To ease struggling housing resale market, MP proposes changes in methods of valuation for older apartments 

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Cheryl Chan, MP for Fenghsan constituency, is suggesting a “multi-prong” solution for the problem that owners of older flats leased from the Housing and Development Board (HDB) face. These owners are concerned that the apartments are losing value even as their leases are beginning to shorten.

Ms. Chan’s suggestions will help both buyers and sellers, since it will alter the method of valuation for these older units as well as lengthen the lease for apartments in mature towns in certain precincts. She also raised the possibility of letting older apartments be directly leased from the (HDB), and for their property loan structure to be re-evaluated.

Last Monday, May 14, in a debate in Parliament concerning the President’s Address, Ms. Chan declared that since housing is a primary concern for most Singaporeans, the Government now must consider the condition of HDB flats which are 50 years old, or older.  She also called for the Selective Enbloc Redevelopment Scheme (SERS) to be improved.

The MP further said that people who own older apartments find selling them to be difficult, what with a shrinking lease and a bigger number of housing units available in the markets. Buyers, on the other hand, simply deem these older apartments to be too expensive. Therefore, she argued, the value of these flats should not be based on the comparison method of former market sales.

Instead, Ms. Chan suggested that “the valuation to be based instead on its remaining lease, length of time occupied by current owner, and its right-sizing potential.”

Modifying this valuation will allow owners greater liquidity in order to transfer to a smaller unit, or perhaps move closer to their children, while at the same time enabling young adults or families to access apartments in mature estates in their price range from the resale market, something that would also allow for greater social mixing.

Ms. Chan acknowledged the difficulty of enabling redevelopment due to the shortage of new land plots in mature estate. She mentioned this in connection with Sers, which facilitates for apartments to be emptied and demolished with compensation and relocation options for homeowners, for the purpose of future development.

She added, “As HDB flats are typically built precinct by precinct, so rather than selling new land plots for private property, allow the private developers to top up the land lease of HDB flats for future development.”

Another of Ms. Chan’s suggestions is for the government to transform land allowed for private residences into public housing when their leases expire, which would create an improved combination of public and private housing.

The HDB resale market has been in a slump, with the prices of apartments for resale having gone down for six quarters in a row. Experts surmise that this is due to buyers coming to recognize that not all of the aging apartments are eligible for Sers, as well as the decreased value of HDB apartments that have less than 65 years left on their leases.

Lawrence Wong, National Development Minister, wrote in a post on Facebook in March 2017 how only 4 percent of apartments are eligible for SERS since the program started 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.”

HDB said that as of December 2016, there were around one million HDB flats in the country. Of these, less than a third were 30-40 years old, and only 7 percent had were older than 40 years.

Ms. Chan is also suggesting the re-evaluation of Central Provident Fund (CPF) policies for financing the purchase of property, as well as the property loan structure, with the aim of supporting people who need a home. This would entail pegging CPF funds usage and the period of loans to the age of  55 for members.

She explained why, “With a changing job landscape, most workers are not limited by their will to work or the legal retirement age; but rather the possibility of being offered a steady income job beyond that age. As the gig economy presents more variability in a steady income, the need for one to be repaying mortgage beyond age 55 is likely undesirable.”

Furthermore, Ms. Chan also suggested that people who need temporary housing but who are not in a low-income bracket be allowed the rental of apartments directly from the HDB, but within a specific time frame only. These apartments would be chosen from units that have a 45 year lease, or even less.

Examples of these would be newly-divorced single parents, young earners who do not yet need a permanent dwelling, or even families who are in transit, saying that making renting easier for such people would “give them the flexibility and space to manage or rebuild their lives.”

31 COMMENTS

  1. Her ugly mouth looks like she’s gonn say CB out. What a stupid auntie. Pls, changing valuation method will not take away the PROMISE of asset enhancement if u vote for them. Lets recap what that means for this bodoh woman. Asset enhancement means your hdb flat will INCREASE in value. So the only logical and workable way around this is to EXTEND lease upon end of 99 yrs !!

  2. I cannot understand what she’s trying to say. The issue isn’t so much valuation but the price the property can fetch. The price or value of a relatively short leasehold should not be more than the present value of the stream of rental the property is expected to fetch. Otherwise, the buyer is better off renting, unless they are paying for the expectation of capital appreciation. A property with a reducing leasehold will definitely see a decline in price, just as how in financial statements, a leasehold is usually amortized. The owners (or rather lessee) will have to suffer a loss unless someone pays more than the value. That someone is unlikely going to be a buyer in the secondary market.

  3. Cheryl Chan, MP for Fenghsan constituency suggests solutions for owners of older flats leased from the Housing and Development Board (HDB) face

    Don’t understand what she’s talking about. How can we be owners when we leased our flats from HDB? We should be leases and not owners.

  4. IMHO, at the rate the HDB BTO price is rising, it is better to rent from HDB than to buy. An average BTO flat cost about $300,000 to $600,000 depending on the size and location. Divide the price by 99 years ie. 1188 months, a $300,000 can translate into a rental instead of sale amount of $252 per month. If you buy a $600,000 flat, it will work out to about $500 per month. If we take our life expectancy as 80 years and buy the flat at 30 yo, that works out to 50 years of staying in the flat. The rental amount will be $300,000 divide by 600 which will be $500 per month for a 3 roomer and $1000 per month for a $600,000 flat. As it is a rented flat, there is no property tax to pay. This is for the present rate. Imagine by the time our next generation get their BTO in 10 or 20 years time, it may be $1m for a 3 roomer. How do we expect a diploma holder earning about $2,000 to afford to buy one? (Bear in mind that flat prices have been rising and salary has remained stagnant for a long time). In this case, HDB should provide low cost housing and start renting all flats as in the past instead of selling in the form of 99 year lease. Those who think that they are owners have to think again.

  5. If I sell my house I will rent a 2 rooms, got govt tolong, got church tolong, got volunteers visits, got every month groceries packet, got new year angbao and dinner, Christmas gifts and party, so many….. what else? Why struggle to service the loan huh?

  6. The older method to move kampung to HDB . Move the oldest HDB to newer HDB . Demolish older bad designed HDB with new HDB with better design with cost efficient technologies . Don’t just add land cost to make HDB expensive for nothing ..

  7. Wake up people! Seems like Cheryl just acknowledged that the HDB Asset Enhancement Scheme is a PAP fraud after all. Without guaranteed SERS, your mature flat which you bought at a premium becomes a fraudulent investment when a current minister (LW) goes against earlier claims from a former minister (MBT). According to wikipedia – “In law, fraud is deliberate deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.” Please vote wisely next GE.

  8. Dont fall into the trap of leasing from HDB. You end up no HDB flat and government can always change their leasing condition. I already suspect recently all those new about old HDB’s wont get renew after 99 years lease expired is government way of pushing ppl to let go their old HDB. Is a TRAP!!!.