HDB is confusing ownership with lease-holdership

 

In a letter to the forums, Lim Lea Lea, Director of Branch Operations at the HDB clarified that purchasers of HDB flats are “owners of their property”. http://www.straitstimes.com/forum/letters-in-print/hdb-buyers-are-home-owners-not-tenants

This definition is neither legally accurate, nor socially healthy.

The point of law can be corrected quite swiftly: the purchaser is a leaseholder and only enjoys exclusive possession for a period of 99 years. In fact, the bank is effectively the owner of the lease – it is a well known legal principal that they can take possession of your house “even before the ink is dry on the mortgage”.

Even the freeholder, whose title is as close to ownership as possible, is still not the owner of a land or property, though for the sake of this topic it is not necessary to discuss this.

In legal terms, exclusive possession is not the same as ownership. Unlike Mr.Lee Kuan Yew, you may not will your house to be demolished, neither individually nor collectively. This is because you do not own the property.

HDB is legally incorrect to dismiss the term “leaseholder” and call us “owners”.

The other more pressing problem is how this label affects our attitude towards HDB properties.

Many were disappointed to learn that en bloc programs will not be offered to all. This means that the HDB is not obliged to buy back your apartment at market value and your family will be left with nothing at the end of the lease.

The comments following this news was surprising. It was as if we have newly learnt the fact that HDBs would only serve them 99 years, after which there is not a single dollar to be recovered.

The announcement wasn’t a bad thing. In fact, I thought it was good – that in 2017, we finally awaken to the reality that HDBs are public properties and are not designed to make one wealthy. Preserve wealth, perhaps, but not make you rich.

There will be a lot of disappointed people around when after financing their homes for decades, find out that they won’t be receiving as much as they thought they would. Many even plan their retirement around the HDB.

Worse, if they buy at prices that are incredibly high today and find out much later that a loss has to be taken before they could sell.

Many believe that residential properties are a sure ticket to riches but realistically, it won’t be.

You must have heard about how parents and grand parents had bought HDB houses for $20k and sold it for $500k? That was only possible because our economies were expanding in phenomenal numbers, from third world to first. They have bought a piece of property when Singapore was “a fishing village” and sold it when it was a metropolis. Today we are living in a first world condition and unless we can grow from first world to diamond world, this kind of growth is a fool’s dream.

In the years leading up to 2011, property prices shot-up substantially because of government policies to combat recession (amongst other troubles), but it is very unlikely this would be allowed to happen again.

Today, you’d be happy with perhaps $200k growth over about a decade. It works out to about to over a thousand a month, not a lot of money really. Furthermore, you have to put this money back into your CPF to make up for the missed interest rates you’re getting.

It is very important to the individual to set their expectations correctly from day 1: the HDB house is not a form of investment. Don’t overspend on it. Don’t expect their prices to rocket such as those experienced by our parents and grandparents, the economic conditions are different.

There is nothing wrong in calling ourselves leaseholders, by doing so we’ll be able to better understand how to manage this very big purchase.

 

 

About the author

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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2 Comments

  • i agree with your arguments, esp ppl’s expectations that speculating it is a way to get rich. HDB all along has built in mechanisms to prevent this from happening. Furthermore, the impressive growth rates our ah gong ah ma enjoy is not going to happen again. Nowadays, growth rates in prices will be expected to hedge against inflation only.

    But 99 yr leasehold is still a very long-time, enough to feed 2 generations of a family. When the original owner pass away, they will hand it to their children who either 1) get a free house to stay for around 30-40 years without working for it 2) sell the house, rent the house and enjoy a windfall. Imo, ppl who are complaining are just greedy haha.

    Lastly on the part of the en-bloc, the best answer Lawrence Wong has to give is that not all flats will be selected for SERS- regardless of what he really thinks. Its market signalling. if he had said otherwise, a market frenzy will take place and everyone starts paying over-the-top for old flats for no reason.

  • let’s compare Singapore and a communist country – China. In China, all land belongs to the govt and are leased to residents on a 20-70 yrs period. In March 2017, China Premier Li Keqiang said a real estate protection provision that would ensure individual’s access to property under a 70-year lease would be renewed unconditionally is being drafted. Yes, renewal of land lease at no additional charge.

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