By: Leong Sze Hian
HDB a ‘good store of asset value’ for those who plan ahead
I refer to the article “National Development Minister says HDB is “good store of value” – no mention of “asset enhancement”“.
The National Development Minister, Lawrence Wong, said in his post that “a 65-year-old elderly couple living in a 4-room flat with 55 years of lease remaining in Woodlands can sell their flat and right-size to a nearby 2-room Flexi flat with a 30-year lease. They can enjoy a Silver Housing Bonus of $20,000 in cash.” But according to HDB’s web site – those who have received a housing grant have to pay a resale levy of up to $55,000.
Moreover, according to Property Asia Direct, “you need to return the grants back into your CPF account when you sell the HDB flat, PLUS ACCRUED INTEREST over the duration of your occupation in the flat. This is on top of ALL the CPF monies used for your flat purchase (PLUS accrued interest). Hence, even if your HDB flat has appreciated in value, don’t be surprised when you are left with little or no cash proceeds when you sell your flat”.
Mr Wong also said in his Facebook post that those who “prefer to stay in the same flat…can apply for the Lease Buyback Scheme or LBS. This means they continue living in the flat for 30 years and sell the remaining 25 years back to HDB.” I had pointed out in my article “HDB Lease Buyback: $1.7m gain or loss?” how LBS is unlike typical reverse mortgage in other developed countries, where the homeowner would borrow against the equity of his home, and receive the net proceeds of the market value less the loan plus accrued interest, on his demise or sale of the home.
As to the Minister’s comments that HDB owners “also have the option to rent out a room”, surely the need to give up in a sense the privacy of one’s home in order to “monetise” may be kind of like stating the obvious.
“Typical” or so few?
The Minister said that the examples he provided “are typical of many HDB households.” But how can this be when the number who have signed on to the HDB Lease Buyback Scheme is so little?
“Since the launch of the scheme in 2009, 471 households signed up in the first four years – averaging at about 117 annually. A further 494 took up the scheme following modifications in February 2013 over a period of about two years, an average of slightly less than 250 a year” -‘Annual take-up of HDB’s Lease Buyback Scheme more than doubles‘ (Channel NewsAsia, May 15, 2016)
Similarly, how many have downgraded to a two-room flexi flat?
“Plan ahead and make prudent housing decisions”?
So in summary, we have to question if the HDB flat is indeed a “good store of asset value” when one has to downgrade to a tiny 2-room flat (assuming one is able to pay the resale levy), or give up the future equity and value of one’s flat in exchange for a lease of say 30 years and some money into the own CPF.