HDB 101 : What the PAP don't want you to know.

[Papsmearer]

Best is still to grit yr teeth and aim for private property iso HDB. More freedom, more liberal. Private prop mkt offers more possibilities, en bloc esp. Enblo, despite the bad publicity it has invited, is not just money to be made. Enbloc allows a plot of land to be recycled and reused when the props on it age. This is where owning a HDB flat is at a disadvantage, as others have pointed out. And the HDB is a powerful landlord, too powerful in fact, that one shld avoid. It can take away what it giveth, and it tends to play dirty, claiming the greater good...always the greater good.

By the way, I want to tell you something about en bloc. En Bloc is the result of poor govt. planning. The plot of land you are talking about would not need to have been recycle is the govt. did its job probably and rezone it to the highest density possible. In the example that I know very well, Horizon Towers, this complex although 30 years old is in very solid shape. Its well build, and is designed to last a lot longer than 30 years, and much longer than any HDB flat. If the En Bloc takes place, a perfectly good building would be torn down. This is not recycling, its wasting. Recycling is when something is at the end of its economic life and is its components are rejuvenated into something else. This is not the case in many en bloc situations and certainly not for Horizon Towers. If the building is 90 years old and falling apart, than I agree that it should be torn down for something else. The resources that went into building something that is only 30 years old is wasted if you tear it down. As well, the energy and resources needed to build a new building to replace it is huge. En Bloc is a scheme for developers in a land scarce country to find new land.

 

[Papsmearer]

Why are we drifting away from our concerns about our children's ability to buy "public subsidised housing that they won't be able to afford without lowering their quality of life"? Most of us here are not paying the astronomical prices that had skyrocketed over the last few years, right?

We are not drifting away from that. This thread is meant more as an educational tool, to see what really is happening.

 

[Sperminator]

Yes, ultimately, the aim is to get private property to avoid the HDB/PAP trap. However, I caution you on private property. In my opinion, not all private properties are born the same. A 99 year lease private property is just as bad as a HDB flat. U face essentially the same problem, accept the landlord is a private developer. Freehold is the best option. But of course the cost is very high, and in the high end of the market, the fluctuations in price is even worse.

Dear Mr. PAPsmearer,

Thank you for all your clarifications and well written summary about the predicament of the Singaporeans are facing.

I've always wondered why must our hard earned money when put inside the HDB pigeon hole, miraculously, after 99 years or the stipulated amount of time, be vapourized into nothing, and our life time of working means nothing to our next generation...

And really, there are so much land to go around, and by looking around, is really singapore fully developed? without lands? go walk around, and you see many flat lands not developed... and expected to have 13 Million people for touring SGP, the accomodations are already there...

I can't help but think that being a Singaporean can be very tough...

When you are born, must compete for good schools...

When you go to good college or university, compete for good grades...

When you go NS, (okay, this one no one compete... haha... all just want to skive..., except indian chief... and sign ons)

When you work in the economy, compete for survival... and with recent years, compete with FTs in your own home... FTs that don't need to serve NS. work longer hours, lower pay, etc...

When you want to get married, you got to wait long long for your pigeon hole, 3 to 5 years? whereas the FTs will get unfairly low rental rates per pax, whereas singaporean have to go for free market rentals...

Then when you finally manage to buy the contract to be a legal tenant of the HDB for the air space pigeon hole for 99 years, or less if you buy 2nd hand... then you're perpetually in debts for at least 30 years, no thanks to the high prices of pigeon hole, and at the same time, receiving "COMPETITIVE" salary compared to other 1st world nations (hey Singaporeans are not stupid, we look at Hong Kong average pay, their's HIGHER!!! and they next to CHINA!, SGP next to Malaysia)

Then when you have depleted most of your resources to raise your children, putting them to the university... and when they have graduated...

When you look at your finances when you are in your 60s in SGP... yes, although you can sell away the rights of the tenantship to another, but are you going to consider going to Johor and die in a hospice there because you are no longer economically viable to SINGAPORE???

WTF... think for yourselves... because no one will think for you... not even the gov...

And I 100% agree with what Mr. PAPsmearer's point of view, and I feel what he says 100%, and we must all think carefully of our own future... and decide what is in our best interest.

 

[Papsmearer]

Not sure if that is what the threadstarter intended? Be that as it may, I agree HDB housing started as a public housing for lower-income families, so is supposed to be public housing that is affordable to its residents. I also think that the HDB shouldn't have moved away from using a cost-plus pricing concept to a market value pricing just because they are buying land from SLA at developed (higher) land prices nowadays. (Previously govt can seize land from landowners and compensate with peanuts.) So I think that the policy has backfired because while income levels have gone up only by single digits, housing prices have gone up by double digits over the last 40-50 years. E.g. a fresh grad in 1974 starting pay was abt $1200 pm. HDB flats were $35-50K. Now, a fresh grad starting pay is $2500 pm before crisis, and HDB flats are now $350K! So pay has doubled; but HDB prices have gone tenfold! Must be over the years, things have gone on autopilot and nobody notices anything that needs adjusting. Or worse, afraid to challenge one of those Old Man's sacred cows.

I think you don't fully comprehend what is going on here. Nothing that HDB does is by accident or backfiring. Yes, once upon a time, the purpose of the HDB was to provide cheap affordable housing to the masses. It was a robin hood scenario, where the HDB would rob the land from the rich land owners and than redistribute it to the people in the form of cheap housing. Somwhere along the way, Lee Con You noticed the steadily growing pile of money sitting in CPF accounts accumulated by peasants that were steadily having their incomes increase thru "good times". Lee Con You realised that this represented a substantial liability to the govt. as they have to paid out at retirement time. The PAP realised that they can takes measures such as low interest rates for the CPF accounts, and delaying of the retirement age, etc. but in the end, this billions of dollars represented a real liability to the PAP. Also, around the same time, the Lee Family and the Kwas as well as other PAP elites started accumulating a lot of real estate in S'pore, in particular private residential real estate.

So the question became, how do you reduce the CPF laibility to be paid out on retirement, and make profits for the PAP elite at the same time? The answer is to increase the price of the HDB flats. Any increase in HDB flat prices has a ripple effect on private property which is what the PAP elites own. The PAP than concocted the scheme to allow people to make down payments with their CPF and also use it for monthly payments in order to afford their higher priced flats. It does not mean the flats are larger size or of higher quality, it just means they are the same accept for a higher price. By doing this, the PAP has siphoned off CPF funds back into its own pockets thru these overpriced flats, and at the same time, reduced their CPF liabilities by the billions of dollars, while also increasing the value of private properties.

So, the point you raise about the affordability of flats for a uni grad from the 70s versus one from today is really moot. The HDB does not care. As long as people don't understand how the game is played, they can continue to make huge profits by selling these overpriced flats to modern suckers. Someone will always pay. Whether its some stupid sinkie killing themselves to come up with the down payment or killing themselves to make the monthly payments, or some of the many FTs they let in as PRs and Citizens, someone is always paying the price.

As an ancillary to this, the billions that the HDB made thru the decades now can be invested thru Temasek and GIC. They have successfully taken money out of the people's hand and put it into the govt's hand. Lee Con You is definitely aware of the goings on, and some of the brightest minds are working to constantly refine the system, and max the profits for the HDB.

 

[Papsmearer]

In reality, we came to this world with nothing and we will go off with nothing. In our life time, whatever we owned, we will have to give it up. We can't bring it to our grave. In this world there are so many things in life we can reach it. Its all around us. Like owning a home, a car and good food etc. We must remember good thing life, will one day comes to an end.

I understand this. U come into the world with nothing and leave with nothing. But in between, its your god given and fundamental right to make something of yourself and to leave your children better off than you were. In most countries of the world, real estate is a person's main asset, and that is how their children can benefit from their death. Now How can this happen in S'pore under the present system?

 

[lockeliberal]

Dear PAP

A good argument with one basic flaw. Your diatribe against leasehold being nothing more than rental and not in any sense home ownership. HK is 100% leasehold land as in most land China. If you ask any private property owner whether they are in fact renting it, they will argue they own it.

Though HDB and SLA are in essence left pocket right pocket under the same owner, they are distinct accounting entities. What matters and what is unknown is

a. how much HDB pays SLA for the land

b. Land Revenue from SLA remains locked and not counted in annual budget surplus deficit figures.

c. The flip side of low CPF interest rates is low mortagage rates. The CPF housing deal over the long term is the best deal in town.




Locke

 

[Papsmearer]

Dear PAP

A good argument with one basic flaw. Your diatribe against leasehold being nothing more than rental and not in any sense home ownership. HK is 100% leasehold land as in most land China. If you ask any private property owner whether they are in fact renting it, they will argue they own it.

Though HDB and SLA are in essence left pocket right pocket under the same owner, they are distinct accounting entities. What matters and what is unknown is

a. how much HDB pays SLA for the land

b. Land Revenue from SLA remains locked and not counted in annual budget surplus deficit figures.

c. The flip side of low CPF interest rates is low mortagage rates. The CPF housing deal over the long term is the best deal in town.




Locke

Once again Locke, your lack of analytical thinking is very obvious, and frankly dissappointing. Its not a diatribe and there is no flaw. We are really renting and we are tenants. IT SAYS SO IN YOUR CONTRACT, READ IT.

Secondly, we are not in HK nor are we in China, as such we do not care about what some hongkie thinks whether he is renting or owning. We are talking about singaporeans and singapore, don't jump around. U can let some hongkie argue all day about whether they own it or not, we dont' give a shit.

Thirdly, and a very obvious fact that you have missed, China and HK are COMMUNIST. By this very definition, all land is owned by the state. There is no freehold. Once again u are comparing 2 different systems.

Fourthly, " The CPF housing deal over the long term is the best deal in town. " is an erroneous statement. For the vast majority of people in the country, its the ONLY "deal" in town. By the way even if mortgage rates for HDB loans were high, interest rates for the CPF accounts would be low. The correlations between the 2 is very low, and hence there is no flip side.

 

[lockeliberal]

Dear PAP

The leasehold system was inherited from the British , it was there before communism and would be there went HK goes democratic etc etc

Secondly there is a legislative peg between the CPF Interest rates and the HDB Mortgage rates, the stated difference is 0.1% . It is in fact the best deal in town.


Locke

 

[Sperminator]

Dear PAP

The leasehold system was inherited from the British , it was there before communism and would be there went HK goes democratic etc etc

Secondly there is a legislative peg between the CPF Interest rates and the HDB Mortgage rates, the stated difference is 0.1% . It is in fact the best deal in town.


Locke

It's not as easy to get the HDB Mortgage Loans anymore...

People are being forced to take higher Private Bank Loans Rates...

And its also not easy for people who are aged 35, who want to buy a pigeon hole, and is single a 3 room flat... these people who are not married don't need a 4 room flat...

People are being forced into desperation... catch 22 situation.

Perhaps Mr. Locke you're no longer having such problems, however, there are many in SGP who are 35 and above, not married, earning more than SGD 3000 per month, want to buy 3 room flat, but is encouraged to buy a much more expensive 4 room, and forced into the Private Bank Loans... simply because these people "OVER QUALIFY"

there is no longer free choice...

How about a person deciding not to get married? and is just financially intelligent? People are being forced into financial burdens, when they don't need a bigger room.

And one of the thing the PAPPIES don't want you to know is that when they manage to let you buy a expensive pigeon hole, objective achieved, because one will be perpetually in debts for 30 years, no mobility exist... work in SGP till you die.

 

[kingrant]

Do you know that the CPF scheme was started during David Marshall/Tan CC's govt in 1955 and not the PAP?

The CPF was originally conceived as a savings scheme for retirement and in fact was kept that way for many years. It was tweaked to allow citizens to buy HDB or private housing after popular demands.

I think you don't fully comprehend what is going on here. Nothing that HDB does is by accident or backfiring. Yes, once upon a time, the purpose of the HDB was to provide cheap affordable housing to the masses. It was a robin hood scenario, where the HDB would rob the land from the rich land owners and than redistribute it to the people in the form of cheap housing. Somwhere along the way, Lee Con You noticed the steadily growing pile of money sitting in CPF accounts accumulated by peasants that were steadily having their incomes increase thru "good times". Lee Con You realised that this represented a substantial liability to the govt. as they have to paid out at retirement time. The PAP realised that they can takes measures such as low interest rates for the CPF accounts, and delaying of the retirement age, etc. but in the end, this billions of dollars represented a real liability to the PAP. Also, around the same time, the Lee Family and the Kwas as well as other PAP elites started accumulating a lot of real estate in S'pore, in particular private residential real estate.

So the question became, how do you reduce the CPF laibility to be paid out on retirement, and make profits for the PAP elite at the same time? The answer is to increase the price of the HDB flats. Any increase in HDB flat prices has a ripple effect on private property which is what the PAP elites own. The PAP than concocted the scheme to allow people to make down payments with their CPF and also use it for monthly payments in order to afford their higher priced flats. It does not mean the flats are larger size or of higher quality, it just means they are the same accept for a higher price. By doing this, the PAP has siphoned off CPF funds back into its own pockets thru these overpriced flats, and at the same time, reduced their CPF liabilities by the billions of dollars, while also increasing the value of private properties.

So, the point you raise about the affordability of flats for a uni grad from the 70s versus one from today is really moot. The HDB does not care. As long as people don't understand how the game is played, they can continue to make huge profits by selling these overpriced flats to modern suckers. Someone will always pay. Whether its some stupid sinkie killing themselves to come up with the down payment or killing themselves to make the monthly payments, or some of the many FTs they let in as PRs and Citizens, someone is always paying the price.

As an ancillary to this, the billions that the HDB made thru the decades now can be invested thru Temasek and GIC. They have successfully taken money out of the people's hand and put it into the govt's hand. Lee Con You is definitely aware of the goings on, and some of the brightest minds are working to constantly refine the system, and max the profits for the HDB.

 

[Papsmearer]

Dear PAP

The leasehold system was inherited from the British , it was there before communism and would be there went HK goes democratic etc etc

Secondly there is a legislative peg between the CPF Interest rates and the HDB Mortgage rates, the stated difference is 0.1% . It is in fact the best deal in town.


Locke

Locke, why you persist in making an ass of yourself?

The leasehold system in HK may have been inherited from the British, but by your argument, most of Mainland China also has the leasehold system. Hmm....lets see, they were communists, and before that imperial china manchu and feudal warlord system, and exactly when were the British occupying all of China so that their system could be inherited? Let me reiterate. Them COMMUNIST, us NOT COMMUNIST.

The HDB mortgage rate that you quoted of 0.1% over CPF rate is for the Concessionary Rate. U have to qualify for this. Many people don't, and they have to resort to Market Interest rate at the banks. Try a mortgage rate closer to 4%, and in the past it has been as high as 4.75%. And you telling me there is correlation between the CPF rate and the interest rate? Wrong.

 

[Papsmearer]

Do you know that the CPF scheme was started during David Marshall/Tan CC's govt in 1955 and not the PAP?

The CPF was originally conceived as a savings scheme for retirement and in fact was kept that way for many years. It was tweaked to allow citizens to buy HDB or private housing after popular demands.

Popular demand according to who? The PAP? The SHit Times? No citizen would knowingly want their CPF to be tweaked into a scheme that escalated the housing prices.

 

[Cestbon]

Locke, why you persist in making an ass of yourself?

The leasehold system in HK may have been inherited from the British, but by your argument, most of Mainland China also has the leasehold system. Hmm....lets see, they were communists, and before that imperial china manchu and feudal warlord system, and exactly when were the British occupying all of China so that their system could be inherited? Let me reiterate. Them COMMUNIST, us NOT COMMUNIST.

The HDB mortgage rate that you quoted of 0.1% over CPF rate is for the Concessionary Rate. U have to qualify for this. Many people don't, and they have to resort to Market Interest rate at the banks. Try a mortgage rate closer to 4%, and in the past it has been as high as 4.75%. And you telling me there is correlation between the CPF rate and the interest rate? Wrong.

All 1st time buyer are eligilble to take HDB loan 2.6%. 2nd time buyer have to take loan from open market(that bank). Nothing wrong with the policy.
The leasehold for 99years or some now even shorter 60years. Nothing wrong willing buyer and seller. The buyer can choose not to buy or live with their parent.

The only big problem is in the past 5 year HDB built too less pigeon hole.
New PR and citizen are fighting for smaller supply that push the price nearly double in last 5 years. Blame Mah BT for wrong decision making. He should be axe from the minister post and MP.

 

[iamtalkinglah]

Secondly there is a legislative peg between the CPF Interest rates and the HDB Mortgage rates, the stated difference is 0.1% . It is in fact the best deal in town.


Locke

It doesn't matter how much is the HDB Mortgage rates. They already made so much profits through the HDB price.

 

[lockeliberal]

Dear PAP

You should examine your argument again. All land in HK was owned by the state and given out under leasehold before it became communist. The China in Communist well turned all the land they already owned into leasehold land. The leasehold system itself has nothing to do with communism but more with state policies and state control of resources. Havingthe Gov owning all the land and leasing it out in some form, is infinitely better in this case than a few rich men owning all the land in land scarce singapore

The leasehold system was british and there were very good economic and development issues for a STATE to own all the land and to lease it out for development and property.

The criteria for the HDB loans are as listed under the website link

http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/HLHDBWho?OpenDocument

The topmost criteria is household income of less than 8,000 whilst we can argue that the limit should be higher at say $10,000 , I would say overall your statement of many people do not qualify does not apply in view of the huge no of loans on the HDBs books


Locke

 

[kingrant]

Under your scenario mentioned above you are one of the lucky few that are not playing the HDB game. U do not own a HDB flat, and in fact you are following one of the solutions by renting it. This whole thread is not applicable to you.

Indeed I'm the lucky few. And I rented because if I buy, I have to stay in it, not because I agree with you, and I'm still not sure I wanted to do that, for other reasons. But I may eventually buy one from the resale mkt if prices drop.

U have still not address the problem of selling of the HDB flat early to make a profit. If you manage to do that, where would you stay? U probably still have 30 + years of your life to live. Do you rent? If the real estate market has increased to the point that you are selling you flat at a profit, I can guarantee you the rental market would be even higher. Your excess profits will be eroded away by higher rents over the last 30 years of your life. If you don't rent and buy another flat, well, would it not be more expensive too due to the same rise in real estate prices that enabled you to sell your original flat at a higher price?

I will sell, say, the 5 room one and buy a 4 room, keep the change, and wait for the 4 room to go up in price in a few years time. Agree that the best times are gone and doing what I did will be hard to copy . The prop mkt was depressed for ome time until just before the outbreak of the global fin crisis, when property prices shot up due to the end of the 10 year construction boom/bust cycle, and the deferred payment scheme fuelled the fire for many new launches, but the recovery got hammered by the GFC and govt moves to curb speculation by rescinding the DPS. After the crisis, now it's also the advent of IRs opening that exerts upward pressure on prices.

Finally, yes, its true that you can use only the money in the Ordinary account towards flat purposes. But add it all up over the 20 years of the HDB loan. First, you have to take the money out for the down payment, and than money out for the money payments, and any other upgrade costs. Total this all up over 20 years, and add in the Present Value of money and it will easily cost you several hundred thousands dollars out of your CPF account. If you don't buy a flat, all these money will be available to you at your retirement.

But I still say paying rents means more pressure on yr domestic budget. Imagine yr pay already deducted for yr CPF and then you want to use take home pay to pay rent. Beats me.

 

[kingrant]

Have to disagree with you that enbloc is nec a result of poor planning. No govt in the world zones land use to max plot ratios and then keep it fixed for eternity. Changes will have to be made to the plot ratio as time goes on, demographics, economic needs, building of new roads, expressways, MRT, resiting of airports etc.

What I have said is that Enbloc dev allows existing land to be reused, so it is a mechanism. What I have also said is that there has been a lot of bad press on what is otherwise a good mechanism due to greedy prop agents who want to stir the mkt by pushing on developments that are still young.

At the height of enbloc fever, you can put yr CPF into old private 4 or 5 storeyed estates like Rose Gdns and some Joo Chiat estates to make a killing from enbloc sales. One only needs to be constantly on the lookout for where best to park yr moollah.

Thought you're smarter than that.

By the way, I want to tell you something about en bloc. En Bloc is the result of poor govt. planning. The plot of land you are talking about would not need to have been recycle is the govt. did its job probably and rezone it to the highest density possible. In the example that I know very well, Horizon Towers, this complex although 30 years old is in very solid shape. Its well build, and is designed to last a lot longer than 30 years, and much longer than any HDB flat. If the En Bloc takes place, a perfectly good building would be torn down. This is not recycling, its wasting. Recycling is when something is at the end of its economic life and is its components are rejuvenated into something else. This is not the case in many en bloc situations and certainly not for Horizon Towers. If the building is 90 years old and falling apart, than I agree that it should be torn down for something else. The resources that went into building something that is only 30 years old is wasted if you tear it down. As well, the energy and resources needed to build a new building to replace it is huge. En Bloc is a scheme for developers in a land scarce country to find new land.

 

[tonychat]

papsmear, i feel so tempted to knight you and call you SIR papsmear. But i have to be sure first.

 

[Papsmearer]

All 1st time buyer are eligilble to take HDB loan 2.6%. 2nd time buyer have to take loan from open market(that bank). Nothing wrong with the policy.
The leasehold for 99years or some now even shorter 60years. Nothing wrong willing buyer and seller. The buyer can choose not to buy or live with their parent.

The only big problem is in the past 5 year HDB built too less pigeon hole.
New PR and citizen are fighting for smaller supply that push the price nearly double in last 5 years. Blame Mah BT for wrong decision making. He should be axe from the minister post and MP.

Yes, u are absolutely right, u can choose to buy or not to buy. However, you should be in possession of the information that enables you to make this decision. hence the purpose of this thread. People just buy flats without the full knowledge of what they really cost. The cost benefit analysis is quite complicated on this, and it changes on whether u are a first or second time buyer, among many other consideration.

Yes, I have pointed out in other posts that the HDB has build way too few units. In the 80s, and 90s, 30,000 plus new units a year was not unusual. Now in the last few years, its barely 10,000, and in fact in 2008, I think it was only 2700. How can they build so few in the face of the FT influx, and natural demand? The reason is that MBT did not make the wrong decision. It is a deliberate plan. What happens when you reduce the supply of a product? The demand goes up. The HDB knows this. By raising the demand of the flat, the price of the flat goes up, and in particular the resale market price. This in turn enables the HDB to demand a higher price for new builds. This is all part of their plan. Otherwise, they cannot justify such large price increase. Remember the HDB is always talking about market subsidies. They claim their price is below what the market is charging and is therefore a subsidy. Well, by escalating the price of the market (by reducig the supply of flats), the market price goes way up, but the HDB can still charge much more and claim they are giving market subsidies as their price is still below the market high that they created.

 

[ps07857]

very good post PAPsmearer... I am left speechless after reading it. I think you are one of the few forummers that are able to see through AND write about the the practices of the PAP/HDB. Thanks for starting this thread.