HDB become 0, CPF used also become 0?


What happens when your HDB flat becomes worthless at the end of its lease – your CPF used will vanish too?

I refer to the article “The Big Read: No easy answers to HDB lease decay issue, but public mindset has to change first” (Channel NewsAsia, Jun 5).

It states that “The People’s Action Party (PAP) Government has long held up homeownership as a way to give citizens a direct stake in the country. Over time, its “asset enhancement policy” became a buzz phrase for public housing.

Since the 1990s, it has drummed in the idea of an HDB flat as both a home and an asset, providing Singaporeans an important form of retirement security.

Former Prime Ministers — Mr Lee Kuan Yew and Mr Goh Chok Tong — made bold pitches for asset enhancement, while in the last decade or so, government leaders continued to refer to an HDB flat as a “key investment asset”.

At a dinner for the International Housing Conference held in 2010 by HDB, Prime Minister Lee Hsien Loong linked the value of HDB flats to the strength of the economy: “Provided Singapore continues to do well, our flats will maintain their value, and Singaporeans can enjoy an appreciating asset.”

In 2011, then-National Development Minister Mah Bow Tan also reiterated the importance of the policy as he rebutted a suggestion by the Workers’ Party to peg the prices of new flats to the incomes of qualifying households instead of resale market prices.

Mr Mah had added: “I want to say we are proud of the asset enhancement policy. The policy is what has given almost all Singaporeans a home of their own, a home that also an asset (which) grows in value over time.”

As to “Without a doubt, a homeowner who bought his flat in the late ‘60s for example can easily sell it today at a price more than 40 times compared to what he had paid, analysts noted.

Even for those who bought their flats some years back, it is likely that they can sell it for a profit.

It may be a different story, however, for ageing flats which were bought recently — and this is how it should be, analysts said.

But of more pressing need is for buyers and sellers to adjust their mindset, to befit reality.

“This issue of ‘decaying leases’ is likely to be a circle that cannot be squared”” – with all the intense debate going on – why hasn’t anybody asked the obvious “catastrophic” question – if the value of HDB flats decline to zero at the end of the typical 99-year lease – does it mean that all the CPF used plus accumulated interest will also become zero?

Leong Sze Hian

About the Author

Leong Sze Hian has served as the president of 4 professional bodies, honorary consul of 2 countries, an alumnus of Harvard University, authored 4 books, quoted over 1500 times in the media , has been a radio talkshow host, a newspaper daily columnist, Wharton Fellow, SEACeM Fellow, columnist for theonlinecitizen and Malaysiakini, executive producer of Ilo Ilo (40 international awards), Hotel Mumbai (associate producer), invited to speak more than 200 times in about 40 countries, CIFA advisory board member, founding advisor to the Financial Planning Associations of 2 countries. He has 3 Masters, 2 Bachelors degrees and 13 professional  qualifications.