View Full Version : HDB GAINS $2.5M FROM 1 LEASE BUY-BACK FLAT?
I refer to the article "More take up Housing Board's Lease Buyback Scheme" (Straits Times, Jan 13).
It states that "But some like 68-year-old Mr Tan, a single who asked that his full name not be published, have found a solution to their woes in HDB's schemes.
Pay $222,900 to HDB for 30 year lease?
The retired senior clerk lost the bulk of his $300,000 savings by betting heavily on Toto. Last year, he sold his three-room flat back to HDB under the Lease Buyback Scheme for about $360,000. He then paid HDB $222,900 for a 30-year lease on the flat, so he could continue to live in it.
Get $20,000 cash bonus plus $731 monthly?
About $120,000 of the net proceeds have gone into his CPF Retirement Account, and he receives a monthly payout of $731. He also received a $20,000 bonus in cash."
Let's try to analyse what this may mean for the HDB.
HDB may stand to gain $2.5m?
The $222,900 which the HDB flat owner pays to HDB - if compounded at 5% for 30 years is $984,971.
The current flat value of $360,000 - if the flat appreciates at say 5% per annum for the 30 year lease - becomes $1.56 million.
So, does it mean that the HDB may stand to gain $2.5 million ($984,971 + $1.56 million)?
Flat appreciated at 6.9% p.a.?
In this connection, as to "At first, I wanted to sell my flat on the open market. But I've lived here for more than 30 years and am very used to the environment," said Mr Tan, who bought his Toa Payoh flat for $45,000 in 1982"
- the flat actually appreciated by 6.9% per annum over the last 31 years - more than the 5% assumed in the above calculations.
Reverse mortgage?
In contrast, let's examine what normally happens in a typical reverse mortgage in other countries (currently, there are no reverse mortgage schemes in Singapore)
Take monthly income as a loan with the flat as security?
The $20,000 cash CPF Silver Bonus given for using the flat's sale proceeds to top-up one's CPF Minimum Sum, plus the $731 monthly CPF Life monthly annuity - compounded at say 5% as a loan - becomes $700,271 after 30 years
Still get $860,000 after 30 years?
So, if the flat owner dies or decides to sell after 30 years - the net proceeds available to the flat owner or his or her estate is $859,729 ($1.56 million - $700,271).
Flat owner's loss - HDB's gain?
So, does it mean that in a sense, the flat owner may end up losing $859,729, and the HDB may gain $2.5 million?
If alive after 30 years?
Another short-coming may be that there is the uncertainty as to what happens if the flat owners are still alive after the 30 year lease?
The assurances being given so far that arrangements will be made to enable the lease to be extended, is not good enough.
In contrast, in a typical reverse mortgage in other countries - the retiree gets to stay until his or her death.
HDB may realize gains earlier?
Since Mr Tan is 68 years old, chances are quite low that he will get to live up to the 30 year lease which he has paid for to the HDB.
So, does it mean that the HDB may likely take possession of the flat earlier than the 30 years - and in a way, get to realize their gains on the flat even earlier?
Leong Sze Hian
*Leong is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, has authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper column, Wharton Fellow, SEACeM Fellow, columnist for Malaysiakini, executive producer of the movie Ilo Ilo (24 international awards). He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors and 13 professional qualifications.
http://therealsingapore.com/content/hdb-gains-25m-1-lease-buy-back-flat
BY
KOK XING HUI
[email protected]: 4:03 AM, SEPTEMBER 9, 2014
SINGAPORE — The enhancements made to the Lease Buyback Scheme (LBS) drew a flurry of questions from parliamentarians yesterday, with some asking how the Government determines the value of flats that are eligible.
Others wanted to know what would happen under various scenarios, such as if a flat on the scheme came up for sale en bloc or whether flat owners would be able to obtain their proceeds in a one-off cash payment if they meet their Central Provident Fund (CPF) Minimum Sum requirement.
During the National Day Rally last month, Prime Minister Lee Hsien Loong announced that the scheme would be extended to owners of four-room flats. Other tweaks to the scheme were subsequently announced: Relaxing the Minimum Sum top-up rules, allowing home owners to choose a range of leases to keep and increasing the household income ceiling for eligible participants. These changes will come into effect in April next year.
Hougang Member of Parliament Png Eng Huat asked if the Government would consider relaxing restrictions on the sale and subletting of the LBS flat and the minimum occupation period. Currently, those on the scheme cannot sublet the entire flat nor sell it.
In response, National Development Minister Khaw Boon Wan said these rules will not change as the LBS is an option for those who want to continue living in their homes.
He also explained that the restrictions, in fact, help the Housing and Development Board (HDB) to buy the lease back at a price higher than its value, resulting in a higher payout for the home owner.
A person who has lived in his flat for 30 years and wishes to sell half of the remaining 70 years on the lease would not be able to obtain half of the lease’s total value as a result of depreciation. This is due to the fact that money is worth more today than in the future and that shorter leases depreciate quicker.
“If it’s a strict computation (of the value), it is 75:25. The tail half of your lease is a lot less than the front end of the lease which you are retaining,” he said. “If you work on that basis, the cash proceeds on the lease buyback will be much less,” Mr Khaw said.
Hence, the HDB “quite rightly” introduced conditions for the scheme — one cannot sell or wholly sublet their flats under the LBS.
“Because of those conditions, when valuers value the front end of the lease to be retained, they take that into account and discount it so that instead of 75:25 split, it then ends up roughly 60:40,” he said. This 25 per cent to 40 per cent jump is a “significant improvement in the value”, he added.
The minister also explained that the LBS proceeds are calculated by taking the market value of a flat and its remaining lease, minus the value of the lease retained by the household and any outstanding loan amount.
Should an LBS flat come under the HDB’s Selective En bloc Redevelopment Scheme, the owner will receive compensation based on the remainder of the lease on their flat at the time.
They will also be given the option of buying a new replacement flat with the same lease as their LBS flat or a fresh 99-year one at a subsidised price.
Mr Khaw also said those who have topped up their CPF Retirement Accounts to meet the Minimum Sum requirements can take any remaining proceeds of up to S$100,000 in a lump sum.
http://m.todayonline.com/singapore/mps-ask-how-flats-lease-buyback-plan-are-valued
Don't like the scheme then don't take it. like the old man advice. Don't sell ur HDB. Hold it tight tight.
I refer to the article "More take up Housing Board's Lease Buyback Scheme" (Straits Times, Jan 13).
It states that "But some like 68-year-old Mr Tan, a single who asked that his full name not be published, have found a solution to their woes in HDB's schemes.
Pay $222,900 to HDB for 30 year lease?
The retired senior clerk lost the bulk of his $300,000 savings by betting heavily on Toto. Last year, he sold his three-room flat back to HDB under the Lease Buyback Scheme for about $360,000. He then paid HDB $222,900 for a 30-year lease on the flat, so he could continue to live in it.
Get $20,000 cash bonus plus $731 monthly?
About $120,000 of the net proceeds have gone into his CPF Retirement Account, and he receives a monthly payout of $731. He also received a $20,000 bonus in cash."
Let's try to analyse what this may mean for the HDB.
HDB may stand to gain $2.5m?
The $222,900 which the HDB flat owner pays to HDB - if compounded at 5% for 30 years is $984,971.
The current flat value of $360,000 - if the flat appreciates at say 5% per annum for the 30 year lease - becomes $1.56 million.
So, does it mean that the HDB may stand to gain $2.5 million ($984,971 + $1.56 million)?
Flat appreciated at 6.9% p.a.?
In this connection, as to "At first, I wanted to sell my flat on the open market. But I've lived here for more than 30 years and am very used to the environment," said Mr Tan, who bought his Toa Payoh flat for $45,000 in 1982"
- the flat actually appreciated by 6.9% per annum over the last 31 years - more than the 5% assumed in the above calculations.
Reverse mortgage?
In contrast, let's examine what normally happens in a typical reverse mortgage in other countries (currently, there are no reverse mortgage schemes in Singapore)
Take monthly income as a loan with the flat as security?
The $20,000 cash CPF Silver Bonus given for using the flat's sale proceeds to top-up one's CPF Minimum Sum, plus the $731 monthly CPF Life monthly annuity - compounded at say 5% as a loan - becomes $700,271 after 30 years
Still get $860,000 after 30 years?
So, if the flat owner dies or decides to sell after 30 years - the net proceeds available to the flat owner or his or her estate is $859,729 ($1.56 million - $700,271).
Flat owner's loss - HDB's gain?
So, does it mean that in a sense, the flat owner may end up losing $859,729, and the HDB may gain $2.5 million?
If alive after 30 years?
Another short-coming may be that there is the uncertainty as to what happens if the flat owners are still alive after the 30 year lease?
The assurances being given so far that arrangements will be made to enable the lease to be extended, is not good enough.
In contrast, in a typical reverse mortgage in other countries - the retiree gets to stay until his or her death.
HDB may realize gains earlier?
Since Mr Tan is 68 years old, chances are quite low that he will get to live up to the 30 year lease which he has paid for to the HDB.
So, does it mean that the HDB may likely take possession of the flat earlier than the 30 years - and in a way, get to realize their gains on the flat even earlier?
Leong Sze Hian
*Leong is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, has authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper column, Wharton Fellow, SEACeM Fellow, columnist for Malaysiakini, executive producer of the movie Ilo Ilo (24 international awards). He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors and 13 professional qualifications.
http://therealsingapore.com/content/hdb-gains-25m-1-lease-buy-back-flat
the usual bullshit sites. with flawed anal list. trying to be expert to scam people. u mean house price is a straight line upwards? no years where the price goes down? what about those who want to retire and need $ and cash out during the 2008 crisis. or the 1997 crisis or the 2000-2005 slum period? did housing grow like they say 5% yoy then?
This Joker is a scam they must will choose a base year where hdb was $6000 the and then the number even look largy better.!
further more the comparison flawed is comparing to someone who cash out the lease by back and spend the cash verses someone who didn't. its akin to someone who spend all the $ from the lease by back verses another who is smart enough to invest it in something that generate 5% a year.
http://www.tremeritus.com/2014/09/02/lousy-deal-from-current-hdb-lease-buyback-scheme/
The commentary (“Emotional barriers to retirement adequacy”; last Thursday) cited psychological barriers as a reason for the poor take-up of the Lease Buyback Scheme, and that there are other more “attractive” options for asset-rich, cash-poor Singaporeans to monetise their properties.
Another reason cited was the scheme’s inflexibility.
But the Government has said it will increase flexibility, for example, by allowing flat owners to retain more or fewer years on their flats’ lease (“Govt looking at flexible options for lease buyback; yesterday).
While it may be true that Singaporeans cannot bear to lose the homes they worked so hard for, many may feel the scheme is not a good deal.
Take, for instance, a flat with 70 years left on its lease and a market value of $323,000.
The HDB will buy 40 years of the lease at $138,000, less than the $184,570 if one were to divide the market value by 70 and multiply it by 40. It is said that the lower figure is derived after accounting for depreciation over time, but the fact is properties have almost consistently appreciated in value over time.
I propose that the Government take a more generous approach in trying to help the people. Even if we do not take appreciation into account, can the HDB offer the pro-rated amount?
https://scontent-a-mad.xx.fbcdn.net/hphotos-xap1/v/l/t1.0-9/10659416_10203446396533509_8674610164835890986_n.jpg?oh=b66176c32e5f066989d0d312504f193b&oe=548A7F9C
If HDB sell 3 room SGD 273,000 for 99 years and new.
How much should HDB sell 3 room for 30 years.
One easy way is to use the 'dividend discount model' to asset valuation.
Take all the positive cashflows (rents of rented out) you would receive over the holding period, and discount all to present value using an appropriate discount rate.
You will notice that HDB's way of valuation is more apt for this method.
I am not saying that is what HDB should use, or they should not offer an outsized value to these retirees...but based on the singaporean phyche, I will say the number who will take up on this lease-buyback from HDB will still be small.
One easy way is to use the 'dividend discount model' to asset valuation.
Take all the positive cashflows (rents of rented out) you would receive over the holding period, and discount all to present value using an appropriate discount rate.
You will notice that HDB's way of valuation is more apt for this method.
I am not saying that is what HDB should use, or they should not offer an outsized value to these retirees...but based on the singaporean phyche, I will say the number who will take up on this lease-buyback from HDB will still be small.
Its meant to help the cash strap who don't want to sell their place but need cash. take HDB LBB like a social pawn shop. However I don't think its in the government interest to entice the whole nation to LBB. The 2ndary resale market will still be better model. So LBB cannot offer a better offer than the 2nd resale market. coz if LBB is better than resale the whole eco system will collapse. the risk will all be transferred to the government. Which indirectly are all the tax payers.
http://www.tremeritus.com/2014/09/02/lousy-deal-from-current-hdb-lease-buyback-scheme/
The commentary (“Emotional barriers to retirement adequacy”; last Thursday) cited psychological barriers as a reason for the poor take-up of the Lease Buyback Scheme, and that there are other more “attractive” options for asset-rich, cash-poor Singaporeans to monetise their properties.
Another reason cited was the scheme’s inflexibility.
But the Government has said it will increase flexibility, for example, by allowing flat owners to retain more or fewer years on their flats’ lease (“Govt looking at flexible options for lease buyback; yesterday).
While it may be true that Singaporeans cannot bear to lose the homes they worked so hard for, many may feel the scheme is not a good deal.
Take, for instance, a flat with 70 years left on its lease and a market value of $323,000.
The HDB will buy 40 years of the lease at $138,000, less than the $184,570 if one were to divide the market value by 70 and multiply it by 40. It is said that the lower figure is derived after accounting for depreciation over time, but the fact is properties have almost consistently appreciated in value over time.
I propose that the Government take a more generous approach in trying to help the people. Even if we do not take appreciation into account, can the HDB offer the pro-rated amount?
Another bull shit site... All I can is this kind of question is GREED have no end. When they come to talking abt home they say its not assest. when it comes to LBB suddenly it become a assest to them must ask for more $. what a joke.
I think this is an offer for those less well off a chance to have your cake and eat it. Guaranteed housing till death, why still need to nit pick? This group has not and cannot take any risk at all. The offer for some cash in pocket is better than none really. Other options avail as well in renting out rooms, so really there are choices.
HDB is like the banker in casino and will have better odds of winning. Leasee is like player who have less odds winning.
I refer to the article "More take up Housing Board's Lease Buyback Scheme" (Straits Times, Jan 13).
It states that "But some like 68-year-old Mr Tan, a single who asked that his full name not be published, have found a solution to their woes in HDB's schemes.
Pay $222,900 to HDB for 30 year lease?
The retired senior clerk lost the bulk of his $300,000 savings by betting heavily on Toto. Last year, he sold his three-room flat back to HDB under the Lease Buyback Scheme for about $360,000. He then paid HDB $222,900 for a 30-year lease on the flat, so he could continue to live in it.
Get $20,000 cash bonus plus $731 monthly?
About $120,000 of the net proceeds have gone into his CPF Retirement Account, and he receives a monthly payout of $731. He also received a $20,000 bonus in cash."
Let's try to analyse what this may mean for the HDB.
HDB may stand to gain $2.5m?
The $222,900 which the HDB flat owner pays to HDB - if compounded at 5% for 30 years is $984,971.
The current flat value of $360,000 - if the flat appreciates at say 5% per annum for the 30 year lease - becomes $1.56 million.
So, does it mean that the HDB may stand to gain $2.5 million ($984,971 + $1.56 million)?
Flat appreciated at 6.9% p.a.?
In this connection, as to "At first, I wanted to sell my flat on the open market. But I've lived here for more than 30 years and am very used to the environment," said Mr Tan, who bought his Toa Payoh flat for $45,000 in 1982"
- the flat actually appreciated by 6.9% per annum over the last 31 years - more than the 5% assumed in the above calculations.
Reverse mortgage?
In contrast, let's examine what normally happens in a typical reverse mortgage in other countries (currently, there are no reverse mortgage schemes in Singapore)
Take monthly income as a loan with the flat as security?
The $20,000 cash CPF Silver Bonus given for using the flat's sale proceeds to top-up one's CPF Minimum Sum, plus the $731 monthly CPF Life monthly annuity - compounded at say 5% as a loan - becomes $700,271 after 30 years
Still get $860,000 after 30 years?
So, if the flat owner dies or decides to sell after 30 years - the net proceeds available to the flat owner or his or her estate is $859,729 ($1.56 million - $700,271).
Flat owner's loss - HDB's gain?
So, does it mean that in a sense, the flat owner may end up losing $859,729, and the HDB may gain $2.5 million?
If alive after 30 years?
Another short-coming may be that there is the uncertainty as to what happens if the flat owners are still alive after the 30 year lease?
The assurances being given so far that arrangements will be made to enable the lease to be extended, is not good enough.
In contrast, in a typical reverse mortgage in other countries - the retiree gets to stay until his or her death.
HDB may realize gains earlier?
Since Mr Tan is 68 years old, chances are quite low that he will get to live up to the 30 year lease which he has paid for to the HDB.
So, does it mean that the HDB may likely take possession of the flat earlier than the 30 years - and in a way, get to realize their gains on the flat even earlier?
Leong Sze Hian
*Leong is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, has authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper column, Wharton Fellow, SEACeM Fellow, columnist for Malaysiakini, executive producer of the movie Ilo Ilo (24 international awards). He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors and 13 professional qualifications.
http://therealsingapore.com/content/hdb-gains-25m-1-lease-buy-back-flat
I refer to the article "More take up Housing Board's Lease Buyback Scheme" (Straits Times, Jan 13).
He then paid HDB $222,900 for a 30-year lease on the flat, so he could continue to live in it.
Get $20,000 cash bonus plus $731 monthly?
About $120,000 of the net proceeds have gone into his CPF Retirement Account, and he receives a monthly payout of $731. He also received a $20,000 bonus in cash."
Assumption
1. He is broke
2. he is staying alone
3. He has no kid
So if he leases back from HDB @ 222,900 over 30 years, that works out to $620 per month. He can in turn rent out a room at say $700 per month.
He has $731 from the monthly payout from his CPF retirement account.
He now can have $1,320 per month to spend (from payout and renting of room). What other solution does he have????
If he holds on to his HDB, (assuming he is broke), he can only get $700 per month from renting out a room. Viable option for someone who is alone who wants more monthly cash and has no one to pass the house to.
I refer to the article "More take up Housing Board's Lease Buyback Scheme" (Straits Times, Jan 13).
It states that "But some like 68-year-old Mr Tan, a single who asked that his full name not be published, have found a solution to their woes in HDB's schemes.
Pay $222,900 to HDB for 30 year lease?
The retired senior clerk lost the bulk of his $300,000 savings by betting heavily on Toto. Last year, he sold his three-room flat back to HDB under the Lease Buyback Scheme for about $360,000. He then paid HDB $222,900 for a 30-year lease on the flat, so he could continue to live in it.
Get $20,000 cash bonus plus $731 monthly?
About $120,000 of the net proceeds have gone into his CPF Retirement Account, and he receives a monthly payout of $731. He also received a $20,000 bonus in cash."
Let's try to analyse what this may mean for the HDB.
HDB may stand to gain $2.5m?
The $222,900 which the HDB flat owner pays to HDB - if compounded at 5% for 30 years is $984,971.
The current flat value of $360,000 - if the flat appreciates at say 5% per annum for the 30 year lease - becomes $1.56 million.
So, does it mean that the HDB may stand to gain $2.5 million ($984,971 + $1.56 million)?
Flat appreciated at 6.9% p.a.?
In this connection, as to "At first, I wanted to sell my flat on the open market. But I've lived here for more than 30 years and am very used to the environment," said Mr Tan, who bought his Toa Payoh flat for $45,000 in 1982"
- the flat actually appreciated by 6.9% per annum over the last 31 years - more than the 5% assumed in the above calculations.
Reverse mortgage?
In contrast, let's examine what normally happens in a typical reverse mortgage in other countries (currently, there are no reverse mortgage schemes in Singapore)
Take monthly income as a loan with the flat as security?
The $20,000 cash CPF Silver Bonus given for using the flat's sale proceeds to top-up one's CPF Minimum Sum, plus the $731 monthly CPF Life monthly annuity - compounded at say 5% as a loan - becomes $700,271 after 30 years
Still get $860,000 after 30 years?
So, if the flat owner dies or decides to sell after 30 years - the net proceeds available to the flat owner or his or her estate is $859,729 ($1.56 million - $700,271).
Flat owner's loss - HDB's gain?
So, does it mean that in a sense, the flat owner may end up losing $859,729, and the HDB may gain $2.5 million?
If alive after 30 years?
Another short-coming may be that there is the uncertainty as to what happens if the flat owners are still alive after the 30 year lease?
The assurances being given so far that arrangements will be made to enable the lease to be extended, is not good enough.
In contrast, in a typical reverse mortgage in other countries - the retiree gets to stay until his or her death.
HDB may realize gains earlier?
Since Mr Tan is 68 years old, chances are quite low that he will get to live up to the 30 year lease which he has paid for to the HDB.
So, does it mean that the HDB may likely take possession of the flat earlier than the 30 years - and in a way, get to realize their gains on the flat even earlier?
Leong Sze Hian
*Leong is the Past President of the Society of Financial Service Professionals, an alumnus of Harvard University, has authored 4 books, quoted over 1500 times in the media , has been host of a money radio show, a daily newspaper column, Wharton Fellow, SEACeM Fellow, columnist for Malaysiakini, executive producer of the movie Ilo Ilo (24 international awards). He has served as Honorary Consul of Jamaica and founding advisor to the Financial Planning Associations of Brunei and Indonesia. He has 3 Masters, 2 Bachelors and 13 professional qualifications.
http://therealsingapore.com/content/hdb-gains-25m-1-lease-buy-back-flat
the important is not how much hdb gain after a number of years, but rather is the price fair at the point of transaction.
tink leong tze hian already walk fire into devil..
this Leong guy trying to be to cute.. think too much liao lar
Assumption
1. He is broke
2. he is staying alone
3. He has no kid
So if he leases back from HDB @ 222,900 over 30 years, that works out to $620 per month. He can in turn rent out a room at say $700 per month.
He has $731 from the monthly payout from his CPF retirement account.
He now can have $1,320 per month to spend (from payout and renting of room). What other solution does he have????
If he holds on to his HDB, (assuming he is broke), he can only get $700 per month from renting out a room. Viable option for someone who is alone who wants more monthly cash and has no one to pass the house to.
What if the guy ( assuming he is broke) want to go on a holiday to pamper himself? How?
What if the guy ( assuming he is broke) want to go on a holiday to pamper himself? How?
More important to cover basic living expenses or to go holiday to pamper himself?
http://www.stproperty.sg/articles-property/singapore-property-news/why-unsold-lease-is-worth-more-than-portion-sold/a/179741/page1/1
IF A Housing Board flat owner keeps half his remaining lease and sells the other half back to the Government, what he keeps is worth more than what he sells - even though the number of years for each is the same.
This aspect of the Lease Buyback Scheme has puzzled many and yesterday National Development Minister Khaw Boon Wan explained what was behind the unusual situation. The reason, he said, is that a property's value does not fall at a steady rate.
First, there is the so-called "time value of money".
Under the scheme, a flat owner keeps the next 30 years of his lease. The Government pays now to buy the far-flung remainder of the lease - say, the final 30 years.
But $1,000 today, for instance, is worth more than $1,000 in several years' time, said Mr Khaw.
This is why the immediate half of a lease is worth more than the future half.
Second, properties with a very short lease left tend to depreciate faster than properties with a very long lease remaining.
As a result, when half the lease is kept and half sold, the first half is likely to be valued at about 60 per cent and the second at 40 per cent, said Mr Khaw in reply to Ms Foo Mee Har (West Coast GRC).
He later added that this 40 per cent, which the owner receives, is already higher than would be the case under "strict computation".
The first half of the lease is rightly worth 75 per cent, and the other half just 25 per cent. But that would mean much lower proceeds under the scheme.
This is why HDB introduced conditions. Owners who have sold part of their lease cannot resell the flat and cannot sublet it entirely, though they can sublet rooms.
"Because of those conditions put in, when valuers value the front end of the lease to be retained, they take that into account and discount it," he said.
This is why the second half is worth 40 per cent instead of 25 per cent. "So that enables the Lease Buyback Scheme to be a lot more attractive and to be a lot more meaningful to the owners."
He was replying to Workers' Party MP Png Eng Huat (Hougang), who wanted to know why such restrictions existed.
The need for substantial sales proceeds is also why HDB requires at least 20 years of lease to be sold back, Mr Khaw told Ms Lee Bee Wah (Nee Soon GRC).
Mr Hri Kumar Nair (Bishan-Toa Payoh GRC) wanted the Ministry of National Development to reveal how its calculations are made.
"How valuers value properties is not secretive," replied Mr Khaw. "It's an established practice and there are tables which are published by valuers." If owners object to the valuation of their flats, they can appeal, he added.
Ms Foo and Mr Baey Yam Keng (Tampines GRC) wondered how property cycles would affect the scheme as payouts are based on market value.
Mr Khaw said the ups and downs of the property market will affect all monetisation options, from lease buyback to selling one's flat and moving into a studio apartment. The key is proper counselling so that a flat owner is aware of all the options, he said.
Since the Lease Buyback Scheme began in 2009, 1,083 seniors from 812 households have taken part in it.
The sales proceeds go towards topping up their Central Provident Fund savings which are used to buy the CPF Life annuity.
The average monthly annuity payout for people in the scheme is $550. The highest payout is $1,200, and the lowest $50, which was for an owner with only a 5 per cent share of the flat.
More important to cover basic living expenses or to go holiday to pamper himself?
definitely holiday more important lah! after all not much saving to see the world leh.. Must use my CPF to see the world 1st mah!
https://fbcdn-sphotos-h-a.akamaihd.net/hphotos-ak-xpf1/v/t1.0-9/10487223_713710642018280_8850481888063466771_n.jpg?oh=b6b7559e6667e97f92394df70a2f0f79&oe=5498BC7B&__gda__=1418690321_5946f069c6dfb3f8cf668730c7439029
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