National Development Minister Lawrence Wong has reiterated that public and private properties on a 99-year lease are “clearly assets owned by the homeowners” in a new video produced by the Singapore government.
In the nearly three-minute long video, which was published on the Gov.sg Facebook page, the ruling party politician begins by sharing that his parents bought their first HDB flat in Marine Parade for $25,000 in the 1970s and that they had to set aside half of their monthly salaries to service their housing loan.
The minister goes on to assert: “While HDB prices have gone up, household incomes have also increased considerably over this period.”
Claiming that young Singaporeans are able to purchase their first flats at a “generous price discount” today, Mr Wong said that a flat buyer who takes a loan to purchase a HDB flat at a non-mature estate will receive a mortgage servicing ratio of less than 25 per cent. He added: “That’s well below what my parents had to pay in the past.”
Asserting that the “vast majority” of flat buyers are able to service their loans fully from their CPF without using cash, Mr Wong said that the government wants to ensure HDB flats remain affordable for young citizens.
The minister went on the declare that all 99-year leasehold properties are “clearly assets owned by the homeowners. They can rent, they can sell at anytime and keep the proceeds.”
Pontificating on the “heavily subsidised” upgrading works HDB flat buyers are entitled to, the Lease Buyback scheme that allows flat buyers to monetise their flats and the “VERS” scheme, Mr Wong said that these measures are in place because “the vast majority of Singaporeans live in HDB flats. And we are committed to ensuring HDB remains a good home and a good store of value for retirement for all Singaporeans.”
How are HDB flats being kept affordable? How do you monetise your flat before the lease expires? Hear from Minister for National Development, Lawrence Wong, as he shares about what the Government is doing to ensure that HDB flats remain a good store of value for Singaporeans.
Posted by Gov.sg on Friday, May 24, 2019
Mr Wong’s statement that all 99-year leasehold properties are “clearly assets owned by the homeowners. They can rent, they can sell at anytime and keep the proceeds,” matches the government’s stance 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.”
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 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 Mr 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 4 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.
The burgeoning public backlash over the deprecating values of the HDB flats became exacerbated when International Property Advisor chief executive Ku Swee Yong advised “that we be honest with ourselves and recognise that we are merely lessees who rent the HDB flats for their terms”.
The real estate expert’s advice sparked uproar over whether HDB flat buyers are homeowners, lessees, or tenants/renters given the fact that HDB flats are bought on a 99-year-lease from the government.
Responding to the public uncertainties, PM Lee called the argument that the 99-year HDB lease is “merely an extended rental” as “frankly amazing” and asserted that “HDB lessees are owners of their flats and not renters.”
Instead of assuaging the concerns of Singaporeans, PM Lee’s statement only seemed to confuse the public even more since he said that that public flat buyers are both “HDB lessees” and “owners”.
Some Singaporeans suggested that the government has flipped the definition of lessee to suit them, since well-known dictionaries define those who buy property under a lease as lessees who are akin to tenants – not homeowners.
Later, Mr Wong backed his party head’s views and asserted that the notion that HDB flat buyers are merely renters is “factually and legally wrong.” He further cautioned that while the government welcomes feedback on public housing, “the debate must always be based on facts, not misinformation and half-truths.”
More recently, in March this year, potential future prime minister Heng lashed out at criticism that HDB dwellers are simply tenants instead of homeowners and asked people to “get real,” at the annual PropNex conference.
Mr Heng – who is widely expected to become Singapore’s next prime minister after his recent appointment as deputy prime minister – asserted: “This debate that is going on… (People saying), ‘No, this is a terrible hoax… This is macam (like) rental’, I mean, come on, get real.”
In the same talk, Mr Heng stressed 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.
He said: “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 fails to mention is that there are several government policy restrictions which suppresses the attractiveness and value of older HDB flats to buyers. These are some restrictions:
- From 1 July 2013, CPF (Central Provident Fund) usage and HDB loan was restricted for purchase of flats with remaining lease less than 60 years;
- Banks are unwilling to extend loans to finance the purchase of flats that have 35 years left on the lease;
- CPF money cannot be used for down payment or to service the monthly mortgage for flats which have less than 30 years of lease remaining; and
- From the 79th year onwards, the property has to be paid for in cash.