Dropping resale flat prices appear to contradict Singapore’s founding Prime Minister, Lee Kuan Yew’s emphatic promise that the value of public housing “will never go down!”
The Housing Development Board (HDB), a Government statutory board under the Ministry of National Development, announced last month that the price of resale flats has dipped by 0.2 per cent in the last quarter.
The latest price drop follows a steady decline of resale flat prices in the last three quarters. Resale prices declined by 0.1 per cent in the third quarter and 0.2 per cent in the fourth quarter of 2018. In the first quarter of 2019, prices fell by 0.3 per cent.
This means that over the last four quarters (Q3 2018 to Q2 2019) resale flat prices have plummeted by 0.8 per cent. In 2018 alone, resale prices declined by 0.9 per cent. Resale prices are expected to drop further in the coming years, thanks to the high supply of flats completed in 2014 that will enter the resale market this year.
The 0.9 per cent decline resale prices saw in the whole of 2018 is the sixth straight year of resale price decline since 2012, when prices went up by 6.4 per cent.
Singaporeans have said that the trend of dropping resale flat prices contradicts the Government’s past promises that the value of public housing will not go down and that public housing is an appreciating asset.
Responding to criticism over the high prices of housing in 2010, Prime Minister Lee Hsien Loong said:
“The HDB flat is not just a shelter but also a key investment asset…over the long term, the value of HDB flats depends on the strength of the Singapore economy. Provided Singapore continues to do well, our flats will maintain their value, and Singaporeans can enjoy an appreciating asset.”
That same year, PM Lee’s father and Singapore’s founding PM Lee Kuan Yew warned Singaporeans not to cast a protest vote against the PAP over the affordability of HDB flats and scolded that Singaporeans must be“daft” if they find fault with the housing policy:
“We give our buyer an asset which is below market price the moment he buys it. So there is no profit, it’s a loss, but there’s a strategy behind that loss,” he said. “That loss is to give the man an asset which he will value, which will grow in price as the country develops, as his surroundings become better.
“This is a social responsibility which we have undertaken and that’s the reason why we are re-elected… No country in the world has given its citizens an asset as valuable as what we’ve given every family here. And if you say that policy is at fault, you must be daft.”
In March 2011, Lee Kuan Yew promised: “85% of Singaporeans are living in HDB flats and we intend to keep the values of these homes up. It will never go down!… As Singapore prospers, the GDP goes-up, the value of homes will go up.”
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Just before the general election in 2011, then-National Development Minister Mah Bow Tan told Singaporeans: “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.”
In 2013, Lee Kuan Yew again urged Singaporeans not to sell their flats, and assured them that they assets that would grow in value. He promised: “We intend to keep the value of these homes up, it will never go down. Because it will be renewed, the surroundings will improve, and as Singapore prospers, GDP goes up, the value of homes will go up.”
In 2017, the hopes of many Singaporeans, who were counting on their flats to continue appreciating in value, came crashing down when current National Development Minister Lawrence Wong confirmed that the vast majority of flats will be returned to HDB without any compensation for homeowners, when the 99-year-lease runs out.
Wong warned that not all old flats will be automatically eligible for the Selective En bloc Redevelopment Scheme (Sers) and that only four per cent of HDB flats have been identified for Sers since it was launched in 1995.
The Minister’s warning was followed by HDB chief executive Dr Cheong Koon Hean’s comments in April this year that the value of aging HDB flats will indeed decline over time. Dr Cheong’s comments sparked a massive uproar among Singaporeans, with many likening the housing scheme to a “ticking time bomb,” “political big bazooka,” and a “scam”.
Then in October last year, PM Lee Hsien asserted that it is fair that the value of HDB flats will decline to zero at the end of its 99-year lease despite the government’s past promises that HDB flats are “nest-eggs” that keep growing in value over time.
PM Lee added that he thinks “it’s fair!” that the value of HDB flats will plummet to zero value and will likely have to return to the government with zero compensation.
Despite this, the Government is still holding on to the stance that there is value in older flats. In March this year, presumptive future prime minister Heng Swee Keat stressed at the annual PropNex Conference that there is still value in HDB flats with less than 40 years left on the lease.
He, however, failed to mention that there are several government policy restrictions which suppress the attractiveness and value of older HDB flats.
Using a fictitious example of a 25-year-old Singaporean buying a brand new HDB flat that is on a 99-year lease, Mr Heng pointed out that there will be more than 30 years left on the lease when the Singaporean hits the average life expectancy of age 85.
Mr Heng emphatically asserted: “Is there still value in the flat? Absolutely.”
The minister added: “At the age of 85, you decide whether you want to pass on the property to your children. You decide what you want to do with it. There is still value in the property. It is not going to go to zero when you are 85.”
Mr Heng’s claim that the flat will not go to zero value when a Singaporean becomes 85 is only under the assumption that the Singaporean is able to purchase a brand new HDB flat at the age of 25. If he purchases a resale flat, which is more affordable, the value of his property may plummet significantly by the time he turns 85.
The minister also failed to mention is that there are several government policy restrictions which suppresses the attractiveness and value of older HDB flats to buyers, such as CPF and HDB loan usage restrictions for older flats.
A few months later, National Development Minister came out to say that all 99-year leasehold properties are “clearly assets owned by the homeowners” using the same “asset” terminology to describe public housing like his political forefathers and colleagues did.
The dropping resale flat prices, however, may make some homeowners rethink whether public housing is really an appreciating “asset” like the Government continues to claim.
PAP minister stresses that 99-year-lease properties are “clearly assets owned by the homeowners”