HDB 99 YEAR LEASE TIME BOMB COULD CAUSE PROPERTY MARKET COLLAPSE

At least TWO PAP Ministers (Khaw Boon Wan & Lawrence Wong) have confirmed my point about the HDB 99 Year Lease being ZERO in value when the lease expired. This is an important critical fact that most Singaporeans have ignored for decades and despite of such reality, Singaporeans are still pumping huge amount of money willingly into HDB resale market which in turn, pushes up the new BTO HDB flats!

This is one of the important reason why I would insist a TOTAL de-link of new
BTO prices from resale market prices because it doesn't make sense at all.

There are two broad ways of analysing the impacts and implications of this
HDB 99 Years Leasehold issue. i.e. Macro Level vs Micro Level.

Minister of National Development Lawrence Wong has recently flip-flopped over
this HDB 99 year lease issue. First he admitted that when the lease is up,
the HDB flat will have ZERO value and the "Leasers" (which Singaporeans
always thought themselves to be "owners") will have to return the HDB flat to
HDB and HDB has to return the land to SLA. But a couple of days later, in a
dismay effort to cushion off the shocking effect on Singaporeans, Lawrence
Wong came up with the notion that "HDB is a good store of value"!

How could HDB flats which will depreciate and end up with ZERO value
eventually to be a "good store of value"? That's totally nonsensical and
illogical.

There are many people and well known bloggers who have written on this topic
and got many points right but miss a few critical points altogether.

Micro Perspective

The former MND Minister Mah Bow Tan and up to now, Lawrence Wong, keeps
talking about "Monetize HDB flat for Retirement", which is a totally flawed
concept. I would have debated against Mah Bow Tan on this point LIVE on TV if
he had dared to accept my challenge back in GE 2011 and I would have shot
straight into his face with this 99 Year Leasehold issue of HDB and ask him
how could it be possible to "Monetize HDB for Retirement" when most
Singaporeans would face great difficulty in selling off their HDB flats when
it passed the 50 year lease mark?

Yes, the Time Bomb doesn't start to blow up with it reaches 99 Year but
rather, when your flat reaches 50 year old. How many people are able to fork
out over $3000 or even $2000 monthly to pay their mortgage for your 50 year
old resale HDB flat? Or even if they could afford to, why would they want to
buy your flat knowing that it is going to depreciate further and become ZERO
in value in the next few decades?

I believe the projections by the chart above (by Soh Yun Yee) is just too
overly optimistic. HDB flats which pass that 50 year mark, would have
suffered a steep fall in value thereafter!

And look at it this way, for HDB flats, you cannot own TWO HDB flats at the
time! Thus it means that if your parents passed away and left you their HDB
flat while you still own a HDB flat, you will have no choice but to sell one
away! i.e. either you sell off your own HDB flat or your parent's HDB flat!
Many Singaporeans will face this problem and with the upcoming silver bombing
due to aging population, the resale market will be flooded with lots of old
HDB flats with lease less than 60 years or 50 years while demand will be
extremely small!

Thus, what is the impact? A major collapse of resale market for HDB flats
which have less than 50 years lease!

This is the FUNDAMENTAL difference between a Private Property vs HDB flats
with the same 99 year lease. For Private Property, you could still keep that
property which you inherit from your parents and rent it out, really
"monetize" it, but for HDB? You can't.

For Private Property, there is a good chance for you to seek private en-block
and monetize it fully, renewing the lease again when you do so. But for HDB?
You will have to wait for HDB to initiate that SERS which is basically
non-existence now because it is not PROFITABLE for HDB to do so! This is the
reason why only 4% of HDB flats had gotten SERS and Minister Lawrence Wong
has "hinted" or rather "WARNED" that Singaporeans should not expect their HDB
flats to enjoy SERS!

Macro Perspective

Uncle Leong has rightly pointed the following:

There are 1 million HDB flats, of which 70,000 or 7 per cent are over 40
years old. About 280,000 units are 30 to 40 years old. That’s one in three
flats 30 years or older.

But what is exactly the implication? It means that by 2020, the problems of
99 Years Lease will start to surface. Yes just 3 more years. Most HDB flats
were built in late 1960s, 1970s to 1980s. From 1970s to 1980s, we have
housing estates like Tiong Bahru, Tanglin Halt, Queenstown, Bukit Merah,
Bukit Ho Swee, Toa Payoh, Hougang (old Hougang), Ang Mo Kio, Bedok, Jurong
etc built within this period. It would also mean that many flats from these
towns will face the problems when they cross 50 years lease, starting from
2020 (1970 to 2020, it is 50 years)!

It also means that if PAP government just stop doing SERS or do it at
extremely slow rate, when the lease expired for all these HDB flats in these
towns, where are these Singaporeans going to find another HDB flat to live
in? Where to find even HALF the size of these towns (assuming flats will be
built double the height of the old ones) add together to house them?

By 2060, we will start seeing these problems exploding.

On the other hand, do you really think your HDB flats could last 99 years? I
am doubtful that most HDB flats could even last 70 years while some could not
even last 50 years due to poor quality of the material used during the late
1970s to 1980s construction boom. HDB upgrading could only solve parts of
these massive problems. Some old HDB flats even have obvious cracks and
problems of concretes falling off that walls before they reach 50 years old!

Conclusion

99 Years Lease HDB flats are good policy deal IF AND ONLY IF the flats are
kept at extremely low cost and there are continuous efforts to en-block and
rebuild them starting from 30 years old onwards. At least 50% of the flats
built from 1960s to 1980s should be SERS or en-block and rebuilt before the
99 years lease expired. This will ensure we have enough land for cross
generations usage and cater for gradual population growth.

It is not meant to be "Asset Enhancement" nor "Monetize for Retirement" but
PURELY cater to the housing needs of Singaporeans of ALL GENERATIONS.

Unfortunately PAP has strayed too far away from its initial ideology just to
insert all means to milk Singaporeans while kicking the cans of problems down
the generations instead of maintaining a good balance in providing for the
critical basic needs of Singaporeans.

I would not mind to replace my 99 years lease HDB flats with another one when
it is near expiry if I have bought my first HDB flat CHEAP at cost plus and
continue to buy my second replacement flat CHEAP at cost plus as well!

But the crazy Asset Enhancement Scheme introduced by PAP government during
Goh Chok Tong's era has really screwed us up badly with the poison of greed
to entice Singaporeans to use more of their CPF funds to pump up the HDB
flats while sold the FALSE dream of forever "Enhanced" value of their HDB
flats so that they could "Monetize their HDB Flats for Retirement"! It has
mixed up and over-drawn, over-stressed our CPF which should be strictly for
our retirement needs!

Singaporeans are blinded by the poison of greed of short term gain in buying
and selling their HDB flats in one or two generations, but they have
unknowingly, sold out their own retirement plan and their future generations'
welfare by falling for such poisonous enticement.

Goh Meng Seng

Editor's Note: 

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