Minister: You own HDB (22.8.18); You lease HDB (24.3.17)?


The Minister who started the “HDB become worthless” panic in March last year by saying its a lease – now says its ownership? 

I refer to the article “A 99-year leasehold flat is an owned asset, not a rental: Lawrence Wong” (Straits Times, Aug 22).

It states that “A Housing Board flat sold on a 99-year lease is an asset that will appreciate as the country prospers – a fundamental tenet of Singapore’s home ownership policy, said National Development Minister Lawrence Wong on Tuesday (Aug 21).

Said Mr Wong: “There is a high likelihood that over a period of time, if the economy does well, if incomes rise, then property values will appreciate together with the fundamentals of the economy and your stake in the nation – your home – can also appreciate in value.”

Mr Wong was answering a question by a member of the public on the 99-year leasehold for HDB flats at a forum organised by government feedback unit Reach on what people thought about last Sunday’s National Day Rally.

The first question of the night, by a Toa Payoh resident who identified himself as Mr Lu, touched on a hotly debated issue of whether residents own, lease or rent their HDB homes.

Mr Lu asked if the Government should clarify that a 99-year lease is actually a form of long-term rental, and if it was thus misguided for residents to seek capital gain from their properties.”

As to “Mr Wong said a 99-year lease is an ownership, not a tenancy” – wasn’t it this same Minister who arguably, initiated the panic and concerns about HDB flats becoming worthless at the end of the 99-year lease, when he said in March last year that “Mr Wong said that for most HDB flats, their leases will eventually run out and the flats returned to HDB, which in turn surrenders the land the flats are on to the State.

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

He had also advised first-time home-buyers to choose a resale flat with a sufficiently long lease to cover their needs. Since the average life expectancy of Singaporeans is 85 years, people could buy flats with leases that cover them until the age of 95, Mr Wong suggested”? (“Don’t assume all old HDB flats will become eligible for Sers, cautions Lawrence Wong” (Mar 24, 2017)

In this connection, even the Straits Times said in a commentary on 28 December, 2017 (“2017 Yearender: Housing – Understanding what happens at the end of a 99-year lease“) that “National Development Minister Lawrence Wong raised eyebrows in March when he reminded Housing Board residents that the Selective En bloc Redevelopment Scheme (Sers) will not apply to all flats, only a few.

This led to a discussion on what it means to have the value of leasehold homes depreciate to zero.

With 70,000 of the total stock of one million HDB flats at more than 40 years old, nearly 10 per cent of today’s public housing will face lease expiry in 50 years”.

So, is the Minister in a sense, contradicting himself now (“99-year lease is an ownership, not a tenancy”) vis-a-vis what he said in March last year (“their leases will eventually run out and the flats returned to HDB”)?

With regard to “We are land-scarce in Singapore, we have constraints. If we give out and sell freehold land today, everyone who buys it will be very happy, and your children and whoever you pass your land to will be very happy, but eventually, there will be those without land,” said Mr Wong.

Hence, the limited leasehold terms allow Singapore to recycle land for the future. Although finite, it will cover the housing needs of at least two generations, he added” – “The idea of land shortage is a planning assumption that was valid during the days of rapid growth during nation building, but is becoming more irrelevant today.

Singapore has expanded by more than 2 sq km per year for the last 59 years. Meanwhile, improvements in urban planning, the increasing plot ratios of HDB estates, and the release of massive new sites in the future will free up more land.

According to the HDB Annual Report 2016/17, existing HDB towns can house another 490,000 residential units. Bidadari, Tampines North and Tengah Forest Town are three new sites that started development in the past three years.

Beyond 2030, Paya Lebar Airbase and the Greater Southern Waterfront at Pasir Panjang may add over 200,000 housing units. With the flight path of Paya Lebar Airbase removed, plot ratios in Aljunied and Hougang will increase, examples of which we can already see from changes to the master plan made to the Aljunied neighbourhood.

As I argued in an earlier article in 2016, the result is that land can be used more intensively. The current stock of 1.3 million units can be expanded, to house a bigger population of up to 10 million. This is not to say we should aim for such a population figure; my point is that increased land use density and the opening of new towns can significantly add to our housing stock” (Ku Swee Yong’s article “Outdated ideas on home ownership and land shortage are crippling us” (Straits Times, Aug 14)).

In respect of “Mr Sam Tan, who is also Minister of State for Foreign Affairs, Social and Family Development, agreed, adding that good economic growth in the past five decades has led to homes becoming valuable assets.

“So long as we as a people and country work together to grow our economy and share in the wealth of economic growth, then going forward, our homes will be an important and valuable asset that we can use as a retirement nest egg,” said Mr Tan” – this may be somewhat flawed, as arguably, it was the Government’s consistent rhetoric that HDB is an “asset enhancement” policy, and the Government’s control of supply and demand (eligibility and pricing policies, etc) which drove the relentless rise of HDB prices.

As to “”When you buy a car, how long can you use a car for? Is it a rental car, or your car? A 99-year lease is far longer than 10 years. It is yours. It is an asset. It is owned by the homeowner,” said Mr Wong” – this may be akin to an apple to orange comparison.

Everybody knows that the moment you drive your new car out of the showroom – it will start depreciating in value, but everybody knew (thanks to “asset enhancement”) that HDB values would generally go up over time, until the revelation now (started in March last year by the same Minister) that your CPF and cash used to pay for your HDB flat may go up in smoke at the end of your 99-year lease!

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.