View Full Version : Is this a Good or Bad idea.
HDB flats 'good store of asset value' for those who plan ahead: Lawrence Wong
SINGAPORE: A Housing & Development Board (HDB) flat is a “good store of asset value” for those who plan ahead and make prudent housing decisions, National Development Minister Lawrence Wong said.
His comments, made in a Facebook post on Wednesday (Apr 12), come in response to online debate over his comments that not all HDB flats will be eligible for the Selective En bloc Redevelopment Scheme (SERS).
The minister said in a post on Mar 24 that he was "concerned" over the idea that some home buyers in Singapore were forking out high prices for older flats in the hope of benefiting from SERS. He also pointed out that when the leases for HDB flats run out, they have to be returned to the state.
On Wednesday, Mr Wong noted that Singaporean couples enjoy significant subsidies when they purchase a HDB flat for the first time – whether it is a new or resale flat.
“Take for instance a 30-year-old couple, with a combined monthly income of S$5,000, looking for a resale flat in Woodlands near their parents. They can get up to S$75,000 in grants off the resale flat price, and should easily afford a flat with a lease of 90 years.
“Thirty-five years later, the couple will be 65 and the remaining lease of the flat will be 55 years. They still have an asset which can be monetised for retirement,” he said.
He also noted that elderly couples can opt to sell their flat and “right-size” to a two-room Flexi flat with a shorter lease, to enjoy the Silver Housing Bonus of S$20,000 in cash and use their sale proceeds for their retirement.
Those who prefer to stay in the same flat can apply for the Lease Buyback Scheme and sell part of the remaining lease back to HDB, Mr Wong said. They also have the option to rent out a room, he added.
These examples are simple, but typical of many HDB households, he said.
“The general point is that the HDB leasehold flat is not only a good home, but also a nest-egg for future retirement needs. That's what we have achieved and that's what we will continue to ensure - both now and in the future.”
- CNA/cy
https://scontent-fra3-1.xx.fbcdn.net/v/t31.0-8/17833942_10210231603439441_7804982864756029227_o.jpg?oh=056313203919609134d8c107deab05ac&oe=599AE7A1
http://str.sg/4X88
Will you still love your HDB flat when it's over 64?
Data shows that buyers don't mind old HDB flats, paying similar prices for flats whether they are 25 years old or 50. But beware a potential sharp fall when flats cross 64, with less than 35 years of lease remaining. That's when financing restrictions kick in.
In the natural order of things, depreciation sets in as the lease on a property decays over time - meaning as the asset ages, its value should fall in tandem.
Housing Board (HDB) flats which are mostly sold on 99-year leases, however, appear to defy this logic - at least for now - supported by healthy home demand and the growing economy.
Values of older flats in mature estates remain resilient, with some choice units fetching high prices. A five-room flat in Queen's Road went for $950,000 last year despite having only 57 years left on the lease. That worked out to be $706 psf based on a size of 1,346 sq ft, consultancy OrangeTee said.
But prices are unlikely to keep rising through the flat's 99-year lease. The likelihood is that values will fall at a faster clip when the flat's remaining lease is below 35 years.
OLD IS GOLD?
Property agents say buyers may prefer older flats as they are more spacious. Also, some buyers may want to live near their parents in mature estates.
Buyers may also bank on their HDB block being picked for the Selective En bloc Redevelopment Scheme (Sers). Under Sers, the HDB acquires ageing blocks for redevelopment. It compensates residents at market rate for their old flats, and lets them buy new units nearby at subsidised rates.
"From our engagement with buyers of old leasehold flats, it seems that most (think) they would qualify for Sers well before the end of the 99-year lease," noted Mr Eugene Lim, key executive officer at ERA Realty Network.
Such speculative buyers are willing to pay up to a 10 per cent premium over the market price for the old flats, PropNex Realty chief executive Ismail Gafoor said.
Such unrealistic mindsets prompted a blog post by National Development Minister Lawrence Wong last month, urging home buyers not to assume that all old flats will be selected for Sers. In fact, only 4 per cent of HDB flats have been identified for Sers since 1995. The vast majority of flats, Mr Wong noted, will be returned to HDB when their leases run out.
TIMELY REMINDER
Observers say Mr Wong's comments are a timely reminder and a reality check for those over-paying for old flats, or buying them in hopes of profiting from Sers.
It also creates an opportunity to educate home buyers on issues relating to HDB lease decay as flats continue to age.
There are about one million HDB flats. Of these, 70,000 or 7 per cent are more than 40 years into their leases. About 280,000 units are between 30 and 40 years old, according to HDB figures. That works out to about one in three flats being 30 years or older.
More than just a roof over the head, public housing and home ownership has been a key pillar of Singapore's nation-building. HDB flats are also seen as a store of value that can be unlocked when needed. They are also regarded as a reasonable hedge against inflation.
The issue of decaying HDB leases and addressing the implications on retirement adequacy will pose a challenge for the Government in the decades to come.
"It will have to manage expectations that a sizable number of HDB home owners will see the value of their flats being zero at the end of their 99-year lease," said Singapore Management University (SMU) law don Eugene Tan.
Mr Christopher Gee, senior research fellow at the Institute of Policy Studies, said: "Retirement security for a majority of Singaporeans is dependent on the housing market cycle, and the presumption that housing prices at least preserve their value over time."
PRICES STILL HOLDING UP
Property agency ERA said 1,869 flats with 60 years or below of lease were sold last year, up by about 11 per cent from the 1,679 units transacted in 2015. Deals involving such old units account for less than 10 per cent of total resale HDB transactions last year.
Average resale prices of flats with 60 years and under of lease was $364,052 in 2016, relatively stable compared with $364,264 in 2015, said Mr Lim of ERA.
Real estate portal SRX Property, meanwhile, said buyers appeared to be "rather agnostic" about the price of flats aged between 25 and 50 years, based on its analysis of HDB resale transactions in at least three estates last year.
For example, the median per sq ft price paid for flats in Bedok with lease commencing in 1970 (aged 46 years in 2016) was $407, just slightly lower than $414 for those built in 1995 (aged 21 years). Median transaction prices were much higher for newer flats built after 1995.
Dr Tu Yong, associate professor at the National University of Singapore's Department of Real Estate, noted: "Lease decay and depreciation is natural. But other factors like location and demand may push up the value, so the effects of lease decay are not so obvious."
Property prices are also dependent on factors such as size of units and their rarity. Rare terraced flats, for instance, accounted for most of the top five HDB deals for older units last year, said OrangeTee. For example, a four-room terraced flat of 1,163 sq ft in Stirling Road, Queenstown, was sold for $980,000 last year, with 51 years of lease left.
DEPRECIATION: AN ILLUSTRATION
So HDB flat prices are robust now - but will it be so 10, 20 years later, as more hit 50, then 60 years old?
It is hard to ascertain the pace at which flat values will fall. There is no available information on the rate of value depreciation for HDB flats with each passing decade.
However, analysts expect property values to drop more sharply towards the tail-end of the lease when loan restrictions and constraints in using Central Provident Fund (CPF) savings to finance the flat kick in.
International Property Advisor chief executive Ku Swee Yong said there are possibly three key points in the flat's lease cycle that will mark steeper falls in value as its resale appeal wanes, due to financing restrictions.
First, at less than 35 years of lease left when banks are unwilling to extend loans to finance their purchase. That applies to flats that are at least 64 years old.
Second, at under 30 years' lease remaining when CPF money cannot be used for down payment or to service the monthly mortgage (flats that are 69 years old). And third, when leases go under 20 years (flats that are 79 years old).
"When leases drop to 20 years and below, the prospective buyers will not be able to get HDB loans, bank loans or use CPF for the purchase. Everything has to be paid in cash in one go," Mr Ku noted.
The amount of CPF money that can be used to finance the flat purchase is also lower for units with a remaining lease of at least 30 but under 60 years.
Even before these key milestones, owners may start to find it difficult to sell their ageing units, Mr Ku said. He offers an example: A buyer pays $860,000 for a 43-year-old five-room flat in a mature estate, with 56 years left on the lease in 2017. Say he wants to sell the flat in 2033, with 40 years of lease left. Assuming the flat is in good physical condition, and its price falls at 1 per cent a year, it would be valued at $732,000 then.
If rules don't change, a buyer can only get a bank loan with a 10-year tenure to finance the flat, or an HDB loan with a 20-year tenure.
For a bank loan, the monthly mortgage payment will be $5,200 (for an 80 per cent loan over 10 years) and $3,500 for an HDB loan (90 per cent loan over 20 years).
"How many households would want, or have the ability, to service that kind of mortgage?" he asked, adding that households can choose newer flats with longer leases, and take loans with longer durations and lower monthly mortgages.
This could make re-selling pricey older units challenging.
99-YEAR LEASE CLOCK
Market watchers are divided on whether Minister Wong's comments on Sers will immediately dent sales prospects for older flats. "For now, because of overall demand, prices of HDB resale flats will not be negatively affected," says PropNex chief Mr Ismail.
However, property consultancy Edmund Tie & Company believes it may dampen demand especially for highly priced old units. It noted that there has been more discussion on the lease issue among buyers recently.
"There's more awareness, people are concerned if they put in a lot of money in the flat, whether they can recoup it in the future... We may see prices of the more expensive units easing 3 to 5 per cent this year," said Dr Lee Nai Jia, head of South-east Asia research at Edmund Tie & Company
To be sure, this matter of lease decay is not new. Every flat buyer ought to know that an HDB flat comes with a 99-year lease at best, and the buyer's rights are in accordance with the terms and conditions in the HDB lease agreement.
Ms Tang Wei Leng, managing director at Colliers International, Singapore, said: "The HDB owner or lessee has paid a price for the right of use to the property for the lease period. It is therefore fair that the value will run down to zero when the lease expires."
Sers is a niche programme affecting 80 sites so far. It rejuvenates ageing estates and gives flat owners a chance to get a new home with a fresh 99-year lease. But it is an expensive undertaking for the Government, which has said it will continue to offer Sers but only very selectively. In fact, SMU's Associate Professor Tan said he won't discount the possibility that Sers might be scrapped in future for fiscal reasons.
Barring any new schemes, this means most HDB flats will go back to the state once the lease is up.
Flat buyers would best not think of the 99-year lease as a clock that can be reset, but as a guide to planning their home purchase - ensuring the unit meets their budget and needs over the lease period.
Agree
HDB flats 'good store of asset value' for those who plan ahead: Lawrence Wong
Buy two BTO, plan ahead, don't wait for Durian to drop.
Bad idea
“Take for instance a 30-year-old couple, with a combined monthly income of S$5,000, looking for a resale flat in Woodlands near their parents. They can get up to S$75,000 in grants off the resale flat price, and should easily afford a flat with a lease of 90 years.
“Thirty-five years later, the couple will be 65 and the remaining lease of the flat will be 55 years. They still have an asset which can be monetised for retirement,” he said.
He also noted that elderly couples can opt to sell their flat and “right-size” to a two-room Flexi flat with a shorter lease, to enjoy the Silver Housing Bonus of S$20,000 in cash and use their sale proceeds for their retirement.
Those who prefer to stay in the same flat can apply for the Lease Buyback Scheme and sell part of the remaining lease back to HDB, Mr Wong said. They also have the option to rent out a room, he added.
When the shit hit the fan, you want to be the one upstair not the one with no other choice.
http://www.todayonline.com/singapore/improvements-hdb-lease-buyback-scheme-sees-jump-take-rate
http://english.stackexchange.com/questions/21860/whats-the-etymology-of-when-the-sht-hits-the-fan
Don't understand why can't they give a better idea instead.
Why wait till the shit hit the Fan than giving shit idea.
http://www.straitstimes.com/singapore/housing/buying-an-old-hdb-flat-here-are-some-things-to-consider?utm_campaign=Echobox&utm_medium=Social&utm_source=Facebook&xtor=CS1-10#link_time=1491994311
SINGAPORE - Data shows that buyers don't mind old HDB flats, paying similar prices for units whether they are 25 or 50 years old.
But beware a potential sharp fall when flats cross 64, with less than 35 years of lease remaining. That's when financing restrictions kick in.
Minister for National Development Lawrence Wong cautioned last month that the vast majority of flats will be returned to HDB when their leases run out.
Flat buyers would best not think of the 99-year lease as a clock that can be reset, The Straits Times' Wong Siew Ying wrote in a commentary.
We summarise some things to consider if you are planning to buy an old flat:
1. HOW MANY OLD FLATS ARE THERE ON THE MARKET?
There are about one million HDB flats. Of these, 70,000 or 7 per cent are more than 40 years into their leases. About 280,000 units are between 30 and 40 years old, according to HDB figures. That works out to about one in three flats being 30 years or older.
2. WHAT ARE THE AVERAGE RESALE PRICES FOR THESE FLATS?
Average resale prices of flats with 60 years and under of lease was $364,052 in 2016, relatively stable compared with $364,264 in 2015, said Mr Eugene Lim, key executive officer at ERA Realty Network.
For example, the median per sq ft price paid for flats in Bedok with lease commencing in 1970 (aged 46 years in 2016) was $407, just slightly lower than $414 for those built in 1995 (aged 21 years). Median transaction prices were much higher for newer flats built after 1995.
3. WOULD PRICES BE AFFECTED BY MINISTER WONG'S COMMENTS?
Property consultancy Edmund Tie & Company believes it may dampen demand especially for highly priced old units. It noted that there has been more discussion on the lease issue among buyers recently.
"There's more awareness, people are concerned if they put in a lot of money in the flat, whether they can recoup it in the future... We may see prices of the more expensive units easing 3 to 5 per cent this year," said Dr Lee Nai Jia, head of South-east Asia research at Edmund Tie & Company.
4. WOULD PRICES STILL BE ROBUST 10, 20 YEARS LATER, AS MORE FLATS HIT 50, THEN 60 YEARS OLD?
Analysts expect property values to drop more sharply towards the tail-end of the lease when loan restrictions and constraints in using Central Provident Fund (CPF) savings to finance the flat kick in.
Analysts highlight three possible key points in the flat's lease cycle that will mark steeper falls in value:
- At 64 years
With less than 35 years of lease left, banks are unwilling to extend loans to finance the purchase of these flats. That applies to flats that are at least 64 years old.
- At 69 years
With less than 30 years of lease remaining, CPF money cannot be used for down payment or to service the monthly mortgage.
- At 79 years
At this point, the property has to be paid for in cash.
"When leases drop to 20 years and below, the prospective buyers will not be able to get HDB loans, bank loans or use CPF for the purchase. Everything has to be paid in cash in one go," International Property Advisor chief executive Ku Swee Yong noted.
For the full analysis, go to: http://str.sg/4X88
SINGAPORE — Less than three weeks after his initial Facebook post triggered a strong public reaction, National Development Minister Lawrence Wong on Wednesday (April 12) reiterated that Housing and Development Board (HDB) flats provide a “good store of asset value, so long as you plan ahead and make prudent housing decisions”.
“Your HDB leasehold flat is not only a good home, but also a nest-egg for future retirement needs,” said Mr Wong, who provided several examples to reinforce his point.
“That’s what we have achieved and that’s what we will continue to ensure — both now and in the future.”
On March 24, Mr Wong cautioned in a Facebook post that prospective home buyers should not assume that all old HDB flats will be automatically eligible for the Selective En bloc Redevelopment Scheme, or Sers. Expressing his concern that some buyers are forking out high prices for older flats in anticipation of Sers, Mr Wong had noted that only 4 per cent of HDB flats have been identified for Sers since the scheme’s launch in 1995.
But analysts previously told TODAY that the warning may go unheeded for the time being because of the prevalent mindset among buyers today: They are looking to buy a HDB flat and sell it off within five to 10 years, in contrast to the previous generation which generally bought flats with the intention of living in them for decades.
Mr Wong’s comments also prompted some concerns among the public about the value of HDB flats as an asset, especially for retirees. Others questioned how the Government’s asset-enhancement policy for public housing would apply when HDB flats have to be returned to the Government upon expiry of their lease.
On Wednesday, Mr Wong acknowledged that his previous post had “generated some discussion and debate”.
Reiterating that HDB flats are sold on a 99-year lease “like many private properties”, he noted that Singaporean couples benefit from “significant subsidies” when they buy a Build-to-Order or resale HDB flat for the first time.
He cited a hypothetical example of a 30-year-old couple, with a combined monthly income of S$5,000, looking for a resale flat in Woodlands near their parents.
“They can get up to S$75,000 in grants off the resale flat price, and should easily afford a flat with a reasonably long lease of 90 years,” he said.
“Thirty-five years later, the couple will be 65 and the remaining lease of the flat will be 55 years. They still have an asset which can be monetised for retirement.”
He added that currently, a 65-year-old elderly couple living in a 4-room flat in Woodlands with 55 years of lease remaining can “sell their flat and right-size to a nearby 2-room Flexi flat with a 30-year lease”.
Apart from receiving a Silver Housing Bonus of S$20,000 in cash, the couple can also “get quite a lot of money from the sale proceeds — around S$100,000 up front in cash, plus S$500 per month of additional income for their retirement (on top of what they would get through CPF Life)”, Mr Wong pointed out.
If the couple prefers to stay in the same flat, they can apply for the Lease Buyback Scheme under which they can continue living in the flat for 30 years and sell the remaining 25 years back to HDB.
In this case, they will get a cash bonus of S$10,000. On top of that, they will get S$47,000 in cash plus S$400 a month for retirement, Mr Wong said.
“The cash amount is not as much as if they were to right-size, but that’s because they can continue to stay in the same flat, and also have the option to rent out a room,” said Mr Wong, adding that the “simple examples” he provided were “typical of many HDB households”.
Cire Wu
The title of the article should be renamed to stupid netizens making retarded comments endorsed by mothership
The lease is 99 years. If U purchase the flat at 30( a 10-20-year-old common age for locals to get married), U need to live till 129 to see the lease end. Ur kids is likely to not even see the end of the lease having to live till their late 90s to have to do so
2ndly, even 10-20-year-old flat, my first point still apply as U will need to live to close to 100 just to see the end of the lease
Finally, if U buy an overprice 55 yr old flat, U are a freaking retard. Don't blame the govt for your own stupidity
The level of stupidity in those comments is giving me cancer. No wonder the idiotic 99yr rental scheme from SDP have supporters. Its because people are idiots
Powered by vBulletin® Version 4.2.2 Copyright © 2024 vBulletin Solutions, Inc. All rights reserved.