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Thread: The twists and turns of HDB flat values

  1. #1
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    Default The twists and turns of HDB flat values

    The twists and turns of HDB flat values

    Han Fook Kwang

    SEP 2, 2018

    The Vers scheme will help renew housing estates, but let's hope it does not cause another price spiral


    When Prime Minister Lee Hsien Loong announced a new scheme to redevelop old Housing Board flats, a friend texted me this message: "A U-turn looking straight!?"

    He had called it an about-turn because the Government had given the impression it would not extend the 99-year leases of HDB flats when they reach the end of their leases.

    The ambivalence caused concern that these flats would have zero value on expiry, leading people to argue that the Government was reneging on its promise that public flats would appreciate in value over time.

    As recently as in May, National Development Minister Lawrence Wong said in Parliament: "We've made it very clear from the outset that the HDB lease is 99 years. There's no doubt about that… Yet some have already called for automatic lease extensions, or for HDB lease top-ups by private developers. It will be easy for me to give you a politically expedient answer now and try to wave away the problem. But there are serious trade-offs and ramifications to consider."

    The writing seemed clear on the walls of HDB flats.

    The Government's dilemma was that it could not say that the leases would be extended without causing prices of old flats to go through the roof. But neither could it do nothing and allow prices to collapse, creating a political problem with tens of thousands of unhappy home owners.

    PM Lee's National Day Rally announcement of a new scheme called Voluntary Early Redevelopment Scheme (Vers) to redevelop flats which are at least 70 years old offered a way out.

    Owners of these flats would be compensated when they give up the flats for redevelopment, presumably for a higher price than if they had sold them on the open market.

    End of story?

    Not so fast.

    U-turn or not, the road ahead isn't straight and will twist and turn in unpredictable ways.

    First, Vers isn't due to begin until 20 to 30 years' time when flats in two of Singapore's oldest satellite towns, Queenstown and Toa Payoh, reach 70 years old, followed by those in Ang Mo Kio and Marine Parade.

    But that's an eternity in politics, and anything can happen to derail those plans.

    You can't even say if the ruling party will still be in power, and even if it is, whether the government of the day would agree with the proposal.

    Second, there is uncertainty over how Singapore will change as its population ages and fewer young households enter the housing market.

    How will this affect the demand for new flats, redeveloped or otherwise?

    Third is the effect of Vers on HDB prices.

    When Vers is launched in those mature estates, expect the newly developed flats to command some of the highest prices for public housing.

    Resale flats in these places already sell for close to $1 million because they are centrally located, with well-developed facilities such as MRT stations, markets, food centres and schools.

    With Vers, new price levels will be set, assuming present trends continue.

    The likely scenario: New upper-middle-class families moving into these new homes and paying top dollar for them. Older home owners will move out to other parts of Singapore, perhaps having been offered new housing options with shorter leases.

    En bloc fever on a national scale?

    Watch out for it.

    There was a time when rising HDB prices were exactly what the Government aimed for and celebrated, calling it asset enhancement, as a way to increase wealth.

    But more and more people now question this policy for a number of reasons.

    Rising prices make these homes more unaffordable for young first-time home buyers.

    Already, five-room HDB flats in the new estate of Bidadari are priced up to $680,000, but property analysts believe it is still a good buy and will appreciate in value over time.

    Good if you are an upgrader with funds to spare from the sale of your existing flat, but not so good for first-timers on a tight budget.

    It also raises questions about whether Singaporeans should be so heavily invested in property, which, for most them, is also where their retirement funds go to.

    In theory, prices cannot go up too far ahead of incomes. If they do and no one can afford them, there will be a lack of sales and prices will have to eventually come down.

    That's how the market works.

    But in practice, high price levels, though still affordable, simply mean that housing will take up an ever-increasing portion of incomes, leaving less for other consumption and investments.

    The Government has repeatedly argued that public housing is still within reach and that most people are able to use their Central Provident Fund savings to pay for their mortgages. While this might be true, it doesn't mean prices cannot be lowered still so that Singaporeans do not have to spend so much of their retirement funds on housing.

    I support Vers as a way of renewing housing estates and getting around the 99-year lease issue.

    But I hope it will not lead to another price spiral in public housing.

    Home ownership has brought tremendous benefits to Singaporeans, allowing them to share in the fruits of economic growth as values go up with a growing economy.

    Vers can be another feather in the HDB's cap.

    But there are more balls now to juggle in the air - home ownership, affordability, adequate retirement funds, stable housing prices and the inevitability of Singapore's ageing population.

    Watch out for the twisting, slippery road ahead.

    The writer is also a senior fellow at the S. Rajaratnam School of International Studies at Nanyang Technological University.

  2. #2
    Join Date
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    Default

    There was never twists and turns of HDB flat values, they just remove the profit from the HDB.

    In the beginning, HDB was built for poor people most will never buy because Singapore was never their Home.

    My father was force to buy his rental HDB for SGD 6,600 for a 3 room HDB.

    Understand the History of HDB and you will be fine, otherwise, you are in for a big surprise.

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