In March this year, Minister for National Development Lawrence Wong wrote on the ministry’s blog that for the “vast majority” of the public housing flats that Singaporeans “buy,” “the leases [of these flats] will eventually run out, and the flats will be returned to HDB, who will in turn have to surrender the land to the State.”
Wong then dropped the bombshell on Singaporeans: “as the leases [of the flats] run down, especially towards the tail-end, the flat prices will come down correspondingly.”
So what does this mean?
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The Minister confirmed that the value of the flats will be zero at the end of their 99-year lease,” opposition politician Gerald Giam from the Worker’s Party explained – he had asked the then-Minister for National Development Khaw Boon Wan a similar question as well in 2013.
Giam explained: “all HDB [public housing] flats are sold to Singaporeans on a 99-year lease. We are technically not home owners, but lessees.
As such, Giam said, “I asked the Minister for National Development, during the 20 January 2014 Parliament sitting, what the value of HDB flats would be once their leases expire.”
High prices, zero value
Singaporeans will no longer “own” their homes. The homes that they pay one of the highest housing prices in the world to “buy” will have zero value.
But Khaw added that there is a “Selective En bloc Redevelopment Scheme (SERS) [which] is part of the Government’s estate renewal strategy for older estates.
“It offers an opportunity for flat owners to buy a new replacement flat with a fresh 99 year lease,” he added.
For a while, it looked like there was a way out. Khaw said this in 2014.
But four years later, in March this year, Wong put the lid on any such hope. He retorted:
“please do not assume that all old HDB flats will be automatically eligible for SERS.”
He dropped another bombshell:
“only 4% of HDB flats have been identified for SERS since it was launched in 1995.”
In other words, at the current pace that SERS is being implemented, 96 percent of HDB public flats will most likely have their leases run out, these Singaporeans will no longer own their homes, and their homes will have zero value.
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The government does not want to release a breakdown on how housing prices are determined, but now, we have an estimate – land costs could make up as much as 60 percent of the prices of new HDB flats. In Singapore, the government owns about 90 percent of the land. There is not much available information on the land sales statistics but some scattered statistics can be found. The Singapore Land Authority (SLA) manages the land sales system. In 1997, it earned S$14 billion in land sales, which was a historical record. In 2006, revenue grew to $6.2 billion, before reaching S$12.4 billion in 2007 to hit a ten-year high. And in 2012 alone government receipts from land sales totalled the equivalent of £9.1 billion (US$11.7 billion), according to the book, 'Rethinking the Economics of Land and Housing'. Surely, this is not a “pittance.”
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s social commenter and past president of Singapore’s Society of Financial Service Professionals Leong Sze Hian pointed out, in its reporting of the budget surplus to Singaporeans, the Singapore government does not follow the standard framework as set out by the International Monetary Fund (IMF)'s Government Finance Statistics.
In the estimated budget surplus that the Singapore government reported for FY2016, it reported only S$3.45 billion. However, in a separate cash surplus, there is an additional S$10.1 billion reported under the category, “Sales of Land”, Leong said. As he explained, this figure should have been included as revenue under the budget surplus, according to IMF guidelines. However, the Singapore government has omitted this figure.
Leong calculated that the cash surplus for the ten years from 2005 to 2014 would be S$189.8 billion, or billions of dollars in land sales that the government would have earned that it does not report to Singaporeans in the budget surplus.