Why nobody may buy older HDB flats?

I refer to the article “ST Forum: HDB flat as an investment for old age is no longer valid” (theonlinecitizen, Apr 9).

It states that “On Tuesday (3 Apr), the Straits Times published a letter sent in by writer Ronnie Lim, who reported that many seniors who wanted to downgrade to studio apartments were “in a fix as they are unable to sell their old flats”.

“The notion that owning a Housing Board flat is an investment for old age is no longer valid today,” said Mr Lim.

He added that most were hoping to downgrade and live on the profits from selling their flats, but have now become disillusioned.

He attributed the problem to the fact that HDB flats only have 99-year lease and it is made worse by the announcement by National Development Minister Lawrence Wong that not all old HDB flats will be eligible for the Selective En bloc Redevelopment Scheme (Sers). Hence, once the HDB flats reach 99 years, they will have zero value and owners will have to vacate.

“The Government needs to step in to manage this problem and not just leave things to market forces,” Mr Lim urged.

People’s Action Party (PAP)’s asset enhancement policy

When Goh Chok Tong became Prime Minister in 1990, he introduced the “Asset Enhancement” policy, which helps to enhance the prices of HDB flats.

In fact, just before 2011 General Election, then National Development Minister Mah Bow Tan even said, “We’re proud of the asset enhancement policy. (It) has given almost all Singaporeans a home of their own… that grows in value over time.””

After reading the above – I searched for the prices of older HDB flats and found (as an example for illustrative purposes) a 2-room HDB flat in Toa Payoh (mature estate) built in 1967, with an asking price of $200,000.

Since the flat is already 51 years old – let’s try to examine the likelihood of getting a buyer.

Whoever wants to buy the flat will have to wait another five years for the Minimum Occupation Period (MOP), before it can be resold.

So, another five years later will make the flat 56 years old. At that time any buyer would have to deal with the following:-

… anyone who buys it may find it very difficult to find a buyer after five years because by that time – at 61 years old – banks may be less willing to give a housing loan

…  CPF money cannot be used to service the monthly mortgage when the flat reaches 69 years old

… At 79 years – “”the property has to be paid for in cash.

“When leases drop to 20 years and below, the prospective buyers will not be able to get HDB loans, bank loans or use CPF for the purchase. Everything has to be paid in cash in one go”, International Property Advisor chief executive Ku Swee Yong noted”

In the final analysis – are the “70,000 or 7 per cent (HDB that) are more than 40 years into their leases” – literally sitting on a time bomb?

 

Leong Sze Hian

 

 

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19 Responses to “Why nobody may buy older HDB flats?”

  • Bapak:

    PAP G has created more problems then solved. They are not looking into people’s bread & butter problems instead, wasting time fixing all critics.

    Now, they trying to find faults with Dr. Thum. We will soon lose another talent.

    Time to change team, people.

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  • N.Jungne:

    Ha ha ha Chenghu Chu, bo lang ai.

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  • oxygen:

    ALL SCAMS ARE SELF-EXPOSING of its deception – sooner or later. The asset enhancement politics is a rotten scam transfering wealth from the poor to the rich in a short interval of opportunity. Once exposed, NO TAKERS.

    Those trapped can blame nobody but themselves because they are simply too stupid to even BEGIN TO DISCOVER they are stupid to impossibility.

    But there are still suckers chasing property – like last sheep rushing into the abattoir before the scam finds no other suckers.

    As for those already committed – TOO BAD, there is a BIG REWARD waiting for those who is gullibly naive of “buy property, vote PAPpys”. Ha Ha, PAPpys turned around and now bite your dumbed ass – they tell you to sell your HDB according to the lease remain unexpired and NOT a few years before the next buyer cannot find finance to buy from you as this article correctly reveals.

    PAPpys never change from 52 years ago – 1% truth, 99% lies, fantasy and propaganda. DUMBFARKED PEASANTS ARE A WELL-DESERVING LOT OF SUCKERS.

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  • INDIAN malay INDIAN president:

    In fact, just before 2011 General Election, then National Development Minister Mah Bow Tan even said, “We’re proud of the asset enhancement policy. (It) has given almost all Singaporeans a home of their own… that grows in value over time.””

    asset enhancement of HDB has always been pap FAKE news.

    from 2011 to 2017 is less than 10 years, yet, with one stroke of the pen pap changes HDB asset to HDB consumption. 70% sheep truly stupid.

    BTW it is our position to anyone who listens. don’t buy that overpriced used HDB. Singapore is a very small place. near to this mrt near to that school makes no difference. it is unwise to pay premium for that overpriced used HDB. always buy new. directly from HDB. get all the grants entitled. use the savings to buy that car.

    okay. new HDB much smaller. but HDB has always been consumption. why buy used at a premium when new even gets S$ in the form of grant.

    okay. smaller HDB cannot more than one child. unless S$ is no object or belong to pap clan. then in the wrong forum. but if sheep and if in overpriced Singapore one child who can afford U in Cambridge Oxford Harvard or such overseas Us is far superior than more than one child and then cannot even local U and drive Grab only. don’t say cannot.

    watch how pap ministers behave. do as they pap ministers do. not as pap ministers say. after all, believe them die. because master of FAKE news.

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  • Nopityonfools:

    You bought into the nation’s prosperity gospel just like many who bought into religious gospel centered on a man god who promises to indulge your prayers and bless YOU(THE MORONIC SELF).

    Quite mischievous of the people who chose to indulge in DECEPTION and then blame the govt for giving them they wanted – rich blessings and self glorification .

    Despite the bitter aftertaste and impending dire consequences you will be reaping, the people are still rebellious and unrepentant.

    You don’t want to turn around, you want more blessings and prosperity. You are holding on to your idol in your life.

    Deserving fools!

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  • LIONS:

    all HDBs owned by SGS should be reassigned a LONGER LEASEHOLD.
    UNLESS PRs convert to SC,their HDBs should remain 99-years leasehold.

    think this is only fair.

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  • BOOM:

    THEY OVER BUILT THINKING FOOLS WILL RUSH IN !!!

    NOW, THE FOOLS WILL BE SINKIES !!!

    COST OF OLD FLATS DOWN SO HDB WILL EAT THESE FLATS CHEAPER N PUSH YOU FOOLS TO THOSE OVER BUILT FLATS AT NON MATURE ESTATE.

    BOTH WAYS HDB PROFIT…..

    SINKIES ARE REAL FOOLS, ESPECIALLY CHINESE VOTERS RACIST TO CORE !!!

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  • opposition dude:

    If 40 years HDB flats are now the benchmark for time bombs then any flat approaching 40 has already started the detonation sequence.

    Reason being that if you know the flat you are buying is going to be 40 in less than a decade’s time then would you still buy it? The same reasons of selling it will be used. Just how long do you intend to live in it and what would be the value of the flat when it’s say, 50 to 54 years old?

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  • Python 5:

    bo lang ai, then prices must crash until 70% down lah.
    Bishan $1m dollar 5rm flat become 300k.

    N.Jungne:
    Ha ha ha Chenghu Chu, bo lang ai.

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  • PAP has the mandate:

    No one should buy HDB period.

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  • Easy to value HDB flats:

    I am in the market for resale HDB flat as a buyer. I will focus on the older flats that most buyers are not interested in. This is how I will determine my offer price.

    I will assume a straight line depreciation with the initial value being the price (from HDB) of NEW HDB flat in the area of the SAME size. The terminal value of flat after 99 years is zero. I will divide the (new) price by 99 to get the estimated annual depreciation of the flat. The estimated value of an old flat is just the (new) price mentioned above less depreciation which is the age of flat in years multiplied by estimated annual depreciation.

    Using the price of the NEW flat in the same area and of the same size takes into account the location of the flat. Sellers should not ask for a premium above this price because there is no certainty that the old HDB flats will be redeveloped under the SER scheme.

    Valuing the HDB flats as described above is correct because being a 99-year leasehold property it is basically depreciating even if it is in a “prime” location in mature estates.

    PAP Asset Enhancement Scheme is just “spin”, i.e., hype and bullshit aka “fake news”. It is a laughable attempt to make Singaporeans feel rich through an unsustainable “property bubble”. It is also designed to massively increase Government reserves (through the sale of over-priced flats) and to “drain” the CPF accounts of Singaporeans.

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  • What to do?:

    PAP has the mandate:
    No one should buy HDB period.

    But 80% of Singaporeans already bought. So how?

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  • oxygen:

    @ What to do?

    JUST ASK THEM THIS SIMPLE QUESTION – who did he/she voted for

    PAPpy or Oppie.

    What to do?: But 80% of Singaporeans already bought. So how?

    If he/she vote for Oppie, give them a consoling sympathy, tell him/her that your heart bleeds for him/her.

    If he/she vote for PAPpy, ask him/her where is the nearest TOTO/4D/Big Sweep outlet nearby and tell this idiot that you lady luck is shining on your face. It is your lucky day – you have just met one of those idiots confirmed too stupid to even beging to discover he/she is stupid to impossibility. Tell him/her that whatever quick pick of random draw, that you intend to buy, GUARANTEE TO STRIKE FIRST PRIZE. But you are nice, you will give this idiot 0.0001% of your lucky winnings in consolation!!

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  • Python 5:

    the whole HDB scheme now is exposed as a VERY BIG, VERY LONG TERM (99 year)
    pyramid ponzi scheme. which is being unravel slowly now as more and
    more aging flats surface.

    1970-80s, ppl buy it as a place to stay, no speculation of any kind.
    HDB is like a simple hawker centre meal. buy it, consume it, forget it.

    then LKY/GCT comes out with the asset enhancement scheme.
    This is the birth of the HDB ponzi scheme.

    Prices are pegged to condo prices and ppl start to speculate.
    speculation is based on the older the age of the flats, the pricer it becomes.
    new flats are launched with prices shadowing the prices of the older flats.
    terms like “mature estates” are used to justify and prop up the prices.

    then 2017, Lawrence Wong states that not all old flats are eligible for SERS. In a way the govt refuses to guarantee the exorbitant and supposedly appreciated value of all these aging flats now.

    financing is difficult to obtain for older flats simply because the values of these flats are just unjustifiable.

    Govt or banks will not finance the purchase of these aging flats
    because they know this HDB ponzi game is at its terminal stage for these aging flats.

    Better to let owners lose monetary value of their flats gradually and painfully than risking the banks or the govt having to fork out money to lend to buyers of these aging flats.

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  • Python 5:

    11 Apr 2018
    HDB Chief: Pay the price of resale flat that commensurate with its lease.

    _______________________________________________________________________
    take a flat in AMK bought in 1978 for $30k.
    assuming a straight line depreciation method.

    Purchase price in 1978 $30,000.00
    Lease in years 99
    Net depreciation per year $303.03

    Age of flat (2018-1978) 40
    Total depreciation-40 yrs $12,121.21
    Net book value as at 2018 $17,878.79

    and you look at the resale prices today.

    AMK 4 rm (built 1980) – SGD468K
    Bedok 3 rm (built 1979) – SGD370K
    Clementi 4rm (built 1978) – SGD500k

    and you read all the reports from Straits times.

    27Apr2015 – Another Bishan Maisonette flat goes for $1m.
    01Feb2017 – DBSS flat resold for $1.18m in Bishan.
    11Nov2017 – 3 HDB resale flats breach $1million mark.

    _________________________________________________________________

    taking on more and more debts which takes 25-30years to pay back for the purchase of something that depreciates in value and become zero at the end of its leaselife.

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  • Python 5:

    People, especially the 70%.

    Go google and read up these definitions.

    1) Greater fool theory:
    states that the price of an object is determined not by
    its intrinsic value, but rather by irrational beliefs and expectations of
    market participants.

    In real estate, the greater fool theory can drive investment through
    the expectation that prices always rise. A period of rising prices
    may cause lenders to underestimate the risk of default.

    2)Hyman Minsky – stages of a bubble.

    3)Madoff investment scandal.

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  • Python 5:

    https://www.theonlinecitizen.com/2018/04/15/owner-sells-3-room-hdb-for-15-less-after-wongs-comment-about-zero-value-of-expired-flats/

    >>>she managed to get rid of her old flat two months ago in February this year, at a much reduced price of $288,000 – some $52,000 less than her initial asking price of $340,000.<<<

    I'd say this is only the beginning. you will see more and more reductions in offer prices for resale flats from now on. all kena spooked liao.

    think Bt Merah estate was born in 1980-1982.

    how old is her flat? 30-40years?
    what is the original purchase price of her flat? say 35k-40k.
    What is the Net Book value of her flat today?

    Ppl are paying 288K for something that has net book value of less than 30k?
    (blah blah blah about the amenities, and mature estate and proximity to the CBD)

    I'd say this is only the beginning.
    Lets see if there are more and more reductions in offer prices for resale flats from now on.

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  • Puzzled:

    What exactly is the asset enhancement POLICY/SCHEME, plse?

    I’m aware that people wrongly believe HDB prices will go
    up forever, but what is the govt’s POLICY regarding this
    wrong belief about asset enhancement? If there is a policy,
    then steps are being taken. What is being done?

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  • a PG:

    Soon the garmen will rethink and reduce flat prices and open to more foreigners to purchase them. Some rules may change. In time to come (when leases get shorter and shorter), they will be more flat sellers than buyers. That will a nightmare, i.e. akan datang ! Supply exceeds demand if you study economics.

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