Coming Soon! New HDB flats will have only 60 year leases

[aurvandil]

For this budget debate, the biggest announcement is still under wraps.

KBW announced that there is a big property cooling measure pending. After 7 rounds, it is obvious that the previous cooling measures were not working. So he is going to try something new and radical. The following are key points to what he has said:

1) There is a need to balance the interest of home owners and home buyers. While we want to bring prices down to an affordable level for home buyers, the political cost will be too high if there is a sudden collapse in housing prices.

2) He has PLEDGED that the prices of NEW HDB flats will come down by 30%.

3) The current HDB rules need to be substantially changed. This is to the extent of possibly reverting to the 1971 rule where HDB flats can only be sold back to the HDB.

Looking at his comments in totality, we can see which of the current scenarios is most likely to happen:

Cheaper HDB flats which can only be sold back to HDB: This appears to be a red herring. The proposal was put forward by SDP and it is highly unlikely that PAP will adopt it wholesale. There is the huge admin costs of making a market for both buyers and sellers. KBW would also break the rice bowls of thousands of property agents and others involved with the real estate industry.

More financial curbs and controls: This has been done for 7 rounds and did not have the desired impact. If they do it for a few more rounds and it fails, KBW will have failed to keep his pledge.

NEW HBD flats with 60 year leases: Recently, the PAP changed the leases of industrial land from 60 years to 30 years. This was to reduce the soaring cost to business. The transition went smoothly. The prices for the shorter leases were considerably cheaper. At the same time, there was no collapse in the price of the older 60 year/freehold properties. With the empirical data from this exercise, it is possible to reasonably predict the impact of an equivalent move on residential property. From a political perspective, choosing this policy option has the benefit of pleasing both home owners and home buyers. Home owners who have paid substantial amounts for their HDB flats will not see a sharp drop in their flats. At the same time, new home buyers will have access to a "cheaper" HDB flat. This is therefore a politically optimum policy option.

Hypothesis: My hypothesis is that in the not too distant future, KBW will be announcing that NEW HDB flats bought directly from HDB will all have 60 year leases. The length of the shortened leases can be imputed by amount KBW has pledged the price of NEW HDB flats will fall. Since he has pledged prices will drop by 30%, a natural amount to assume that the lease will be shorted by is 30% or to 60 years. With the existing controls on occupancy period, there will be little opportunity for resale profit on these new HDB flats. Of interest and still unknown at this point in time is the type of flats the shortened 60 year lease will apply. It is given that it will be applied to BTO. It is however still 50-50 if it will be applied to DBSS and ECs.

 

[Thick Face Black Heart]

Makes sense for the $8 COW to implement 60 year leases. How else does he propose to drop prices 30% in the midst of so much foreign intake? Don't forget, he is also loosening criteria for buying HDB flats (for singles, divorcees, etc). No way (mathematically impossible) that he can ramp supply up by so much that he can make prices drop 30%.

 

[Bigfuck]

Once it drops to 60, it will look more like a warrant then a bond and the value of HDBs will drop. Intergenerational wealth transfer will be nipped. To be fair, all landed property should be bought back by the government for 1 dollar and all leases, house or otherwise should be reset to 60. 60 is still longer than Shanghai leases. Must be fair right?

 

[cunnilaubu]

60 yrs lease would mean that one gets to stay in the flat for your own life time, with just a few more years left. Not enough to last 2 generations and nothing to bequest to your offspring. So what's the point of buying. Might as well rent.

 

[4Sgie]

In his blog, some people also suggested extending the minimum occupation period to beyond 5 years.

IMHO, this should also be akan datang........

 

[commoner]

there are many HDB resale flats going to be less than 60 years and less. Flats built before 1973, and not being enbloc like some in Redhill area and some Toa Payoh flats hitting 40 years of age are STILL selling at a premium. The new 60 years lease will be the old 99 years lease.

Industrial land 60 years/30 years/12 years or 3+3+3 years lease have been around for long time, and the current story making is just trying to make the lease LESS IMPACT.

Singaporeans will always be obsessed with property especially when the economy is good. When and ONLY WHEN the interest rates shoot up or economic downturn and retrenchement, we will see price soften a bit and government will act again to straighten the market

 

[CannonFairy]

Cow must rethink SERS. You are forced to sell your current flat and forced to relocate and pay extra for a smaller replacement flat.

 

[pocoyo]

Whether 60 or 99 years, probably they will tear down your flat after 30 to 50 years of lease and ask you to buy a new one.

All back to square one..

 

[jw5]

Cow must rethink SERS. You are forced to sell your current flat and forced to relocate and pay extra for a smaller replacement flat.

Apparently he was not supposed to run in the last elections. Don't know what happened.

 

[winnipegjets]

A flat for 60 years should have its price halfed, not 30 percent lower.

 

[aurvandil]

Plse be realistic. We are talking about PAP. They are thinking that Singaporeans will be too "daft" to know better.

A flat for 60 years should have its price halfed, not 30 percent lower.

 

[aurvandil]

The strategy is to SERS all the old flats. The land in good locations will be sold off for DBSS. The land in lousy locations will be used to build 60 year BTOs which will then be offered to those who lost their flat due to SERS.

Under the new rules, there will be very little opportunity to "earn money" by buying a flat directly from HDB, staying a few years and then selling it on the open market.

Cow must rethink SERS. You are forced to sell your current flat and forced to relocate and pay extra for a smaller replacement flat.

 

[ray_of_hope]

If HDB leases are capped at 60 years then there will be interesting side effects. One side effect would be, instead of private property coming down in price I think it will likely keep on rising. The reason being that most people would realise that private property would be one of the few assets where once can enhance one's wealth. All potential buyers of HDB flats intending to buy as an intrinsic store of wealth would now gravitate to the private property market. Condos would rise in price significantly.

It is like the unexpected development in COE prices, where CAT A prices nudged down marginally despite the 50% cash downpayment now needed to buy a car.

 

[aurvandil]

That would seem fine from a political perspective.

For those sitting on freehold private property, I expect a spate of en bloc sales as developers pay top dollar land bank. The freehold land will then be redeveloped and sold as 60 year lease properties.

If HDB leases are capped at 60 years then there will be interesting side effects. One side effect would be, instead of private property coming down in price I think it will likely keep on rising. The reason being that most people would realise that private property would be one of the few assets where once can enhance one's wealth. All potential buyers of HDB flats intending to buy as an intrinsic store of wealth would now gravitate to the private property market. Condos would rise in price significantly.

It is like the unexpected development in COE prices, where CAT A prices nudged down marginally despite the 50% cash downpayment now needed to buy a car.

 

[Fook Seng]

Any plan not to really tackle price for the product but play about with the product itself will not be well received. I am surprised that Govt till now is not able to see this. Whether it is size of the unit or the tenure of the lease, you are changing the product. It is like cutting down the serving of your char kway tio while keeping the price unchanged.

 

[Bigfuck]

Any plan not to really tackle price for the product but play about with the product itself will not be well received. I am surprised that Govt till now is not able to see this. Whether it is size of the unit or the tenure of the lease, you are changing the product. It is like cutting down the serving of your char kway tio while keeping the price unchanged.

I told you they are fake Leeegime scholars. In the open market, no one will take them, pay them peanuts and sue them. What do you expect? They build ivory towers around themselves and shoot everyone to hide their stark incompetence. Time to collapse the towers with the fake scholars in them.