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Singaporeans to Lose More than a Million Dollars from HDB Lease Buyback Scheme?


We refer to the article “HDB Lease Buyback Scheme changes: More cash a draw, but some prefer to bequeath their flats” (Straits Times, Sep 4).
“Bend over backwards”?

It states that “The revamp raises the income ceiling from $3,000 to $10,000.
Under the new rules, they must sell at least 20 years back to the HDB, but those aged 70 and older can keep just 25 years and sell the rest. Those aged 75 and older may keep just 20 years on their lease. Those 80 or older can choose to keep just 15 years.
All eligible flat owners will be able to keep a new maximum of 35 years on their leases.”

From all the announced changes to the lease buyback scheme, we seem to be trying to “bend over backwards” to get more people to sign on to the scheme.
So far, the take-up rate of 800 households after so many years is dismal.

4-room losses even more?

On a proportional basis, we have estimated from our calculations that the loss by a HDB 4-room flat-owner under the scheme may be even more than that for 3-roomers.

Why is this so?

Let’s look at the detailed calculations.
We had calculated that a 3-room flat-owner may lose $$713,121 (“Each HDB flat lose $700,000 – Enhanced Lease Buy-back?“, Aug 15).

For a 4-room flat – using the figures from the chart accompanying the above referenced news report –

Each flat lose $1.1m?

The $450,000 flat – if it appreciates at say an average annual rate of 5% (HDB historical rate of appreciation is about 6%) – may be $1,944,874 in 30 years’ time.

The $200,000 ($130,000 top-up to CPF plus $60,000 cash plus $10,000 cash bonus) if assumed to be borrowed at an average interest rate of 5% (currently the banks’ housing loan rate is about 1.5%) – will accrue to $864,388, in 30 years’ time.

So, in a sense, does it mean that the flat owner stands to lose $1,080,486 ($1,944,874 minus $864,388)?
If so, then who gained $1,080,486 per flat under such a scheme?

Are there any countries in the world that takes away so much of homeowners’ equity in a national reverse mortgage scheme?
Reverse mortgage?

In a typical reverse mortgage in other developed countries, the homeowner would borrow against the equity of his home, and receive the net proceeds of the market value less the loan plus accrued interest, on his demise.
$1.1b lost per year?

If “I don’t think it will be in the tens of thousands… a few hundred definitely, maybe a few thousand” comes true – 1,000 flats a year taking up the scheme may mean a loss of $1.08 billion (1,000 x $1.08 million) for these elderly Singaporeans. At this rate, after say 10 years, we may have lost $10.8 billion.
Each Singaporean loses $2.1m?

As if the $1 million loss per Singaporean in our CPF scheme (“CPF: Each Singaporean lost $1m?“, Jun 9) isn’t bad enough – now we may have another $1.1 million loss under the lease buyback scheme – giving a total loss of $2.1 million per Singaporean!

This article was written by SY Lee and Leong Sze Hian

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