Workers’ Party (WP) parliamentarian Louis Chua has highlighted the mental stress ageing Singaporeans may be grappling with due to the deprecating value of the Housing Development Board (HDB) flats, in a social media post published on Tuesday (15 Sept).
Mr Chua, who was newly elected at Sengkang GRC in the July election, wrote on Facebook: “With many Singaporeans entering their golden years, the knowledge of their HDB flats steadily losing value as they approach the tail end of their leases, can become a significant source of mental stress and insecurity.”
Just a few weeks earlier, Mr Chua had spoken in Parliament about how the concern over lease decay has impacted the HDB resale market. Asserting that the declining value of flats have implications on retirement adequacy, Mr Chua called on the Government to prioritise the lease decay issue in the national agenda.
He said, in his maiden parliamentary debate speech:
“In his addendum to the President’s Address, the Minister for National Development wrote about taking care of Singaporeans’ housing needs, such as ensuring that public housing remains affordable especially for young families, while enhancing schemes to help our seniors tap on their flat’s value to supplement their retirement adequacy.
“However, it is precisely our flat’s value that is in question, where the HDB resale market has been affected by concerns over lease decay in the past few years. This has serious implications for the retirement adequacy of Singaporeans, as much of Singaporeans’ assets are being tied to their primary residence, which is their HDB flat.
“The Government has said earlier in 2019 that it will consider all alternative suggestions and ways to manage the expiring leases of HDB flats. We cannot continue to ignore the elephant in the room, and this is an issue which I firmly believe should rank high on our national agenda.
“Ultimately, more than 80% of Singaporeans live in HDB flats, with the overwhelming majority relying on their CPF Ordinary Account balances to pay their mortgage. With many Singaporeans entering their golden years, the knowledge of their HDB flats steadily losing value, as they approach the tail end of their leases, can become a significant source of mental stress and insecurity.”
With many Singaporeans entering their golden years, the knowledge of their HDB flats steadily losing value as they…
The Government has always held 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 were 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 then-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.
Mr Wong warned that not all old flats will be automatically eligible for the Selective En bloc Redevelopment Scheme (Sers) and that only four per cent of HDB flats have been identified for Sers since it was launched in 1995.
Then in October 2018, PM Lee Hsien Loong 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.
In March last year, PM Lee’s presumptive successor Heng Swee Keat claimed 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.
The Deputy Prime Minister and Finance Minister said: “Is there still value in the flat? Absolutely.”
Mr Heng 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.
Most recently, in June 2019, Mr Wong declared that all 99-year leasehold properties are “clearly assets owned by the homeowners” since flat buyers can rent, sell the flat and keep the proceeds, despite the argument that the value of flats goes down as the lease runs out.