All flats can Lease-buyback: Why?

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Has our CPF system and HDB ‘asset enhancement’ failed Singaporeans?

I refer to the article “Lease buyback scheme open to all HDB flats; Govt looking into letting buyers use more of CPF for shorter-lease flats” (Straits Times, Aug 20).

It states that “Elderly owners in all Housing Board flats – including those in five-room units or executive maisonettes – can soon sell a part of their lease to the Government and use that income to fund their retirement years.”

As to ‘Previously, the Lease Buyback Scheme was restricted to those living in four-room or smaller flats’ – don’t you find it somewhat puzzling that such a significant change in HDB policy, was left out of the National Day Rally speech yesterday evening?

Well, perhaps this may give us a possible clue as to why? – “Minister for National Development Lawrence Wong noted in a blog post on Monday (Aug 20) that there are seniors who prefer to age in place, or have a bigger space for their extended family members to visit them regularly”.

I think we may simply be not saying the obvious – that even owners of larger 5-room and executive flats may be so cash-strapped in retirement – that they may have to resort to giving up the future equity on their flats in return for just the right to stay for say another 30 years and a lump sum of money.

So, whatever happened to our CPF system?

Since the average lump sum payout is just $146,000 for 4-room flats and smaller (see below) – it may not be very much more for 5-room and executive flats.

In this regard, it may be quite uncharacteristic of the HDB to make such a significant policy change without any figures.

Also, why talk about it through a Minister’s blog post?

With regard to “The current take-up rate for the scheme, which was implemented in 2009, is relatively low. As of Nov 30, 2017, about 2,500 families have benefited from it. The proceeds they received average about $146,000” – why is the take-up rate so low?

In respect of “Cash-strapped owners of larger flats, in particular, will have a chance to raise much-needed funds without selling the homes they have lived in for most of their lives, he said.

Mr Wong’s ministry is also looking into ways to let buyers of shorter-lease flats use more of their CPF funds for their purchase without compromising their retirement savings” – isn’t this somewhat self-contradictory?

By allowing people to use more of their CPF to buy shorter lease flats (resale) which have declining or no resale value at all (new short-lease flats) – isn’t it akin to “burning up” your CPF?

As to “Improving the liquidity of the resale market for older flats, he said, would facilitate an elderly resident’s move to a smaller unit.

Currently, CPF can be used for the purchase of older HDB flats subject to certain restrictions, which kick in when the remaining lease is less than 60 years.

A home owner can use his CPF money if his age plus the number of years left on the remaining lease of the property is at least 80 years, but subject to restrictions. No CPF money can be used if the remaining lease is less than 30 years.

“These rules are meant to ensure that buyers purchase a home for life, without compromising their retirement savings,” Mr Wong said. But he added that there is “scope to provide more flexibility for buyers of shorter-lease flats while safeguarding their retirement adequacy”” – isn’t this akin to a contradiction in terms, as arguably it was the change in policy to restrict the use of CPF and housing loans, which caused the rapid decline of the value of older HDB flats in the first place?


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.