Why doesn’t HDB pricing reflect lease period?

your letters

A Chua Bean Chong wrote to the Straits Times forums yesterday (http://www.straitstimes.com/forum/letters-in-print/hdb-pricing-does-not-reflect-flat-lease-period) asking why there is a class of HDB apartments that do not reflect the lease period.

The example he gave was this:

“A 4-room flat (91 sq m) in Ang Mo Kio Avenue 5, with a remaining lease of 52 years, was being sold for $357,200, while a similar four-room flat (93 sq m) in Ang Mo Kio Avenue 21, with its 99-year lease to begin next year, was being sold for $404,000.”

Firstly, we’d like to point out that there is no such thing as Ang Mo Kio Avenue 21, it is quite likely to be Street 21…but moving on…

Repurchased flats are apartments that have been repossessed by the HDB for a variety of reasons; death without legacy, bankruptcy, migration and so on. The HDB then puts these out on ballot known as a sale of balanced flats.

Many think that these units are easier to buy, because of the stigma attached with them but that is incorrect. Balance flats are actually very popular and many express interest in bidding for them. There are many benefits – the apartment is immediately ready, they are sometimes renovated and older apartments are larger. The rules for balloting for them are the same as BTOs, so it is not easy to get one.

Now, back to the writer to the Straits Times.

He suggests these repurchased apartments “reflect the lease”, so given the above example, the price of a flat with 52-year remaining should be $212,000.

This is not tenable.

All apartments in Singapore are priced by the open market and enjoy or suffer the same benefits and burdens uniformly. Why should the repurchased apartments be any different?

It would not be fair for the open market buyers if this class of properties is especially cheaper, just because it was repossessed by the HDB. Acquiring one would then be the equivalent of striking lottery. It would then naturally flow to asking why this apartment isn’t going to someone more “deserving”? Then next the question would extend to, why isn’t every apartment price controlled like this – then the entire system of HDB would be called into question.

Then there is disposal – how would the buyer of this special priced apartment sell or bequest it at death? If he cannot sell at the market rate (because he got it cheaply), how then can the next buyer acquire the apartment? Or would we say he cannot sell it at all?

All that said, the buyer of the repurchased unit can sell off the apartment (after the minimum occupancy period) at the market rate if he so wishes. He is not worse off and neither would the rest of the market.

 

 

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Tay Leong Tan

Tay Leong Tan is a collective of 3 writers. Tay, Leong and Tan. (Who were you expecting?!) We are enthusiastic about labour issues, economics and current affairs in particular.

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