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.”