Speaking at a closed-door post-National Day Rally talk this month, Prime Minister Lee Hsien Loong asserted that it is fair that Housing Board Development (HDB) flats will decline to zero value 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.
The Asset Enhancement policy was pioneered by Singapore’s second Prime Minister Goh Chok Tong in the 1990s. Responding to criticism over the high prices of housing in 2010, Singapore’s third and current PM Lee Hsien Loong exhorted about how HDB flats are an appreciating asset as he 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 father and Singapore’s founding Prime Minister 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 promised again, “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.”
The hopes of many Singaporeans, who were counting on their flats to continue appreciating in value, came crashing down last year 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 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 scheme to a “ticking time bomb,” “political big bazooka,” and a “scam”.
Then, in his National Day Rally speech this year, Prime Minister Lee Hsien Loong said that he is introducing the new Voluntary Early Redevelopment Scheme (Vers).
The new scheme, which will come into effect in 20 years time, will allow homeowners of flats which are 70-years-old to opt to sell the remaining lease back to the government through collective sale, although compensation under Vers will be less generous than that under Sers since there is less financial upside for the Government to buy back 70-year-old flats.
While it remains unclear at this point how much homeowners will receive if they opt for Vers and whether the compensation will be sufficient for homeowners to purchase another flat that affords them the same standard of living, PM Lee’s introduction of Vers seemed to combat some worries that the value of HDB flats will plummet to zero.
That is, until this month at the closed-door People’s Association kopi talk on 14 Oct, when the PM seemed to indicate that value of HDB will drop to zero when the lease runs out and asserted that he thinks this is fair:
During the Q&A segment of the dialogue session, the head of Government touched on HDB flats and the 99-year lease when he was asked the following question by a Mr Thiru from Jalan Kayu:
“Generally people agree that we need to recycle land, so that the future generation have equal opportunity to buy flats. But people are also upset that HDB flats have zero value at the end of the 99-year lease – meaning that the CPF used to pay off the flat also disappears and they have little left for retirement. Your comments please.”
In a meandering response, PM Lee indicated that it would be “unfair” for the Government to pay for flats that have reached the 99-year lease since the homeowner has had use of the flat for that many years:
“Thiru asked me why at 99 years the house has no more value. I think the answer is: because when we sold you the flat, we sold you a 99-year lease – which means you pay a certain amount of money, the flat is yours for 99 years, at the end of 99 years you give the flat back to the Government. That’s what a 99-year-lease means.
“It’s like when we sold the hawker stalls to the hawkers for 20 years, 20-year lease. They got the stall for 20 years, during which they can use it, they can operate it, they can sublet it. At the end of 20 years, it comes back to the Government, it’s the Government’s again.
“And some of the stalls have already come back to the Government. For example, at Chomp Chomp and a few other areas. I think Chomp Chomp has come back already right? But certainly some of them have already come back. So at the end, it’s over.
“But is it fair? I think it’s fair! You buy a property, we give you a price – in fact, we give you a subsidised price – the property is worth a lot of money. You can live in it, after five years you can sell it, after a certain time you can also rent it out and even do lease buyback with the Government.
“If you buy a house which has 99 years leasehold when you get married, say when you are 30-years-old, then by the time you retire – say when you retire at 70, that’s 40 years later – that means the house still has 59 years of life left. So that’s enough for you to live in for free for the rest of your life. Plus extra!
“Unless you happen to live until 129-years-old – which one day maybe somebody will but so far very few.
“So actually we’ve given you a house, paid for by the time you retire, and it has enough value – it’s got enough life – for you to live in it for the rest of your own retirement, and furthermore, at the end it still has maybe – if you live till 90 – maybe its got 30-40 years beyond that.
“So it has value! Value which you can use, value which you can give to you children. Your children may not want to live in it, they can sell it, they can give it back to HDB.
“But at 99 years, it comes back to the Government. You have got 99 years of use out of it while the Government gets back the land, recycle and can redevelop for somebody else. I think that is fair.
“I think that is the fundamental point which we have to understand, because if we made it forever – or if we said at the end of 99 years, you give me back the house, I give you back your dollars – well, then what about the years when you have been living in the house? You must pay rent right? Which I don’t think is the deal.
“So I think that we have to understand this – at the end of 99 years, the house must come back to the Government. In between, what can I do to help the house keep its value? Well, I’ve got HIP, I’ve got HIP II, and at the end – to make it more convenient to people, to give you choices – I offer you Vers.
“You don’t have to take. It’s up to you. But I think it’s a good arrangement and I hope that we will be able to make the term so that some people will take. When does the Vers come? The Vers comes after the house is 70-years-old. It doesn’t mean that it will come on the 70th year on your birthday. But it means after 70 years and before 99 years, you’ve got a good chance of having Vers.”
PM Lee did not appear to consider how much value a HDB resale flat would have for homeowners. Neither did he give an answer to Thiru’s point about how “the CPF used to pay off the flat also disappears and they have little left for retirement”.
Statistician and president of human rights NGO Maruah, Leong Sze Hian, asked: “Based on what PM Lee has said, isn’t this arguably yet another confirmation that your HDB flat may decline to zero value?”