More go for HDB Lease Buyback Scheme
I refer to the article “More go for HDB Lease Buyback Scheme” (Straits Times, May 16).
It states that “After learning that his work contract would not be renewed next year, 68-year-old security officer Abdul Rahman Kemat and his wife decided to sell part of the lease on their four-room flat to get some passive income.
Sold 46 years lease to HDB for $144,000?
The couple, who had 81 years left on their lease, sold 46 years back to the Housing Board for about $144,000 earlier this year.
Of this sum, about $119,000 went towards buying Central Provident Fund Life plans, which provide the couple with a combined monthly payout of $1,000.
His 64-year-old wife, Madam Samah Saat, works as a school canteen helper, earning about $50 a day. They are among 1,506 households who have taken up the HDB’s Lease Buyback Scheme since it was introduced in March 2009.”
Each flat lose $1.7m?
If the 4-room flat is worth $450,000 now – and if it appreciates at say an average annual rate of 5% (HDB historical rate of appreciation is about 6%) – it may be about $2,482,207 in 35 years time.
In this connection, I understand that HDB flats have generally always been able to appreciate in value due to schemes like the Selective En-bloc Redevelopment Scheme (SERS).
The $144,000 paid to the couple – if assumed to be borrowed at an average interest rate of 5% (currently the banks’ HDB housing loan rate is about 1.8%) – will accrue to about $794,306, in 35 years time.
So, in a sense, does it mean that the flat owner may stand to lose about $1,687,901 ($2.482,207 minus $794,306)?
If so, then who gained $1,687,901 per flat?
Are there any developed countries in the world that takes away arguably, so much of homeowners’ equity in a national reverse mortgage scheme?
Reverse mortgage?
In a typical reverse mortgage in other developed countries, the homeowner would borrow against the equity of his home, and receive the net proceeds of the market value less the loan plus accrued interest, on his demise or sale of the home.
Leong Sze Hian
