We Need to Resolve the HDB 99-Year Lease Problem. Here’s How.

Singaporeans have been concerned about the recent announcement by Minister for National Development Lawrence Wong that the value of older HDB flats will decline and, eventually, be worth nothing at the end of their 99-year lease.

HDB owners go into heavy debt and spend their retirement savings paying off this debt only to find that their flats decrease in value and have to be returned to the government at the end of the lease.

This doesn’t make sense.

To overcome this problem, the SDP has proposed the Non-Open Market (NOM) scheme for flats. Under this scheme, HDB will base flat prices solely on labour, materials and administrative costs. They will not contain a land cost component as State land does not cost the government any money.

Currently, the HDB factors in the cost of land which jacks up the prices of the flats making them unaffordable for Singaporeans.

Excluding the cost of State land will substantially reduce prices for HDB flats. We estimate that the prices for NOM flats will be effectively halved or more, ranging from $70,000 for 2-room flats to $240,000 for 5-room ones.

But as the name suggests, NOM flats may not be sold on the open market. Owners wanting to sell their flats will have to sell them back to the HDB at a price that will be the original purchase price less the consumed lease.

Current HDB owners will have the option of converting their flats to NOM ones. When they do this, the government will refund the amount of money based on the original purchase price from the HDB and the price of the same type of NOM flat, subject to a cap.

The difference between the current system and the SDP’s NOM scheme is that Singaporeans won’t have to spend so much of their CPF savings and income to buy their homes. This will leave them enough funds for retirement and other pursuits.

Buyers who choose to stay with the current system can continue to buy and sell their flats on the open market. They are, however, subject to the vagaries of the market and face the prospect of depleting their retirement funds by buying hugely over-priced flats.

Experts have reacted positively to the SDP’s proposal (see here, here, and here).

The current system ties up the people’s wealth in government property which, ultimately, becomes zero in value. It increases debt while reducing consumer spending and investment. This is not good for the overall economy.

The SDP believes that housing, in particular public housing, should not be a tradeable commodity. Our flats are our homes where our loved ones live in security and comfort, not profit-making ventures. The NOM scheme is consistent with this principle.

More important, it frees Singaporeans from the crushing debt burden and overcomes the unthinkable problem that our expensive flats for which we spend a lifetime paying become worthless at the end of 99 years.

For more information on this subject, please read our alternative housing policy Housing A Nation: Holistic Policies for Affordable Homes here.

Singapore Democrats

 

 

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24 Responses to “We Need to Resolve the HDB 99-Year Lease Problem. Here’s How.”

  • ST won't pub.this brillia.idea:

    Now, why does ST and the msm not publish this brilliant NOM idea of the SDP?

    Because they don’t want to give credit to the SDP? Or because they are not able to find a devious way yet to take credit for it usurping the idea of the SDP? Trademark practices of the PAP, whichever the two may be.

    Alas, the troubling part for Sinkies is that the PAP have touted so earnestly Goh Chok Tong’s simpleton get-rich-quick Asset Enhancement brainless formula that fooled a whole generation of brainwashed Sinkies into buying into that Ponzi scheme.

    And the day of reckoning is now appearing on the horizon. The PAP may still try to avert the imminent busting of the bubble and postpone the day of reckoning by passing the babe onto the next generation, our children, to save the arse (and face) of this generation of PAP leaders.

    Adding salt to the wound, GCT was even able to fool them into believing his claim that they are the most talented Ministers in the world and deserved to be paid the highest salaries in the world. Five times the salary of the President of the US but with only one-hundredth the size of its population. Or 100 times the salary of the President of China with only one five-hundredth the size of its population and nearly 14000 times smaller in land mass.

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  • Done deal:

    Seriously, what is all the whining all about? When I bought my first flat, I chose 99 year lease instead of 999 or freehold because it should last my time on earth. If my fortunes improved, and it did, I could upgrade to condo or landed. My children could stay in it for another 50 years or until they buy their own house, another 99, 999 or freehold lease property. Of course I or my children could rent instead of buy. That bullshit about defending the country if we own a stake in it was just fairy tale spun by the government. Why should we die for “our country” when it’s already occupied by foreigners on the quiet? Take a walk down Orchard Road and throw a rock – 9 times out of 10, it will hit a non-Songaporean.

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  • made to pay for your windfall:

    Done deal:
    Seriously, what is all the whining all about? When I bought my first flat, I chose 99 year lease instead of 999 or freehold because it should last my time on earth. If my fortunes improved, and it did, I could upgrade to condo or landed.

    @ Done deal: I belong to the Millenials generation. Your fortunes can improve only at our or your own children’s expense.

    It means we are made to pay for the enhancement windfall you received and are made to work like slaves by having to slog 14 hours a day and need 40 years to pay off the fortune you received in that Ponzi scheme schemed by GCT.

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  • reminder to the 70%:

    Why does the PAP treat the opp parties as enemies?
    Wont working together n sharing ideas for the good of all be a better option?
    PAPs shd come down from their ivory towered way of thinking.
    Right now their atas attitude is bringing much misery to the citizens in many ways.

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  • oxygen:

    THE ASSET ENHANCEMENT POLITICS is DEADLY TOXICITY scam of no beneficial outcome to anyone EXCEPT THE VERY RICH. By transferring wealth from the masses of poor peasants to the rich, it has already reduced much of the present pioneer generation to poverty struggle compounded by imprisonment of CPF savings – itself another scam and theft of private retirement property.

    The optical illusion of false wealth creation in this asset enhancement politics scam is proof that it is fictitious of construct and values. The PG can’t cash out – they got no place to live otherwise – there is NOT even a rental alternative if they sold out. All that it does is driving UPWARD AND SKYWARDS their daily COSTS OF LIVING – the PG is already finding difficulty to survive on their meagre savings outside CPF (if any) or children support (if they are lucky). It is DEPLETING their last survival base even without the burden of sudden health care emergency costs.

    And their sole hard inaccessible fictitious “asset” of public housing lease dwindles to zero value with each passing day.

    Future generation will find it a lot harder. After servicing huge mortgage liability, they will have little for food and bare essential – made worst each passing day of escalating costs of living and INFLUX OF FOREIGN POPULATION adds to rising costs of living. Any healthcare emergency or employment distress is life-ending of consequences.

    Sinkieland is heading for SUDDEN DEATH COLLAPSE of its economy and national survival because its economic framework is hinging on the FAKE ARCHITECTURE of FICTITIOUS PROPERTY VALUES which has no relevance to our trade and competitive edge in the world – EXCEPT ADVERSELY DETRIMENTAL.

    PAPpy in this scam of asset enhancement deception is gambling on the masses of poor enriching a few privilege at the risks of economic decimation of the country.

    LIKE IT OR NOT, IT HAS TO REVERSE THIS POLICY of bubbling up public housing – BETTER SOONER THAN LATER.

    The problem is that the HOUSE OF MOST EXPENSIVE DECORATION OF WALKING DEAD – overhyped, overpaid and non-performing is UNLIKELY to take risks and shake up failed policy and change direction for the better. An adverse electoral outcome might suddenly end the rich harvest flowing into their pockets of -ownself-cheque-ownself politics.

    MAYBE, LIKE THE COMMITTEE FOR FUTURE ECONOMY, THE PAPpys are TOTALLY CLUELESS of the way forward.

    I SUSPECT THIS IS THE HARD TRUTH that even PAST TENSE dare not confront of failure. Truth requires courage to confront reality of failed or past economic mismanagement.

    HAS PAPpys got any courage to face their incompetent failed scams?

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  • LIONS:

    Can the gahmen do something about this?
    Sure they can.
    If this govt is responsible n have resolve to avoid HOMELESSNESS issues in an ageing society where sgs are being made jobless at younger n younger age,the govt may want to consider EXTENDING THE HDB LEASE.

    SGS use most of their savings to buy HDB n it is the govt’s duty to ensure they do not become homeless becos of govt policies?

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  • PAP Is Root Of All Evils:

    reminder to the 70%:
    Why does the PAP treat the opp parties as enemies?
    Wont working together n sharing ideas for the good of all be a better option?
    PAPs shd come down from their ivory towered way of thinking.
    Right now their atas attitude is bringing much misery to the citizens in many ways.

    Asking thieves to work with police?

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  • Lye Khuen Way:

    A very relevant Policy Paper of the SDP which came out years ago.

    It’s made even more relevant after the bombshell reminder of Minister Lawrence Wong.

    I would even promote the expansion of the Rental Scheme of HDB flats to 4/5 rooms.

    The implied rooting of citizens and the pride the so-called Ownerships of their purchased flats was both cruel and not totally true.

    HDB flats ” owners, despite the illusion of having paid a Property Tax do not have Strata Titles.

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  • Khaw dung:

    It’s ok if you bought your HDB at $15K back then like your grannies or grandpas but if you have to fork out close to $500k, it is a different story.

    where is Peanuts Goh, the founder/ceo of SIN INC under chairmanship of lky?

    hiding in his pants.

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  • Make it Freehold:

    Better still make it free

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  • No end in sight:

    Khaw dung: It’s ok if you bought your HDB at $15K back then

    Very true, back then a house costs 10+ years to pay off. Now it’s more like 35+ years, with no money left for the evening years.

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  • Rabble-rouser:

    The whole thing about HDB & their 99-year lease time bomb situation isn’t only about the state land component but also covers a wide spectrum of problems caused by PAP’s command-&-control policies, extreme greed, misallocation of capital & resources, etc:
    1. unnecessary overbuilding leading to unsustainable living;
    2. fallacy over asset enhancement policy for retirement needs;
    3. mis-allocation of CPF monies to housing consumption, not investment; &
    4. the dreaded Demographic time-bomb which will set S’pore into decline.
    Below are the elaboration of the above points:
    1. OVERBUILDING & UNSUSTAINABILITY LIVING
    Nearly 90% of S’pore’s population already either ‘own’ their Private properties or are the master lessee (correct terminology) for their HDB homes. Some have multiple housing (HDBs, ECs, Private) that are used for rental purposes. Many of new condo launches are bought up by Investors for Buy-to-Rent intentions & debt-financed.
    The reason why this is UNSUSTAINABLE WAS:
    * An overconcentration of owned & master-leased properties (90%) – how can properties prices continue to rise any higher?;
    * High-rise & intensive living incur huge costs in energy (lighting for common areas); massive building resources (demand for building material); high conservancy costs (cleaning, maintenance, etc) & expensive general upkeep (painting; repairs, etc); &
    * Perceived demand for S’pore properties rests on continued Foreigners’ Flood & assumed Govt risk underwriting for S’pore property – both are unknown factors which had yet been tested.
    2. ASSET ENHANCEMENT POLICY
    A high proportion of S’pore properties are on 99-year leasehold land. Much like option theory – the closer the properties are to maturity date; the decline in value begins to accelerate. So how can that be Asset Enhancement? Only Freehold land & long-dated leasehold land can enjoy Asset Enhancement; not 99-year leasehold land. Value goes to zero at the end of the lease!
    3. MIS-ALLOCATION OF CPF MONIES
    Mosty CPF holders are using CPF monies for housing consumption, & not for investment. All are using their CPF sums for a single property which is their abode. FYI, it is consumption; not Investment. It’s wrongfully assuming that one can eat your cake & get to keep it! Sorry, it doesn’t work that way! A 99-year HDB leasehold property can’t retain nor appreciate it’s value over time. You’ve been Punk’ed!
    4. S’pore has a clear Demographic problem – the aged will outnumber the young by 2030. The old, aged would want to monetize their assets for retirement but the proportion of young ones are insufficient to absorb the excess of homes being sold for retirement monies.

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  • ahlong meets mingyang:

    aiyo so troublesome, since its a 99 lease can i pay land leases on a annual basis since i dun own the home, or a own the flat but not the land?

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  • Rabble-rouser:

    oxygen: Sinkieland is heading for SUDDEN DEATH COLLAPSE of its economy and national survival because its economic framework is hinging on the FAKE ARCHITECTURE of FICTITIOUS PROPERTY VALUES which has no relevance to our trade and competitive edge in the world – EXCEPT ADVERSELY DETRIMENTAL.

    Many S’poreans are extremely lackadaisical & unbelievably gullible! But it’s not entirely their fault!
    Years of tunnel-vision education; a skewed MSM & a poor media eco-system which only echoes Pro-Govt news/engaging only in Selective reporting; A false & almost fanatical zeal in promoting Meritocratic values as a Superior system for the world. BUT THERE IS A TRIFECTA of 3 GRAND EVENTS COMING DUE!
    The word TRIFECTA is commonly used to describe an unique situation where three elements come together at the same time. Another term commonly used such events is A PERFECT STORM! The events are:
    1. END OF BRICK ‘N MORTAR ECONOMY
    S’pore are all things Brick ‘N Mortar. S’pore is at the tail-end of events that are already happening within the advanced economies. Part of the reason is that S’pore will always have a political vacuum (no bad nor negative news reporting, please!) & an artificial oasis cordon off from real world events. Which is why many S’poreans hold an eternal optimistic view of the world.
    The below link reveals the end of Brick ‘N Mortar in the US with a dire warning for REITs & CMBS (Commercial Mortgage-Backed Securities). Read at your own risk & be prepared for the worst yet to come:
    Link: http://wolfstreet.com/2017/05/09/retail-meltdown-demolishes-mall-reit-investors/
    2. ANTI-GLOBALIZATION TREND
    The death of TPPA under President Donald Trump was an ominous sign for S’pore. Globalization & the associated effects ie. the outsourcing phenomena to low cost economies; the in-sourcing of foreigners (especially Indian IT workers) for their artificially low wages; the relocation of manufacturing facilities; & the offshoring of profits & capital from globalization – All these are in danger of being reversed or had already been reversed. Without a doubt, capital offshore are being repatriated back in anticipation of tax amnesty; reduced corporate tax & investment tax credits. The tide is turning & capital is going to be very expensive to boot for emerging markets.
    3. DEMOGRAPHIC TIME-BOMB
    S’pore is greying! The Baby-boomers have reached the end of their working & productive lives. Even the Straits Times have broached this ‘taboo’ subject abide in their usual optimistic manner;
    Link: http://www.straitstimes.com/opinion/is-singapore-becoming-an-old-young-country
    But when…

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  • Rabble-rouser:

    [Cut-off...] But when retirees outnumbered those numbers forming an emerging family?

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  • Sperm whale sperm:

    What house do you OWN when you DON’T?

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  • Masala Lingo:

    One uncle told me with a silly grin on his face, “Aiya, I would be dead long before the lease expire. This is not my parsah. Leave this headache to the younger generation.”

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  • KNN:

    HDB in the 1960s and early 1970s was just like NOM flats that SDP is proposing. I remember my parents bought their first 2-room flat in Commonwealth back in 1969 for $5000. They then “sold” back to HDB in 1974 and bought a new 4-rm in Toa Payoh. In those early days, citizens can buy & sell back to HDB as many times as they want, subject to minimum 5 years in-between. Don’t have the maximum 2X direct from HDB which I think was implemented in early-1980s.

    Which year did PAP allow HDB flats to be bought & sold on resale market, and what were the Parliament proceedings to allow this change in HDB Act???

    I only remember that PAP allowed people to use their CPF to buy private property in 1986 and resale HDB in 1988. This was due to the big recession in 1985/86 and bad property market and hard times for banks & property developers. Before, CPF can only be used to buy new HDB flat direct from HDB itself.

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  • NotMyProblem:

    KNN:
    HDB in the 1960s and early 1970s was just like NOM flats that SDP is proposing. I remember my parents bought their first 2-room flat in Commonwealth back in 1969 for $5000. They then “sold” back to HDB in 1974 and bought a new 4-rm in Toa Payoh. In those early days, citizens can buy & sell back to HDB as many times as they want, subject to minimum 5 years in-between. Don’t have the maximum 2X direct from HDB which I think was implemented in early-1980s.

    Which year did PAP allow HDB flats to be bought & sold on resale market, and what were the Parliament proceedings to allow this change in HDB Act???

    I only remember that PAP allowed people to use their CPF to buy private property in 1986 and resale HDB in 1988. This was due to the big recession in 1985/86 and bad property market and hard times for banks & property developers. Before, CPF can only be used to buy new HDB flat direct from HDB itself.

    You are right. When GCT was the PM, everything changed. It was GCT who started with this “asset enchantment” and “2 bites of the cherry” things that HDB went haywire.

    Then it was also the greed of the older generation who forgotten that it would affect the younger generations that follow. Now the younger generation suffer.

    Now GCT washed his hand. You only see him at golf clubs.

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  • Anon:

    @KNN;
    Indeed NOM is just a reminder that HDB was meant to provide PUBLIC HOUSING, at least originally. Hence you could nt sell on the open market so not subjected to market forces.

    In the mid 1970s a 5 roomed HDB flat in Bedok South cost $45,000 and you could use CPF savings so it was very affordable even for newly-wed ordinary non-professionals like technicians and office workers, earning a gross salary of just over $1000 per month. You could not use CPF money fir PRIVATE HOUSING!

    PUBLIC HOUSING is about providing for the neccesities of those unsble to afford PRIVATE HOUSING. To allow it to be subjected to market forces is to betray its whole purpose.

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  • oxygen:

    @ Rabble-rouser,
    THE ENTRENCHED FAILED AUTHORITARIAN REGIME is taking Sinkieland over the cliff. The Committee for Future Economy – a ghostly fiction of wisdom of PAPpys whitewashing fabrication is a foacking joke. They came up with a “no defined direction forward” of recommendations on future direction but “lets us see what happens from here” caterpillar mentality. They failed to discredit the population recycling economics and asset enhancement politics as TOTAL FAILURE OF SCAM POLITICAL ECONOMY. By keeping silence, they protect a failed governance incompetence and provide a shelter concealment that urgent changes are necessary and urgent to afford some chances of our existential survival forward. HOW CAN THIS POPULATION RECYCLING ECONOMIC SUSTAINS forward? The brick-n-mortar economy living on debt is already in the crematorium or least in funeral wake now like you said.

    Watch what is unfolding when interest rate rise. I am betting that these will happen. First, the global economy will tank. GLOBAL ECONOMY post GFC has been on a far lower growth trajectory AND THAT IS LIFTED SOLELY by cheap money. There is no strong demand despite 8 yrs of growth. Slower growth begets slower growth because no investment spending. All those capital spending now is focusing on digitization of work place – the cohorts of next generation will be parttime casual workers living on low wages like Japan now. Who can afford expensive property when finding food is already difficult to secure globally? Like you said, ageing demographic – global time bomb except in India, Indonesia and muslim countries in west asia, Blangadesh, Africa – means LOSS OF PRODUCTIVE LABOR and CONSUMPTION DEMAND EXCEPT HEALTHCARE. How productive is healthcare in creating goods and services for export like in Sinkieland? U got more unemployed Sinkies pushing old folks on wheelchair and doing their food shopping for them? YOu need an army of casual home cleaning – the retirees can’t do these themselves – how productive of income and boost to national output these services for the economy competitiveness?

    And PAPpy wants to import even more foreigners to displace Sinkies on cheaper wages – they can’t even pay rent, how to buy property and make babies to feed and clothe? It is COMPOUNDING the calamities forward, adding to costs of living escalation and adding to pressure on public facilities such as transport and healthcare services. Who is paying the taxes to fund all these unproductive investment in infrastructure with little contribution to other productive sector of the economy? And adding to even more bloated excess of retirees forward.

    PAPpy is in denial of failure and refused to change direction.

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  • Squeezed Dry by HDB:

    Sinkies are all dumb-fooks. HDB sell them 99-leasehold flats and call them owners. They are owners in name only ! In reality they are only tenants, stupidly paying 99 years’ rental in advance. Moreover, they shoulder all the responsibility & costs of ownership eg paying for all repairs & upkeep. At the end of 99 years they still have to return everything to the govt. I’ll rather rent the flat as a tenant, and pay my rental every month, with plenty of spare cash left over to do whatever I want. If something breaks down, I just call the landlord to come and repair. Sinkies are brainwashed until they don’t know how to think !!!

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  • Rabble-rouser:

    oxygen: The brick-n-mortar economy living on debt is already in the crematorium or least in funeral wake now like you said.

    S’pore will be the next lost city of Atlantis. But unlike Atlantis which had collapsed & the city was physically swallowed up by the sea ie. covered underwater; S’pore would be covered under immense debt & be swamped by it. Much of the White-Elephant Structures would be emptied of tenants/business & many would be repossessed by Banks. And no one in their right frame of mind would buy those properties because of the risk of online competition growing stronger & simply there is no more real value investing into Brick ‘N Mortar going forward! It will be a long way down!
    Properties in every form would be a Boat Anchor around the necks of their Mortgagees in a rising tide of debt default. Even owner occupied properties would be at risk from Bank’s Margin Call as Property values fall to the ground.
    You were right in 2009 about the risks of property investments & buying from there on. But very few heed your warning! Instead some even mocked you. Well, the joke’s on them!

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  • A radical idea:

    The HDB price is just too high and have suck up most savings of Singaporean that they do not have adequate cash for their retirements years…
    One way is to bring the HDB price down across the board in a one off measures.

    Since it is 99 years lease hold,take the land price out of it completely.Do a across the board reduction of all HDB flats prices..

    For older fully paid flats,for the reduction in prices portion,do a one off transfer of this amount back to their CPF account.

    This will help many elderly Singaporean to cope with the high cost of living in Singapore without putting pressure of Government to provide social net for elderly poor who are asset rich but cash poor…

    For the young,HDB flats will be more affordable to them..also less pressure on them as their job security cannot be taken for granted in these disruptive times…

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