LETTERS: MND Chief’s HDB Flat Retirement “Nest Egg” Scheme is a Time Bomb Awaiting our Children

HAN: In a nutshell, our National Development Minister Lawrence Wong has just told Singaporeans that the way to earn money to fund your retirement is to buy a HDB flat and sell if off later at a higher price.

This is Part 2 of his online monologue on HDB flats – in the first part, he warned Singaporeans not to expect that their flats will be selected for en bloc redevelopment, i.e it’ll be worthless at the end of their 99-year lease.

So the Minister Wong’s logic goes something like this, if I’m not wrong:

(1) Buy a HDB flat
(2) Live in it for 35 years
(3) Sell it off to the next guy to fund your retirement
(4) Next guy lives in it for another 35 years
(5) Then the next guy retire how?

Mr Brown summed it up best:

Wong’s “retirement scheme” is a time bomb awaiting our children or anyone else looking to buy HDB flats in the future.

It’s passing the buck.

It’s no wonder that one generation to the next finds it increasingly difficult to buy HDB flats despite government grants and subsidies – people expect to sell their flats for a profit, at the expense of the next person.

I’m very surprised that a minister will openly encourage such behaviour, knowing full well the repercussions on future generations.
Thanks Han for this letter.
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Ed’s Note:

We reproduce both of Mr Wong’s statements here:

Part 2: Leasehold Properties as Assets

“My last blog on choosing a HDB resale flat generated some discussion and debate. Let me share some additional perspectives.

HDB flats, like many private properties, are sold on a 99-year lease. They provide a good store of asset value, so long as you plan ahead, and make prudent housing decisions.

To begin with, Singaporean couples enjoy significant subsidies when they purchase a HDB flat for the first time, be it a new flat or one from the resale market.

Take for instance a 30-year-old couple, with a combined monthly income of $5,000, looking for a resale flat in Woodlands near their parents.

They can get up to $75,000 in grants off the resale flat price, and should easily afford a flat with a reasonably long lease of 90 years.

35 years later, the couple will be 65 and the remaining lease of the flat will be 55 years.

They still have an asset which can be monetised for retirement.

In fact, this is already happening in Woodlands.

A 65-year-old elderly couple living in a 4-room flat with 55 years of lease remaining in Woodlands can sell their flat and right-size to a nearby 2-room Flexi flat with a 30-year lease.

They can enjoy a Silver Housing Bonus of $20,000 in cash. They can also get quite a lot of money from the sale proceeds – around $100,000 upfront in cash, plus $500 per month of additional income for their retirement (on top of what they would get through CPF Life).

Alternatively, if they prefer to stay in the same flat, they can apply for the Lease Buyback Scheme or LBS. This means they continue living in the flat for 30 years and sell the remaining 25 years back to HDB. They can enjoy a cash bonus of $10,000. In addition, they will get $47,000 in cash plus $400 a month for retirement (again on top of CPF Life).

The cash amount is not as much as if they were to right-size, but that’s because they can continue to stay in the same flat, and also have the option to rent out a room.

I have given some simple examples. But they are typical of many HDB households.

The general point is that your HDB leasehold flat is not only a good home, but also a nest-egg for future retirement needs.

That’s what we have achieved and that’s what we will continue to ensure – both now and in the future.”

Part 1: Choosing a Home for Life

“I read a recent Lianhe Zaobao article (15 Mar) which highlighted the high prices of several short-lease HDB flats in the resale market.

While resale flats are transacted on a willing buyer-willing seller basis, I was concerned by the suggestion that some buyers are forking out high prices for older flats, in anticipation of the benefits of the Selective En bloc Redevelopment Scheme, or SERS.

But SERS, as the name implies, is on a selective basis.

It is only offered to HDB blocks located in sites with high redevelopment potential. These are typically sites where the land has not been well utilised. It is also subject to the availability of suitable replacement sites for residents and the Government’s financial resources.

This is why only 4% of HDB flats have been identified for SERS since it was launched in 1995.

We will continue to maintain this strict selection criteria.

So please do not assume that all old HDB flats will be automatically eligible for SERS.

In fact for the vast majority of HDB flats, the leases will eventually run out, and the flats will be returned to HDB, who will in turn have to surrender the land to the State.

As the leases run down, especially towards the tail-end, the flat prices will come down correspondingly.

So buyers need to do their due diligence and be realistic when buying flats with short leases. This is especially important for young couples, who have to plan for a much longer future.

Hence, when we enhanced the CPF Housing Grant at the recent Budget, I had advised first-time home-buyers to choose a resale flat with a sufficiently long lease to cover their needs.

How long should the lease be?

Our average life expectancy today is close to 85 years.

One possible guide is to buy a flat that covers you and your spouse to age 95. This would cover most of us for life and give us peace of mind in our golden years.

So a 30-year-old couple could consider resale units with leases that are 65 years or longer. And there are many such options in the resale market today.

With a longer lease, you can benefit from the appreciation in property value in the medium-term, especially after factoring in the Government’s housing grants and subsidies.

Later, when your life circumstances change, such as when your children have grown up and moved into their own homes, you have the option of unlocking the value of your flat by right-sizing to a smaller flat. You can then consider a new 2-room Flexi flat (with leases varying from 15 to 45 years) or a flat in the resale market.

Besides seniors, there may also be other buyers who are interested in cheaper, shorter-lease resale flats. This could include those who are going through a transition in their lives, and are not ready to commit to a longer lease just yet.

Over time, we can expect a more diverse HDB resale market, with flats of varying leases to cater to the different life-cycle needs of Singaporeans.

So I encourage potential homebuyers to sit down with your loved ones, work out your budget and needs, and choose a home wisely.”



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