of sense. It provides for renewal of landscape.