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SINGAPORE — The Government is studying the lease issue of older Housing and Development Board (HDB) flats, amid concerns about the impact of lease expiry on resale prices.
Announcing this in Parliament on Thursday (May 17), National Development Minister Lawrence Wong also spelt out the "serious trade-offs" involved as he noted calls for automatic lease extensions or HDB lease top-ups by private developers.
For instance, despite the authorities' best efforts at planning, Singapore is still severely constrained by space. If there is no more land to recycle for future public housing, it could affect future generations and their access to subsidised housing and their ability to have "an affordable and quality home in Singapore", said Mr Wong, who was speaking on the fourth day of the parliamentary debate on the President's Address.
Noting that it is "not a straightforward matter", the minister said the authorities cannot assume that everyone wants a lease extension. More maintenance will be needed for older flats, and this will be costly for residents, he said.
"It will be easy for me to give you a politically expedient answer now and try to wave away the problem. But there are serious trade-offs and ramifications to consider," he said.
He added: "Ultimately, the government must grapple with these difficult questions, study the matter, and do the responsible thing."
Acknowledging concerns about the impact of lease expiry on resale prices, Mr Wong reiterated that there is still value in older HDB flats, which can be unlocked for retirement.
Based on transaction data over the past year, an older four-room flat with less than 60 years remaining would sell for around S$300,000 and a five-room flat would sell for around S$400,000 in non-mature estates. For flats in more popular locations, prices can be significantly higher – more than double the price, Mr Wong said.
"So the transacted price depends not just on length of remaining lease clearly, but also depends on many other attributes. Factors like location, the storey height, the condition of the flat these are all very relevant," he added.
Hence, the sales proceeds from older flats "would be more than sufficient to purchase a smaller flat for retirement", he said. For example, one can buy a two-room flexi flat from HDB with a 40-year lease for around S$100,000, or a three-room resale flat for about S$250,000, depending on location.
Those who prefer to stay in the same place can also use the Lease Buyback Scheme, where they can sell part of the remaining lease to HDB or have the option of renting out a bedroom, he noted.
"So the monetisation schemes we have are in place and they are working; we will continue to review and enhance the schemes, and help our elderly unlock the value of their flats for retirement," he said.
MPS RAISE CONCERNS
On Monday, kicking off the parliamentary debate, Fengshan Member of Parliament (MP) Cheryl Chan proposed taking a "multi-prong" approach to help sellers and buyers by changing the valuation method for ageing units and extending the lease for flats in mature towns of selected precincts, among other things.
Her suggestions came as the HDB resale market continues to be lacklustre, as flash estimates last month showed that prices of resale flats have fallen for six consecutive quarters. Some property analysts attributed this to the realisation among prospective buyers that not all old flats will be eligible for Sers, and the declining value of HDB flats with less than 65 years worth of lease left.
In a Facebook post in March last year, Mr Wong noted that only 4 per cent of HDB flats have been earmarked for Sers since its launch in 1995. "For the vast majority of HDB flats, the leases will eventually run out, and the flats will be returned to HDB, which will in turn have to surrender the land to the State," he said then.
All HDB flats have a 99-year lease. As of December 2016, there were a total of about a million HDB flats in Singapore. Among these, about 7 per cent were at least 40 years old. Another 29 per cent were between 30 and 40 years old, HDB had previously said.
On Thursday, Marsiling-Yew Tee GRC MP Alex Yam pointed out that the ongoing en bloc fever has led to comparisons with the HDB “lease decay” situation. “That a 20-year old private apartment or a 40-year old HUDC (Housing and Urban Development Company) can undergo collective sale and thus monetise the asset for owners and turn back the clock for developers seems unfair,” he noted.
Workers’ Party (WP) Non-Constituency MP Leon Perera said the possibility of HDB resale prices being dampened in the future as more Build-to-Order flats are built, among other factors, “places pressure on the goal of monetising one’s own HDB flat for future retirement income or even emergency or supplementary income”.
“This is a large and complex issue which the Workers’ Party intends to study in the months ahead, with a view to make constructive suggestions,” he added.
Mr Wong said he would welcome any ideas on the issue from the WP, or the public at large, for the matter.
Nevertheless, he reiterated that the lease of HDB flats is "not an immediate issue" given that the vast majority of units have more than 60 years left on their lease. The oldest HDB flat today is about 50 years into its lease.
Noting that buying and selling a property can be a complex undertaking, Mr Wong said it is "easy to get carried away by market sentiments".
For instance, some were speculating in older HDB flats to get the Selective En bloc Redevelopment Scheme (Sers) benefits some time back. Now, people are overly anxious about how much their older flats can fetch in the resale market, he added.
"My advice to Singaporeans is this: Don't buy or sell based on speculative information. Look at the facts and if you are in the market for a home, do your homework carefully, and choose something that fits your needs," he said.
The government will make the resale market work better for potential buyers and sellers, such as by better matching the buyers and sellers in the market. More information on the available flats in the market – be it new flats or resale flats – can be provided to help buyers and sellers transact more smoothly and to make more informed housing decisions that best suit their needs.
The authorities are also watching the private housing market, said Mr Wong. In contrast to HDB resale prices, the prices of private homes have been heading north, setting fresh records.
"The Government cannot control or fix prices, But neither do we take a completely hands-off approach," Mr Wong said. "We recognise that there may be over-borrowing in a very low interest rate environment, and that sharp price changes that run ahead of fundamentals can be destabilising to the broader economy," he added.
Apart from the various measures put in place over the years, the authorities will continue to monitor market trends closely and make use of various policy levers to ensure a stable and sustainable property market. "My assurance is that the
Government will continue to provide affordable and quality homes for all Singaporeans – both now and in the future," he said.
Mr Wong also dismissed speculation circulating online that the Government would stop the use of the Central Provident Fund (CPF) entirely for the purchase of HDB flats.
"Let me be very clear about this. We are not stopping the use of CPF for HDB purchase. Even for older flats, CPF can still be used but under certain conditions to safeguard retirement adequacy of homebuyers," he added.
https://www.todayonline.com/singapo...ts-which-involves-serious-trade-offs-lawrence
