HDB F LATS : ARE WE OWNERS OR TENANTS?
With 80 per cent of Singaporeans living in HDB flats, this question has hit uncomfor tably close to home, judging from the heated debate online. We sur vey a spectrum of home buyers for their views.
Spurred by a news report about the Government taking back 191 private terrace homes in Geylang after their 60-year leases run out in 2030, The StraitsTimes’ reader Larry Leong wrote a letter to its forum page on June 24, 2017. He called for greater clarity on the issues regarding leasehold properties as – while he was applying to lease out his HDB flat – the Housing Board referred to him as “tenant”, and his potential tenant as a “sub-tenant”. He thus questioned: Are HDB dwellers tenants or real homeowners for 99 years?
A HDB spokesman replied: “Flat owners enjoy rights to exclusive possession of the flat during the tenure of the flat lease. They can sell, let out, and renovate their flats, within the guidelines specified in the Lease and Housing and Development Act.” In addition, each HDB flat owner’s name is recorded in the title deed, with the original kept with the Singapore Land Authority, as part of the central and comprehensive record for all properties in Singapore. This confirms that the buyer is indeed an owner, says the HDB, clarifying that the letter writer had misused the term “tenant”. On its website, home purchasers are “flat owners”; “tenants” refer to those who rent public rental flats from the HDB.
This explanation did not go down well with many online denizens, who were already feeling jittery about Minister for National Development Lawrence Wong’s recent warning against shelling out big money for very old flats in hope of striking the Selective En bloc Redevelopment Scheme (Sers) lottery.
To date, only 4 per cent have been identified for Sers to HDB blocks located in sites with high redevelopment potential. Most flats will be returned to HDB when the leases run out, and the land eventually to the State.
The accumulated “bad news” led many critics to complain that despite paying hundreds of thousands of dollars (or even a cool million) for their HDB flat, it doesn’t actually belong to them. Some rationalised that this is the norm for any type of leasehold housing, be it public housing or private condominiums on 99-year leases. Others vented their anger at the Government. As we know, a vocal online minority may not always be representative of most Singaporeans, so we hit the ground to poll some home purchasers. Doris Tan, 43, co- owner of a four- room resale flat in Clementi Do you think we’re flat owners or tenants? I think we are lease-owners, but I don’t see myself as a tenant as I enjoy the right to sell my flat as I wish. The term “homeowner” is used in Singapore as a result of the Government’s constant reminder that we are one of very few countries with 80 to 90 per cent homeownership. That is tied to how a huge chunk of our monthly pay is untouchable, but that’s another story. Do you think your flat is a worthy asset? Yes, because it is the biggest purchase I have and will ever make. I didn’t profit from my previous two flat sales as they were made during downturns. But it was all right, because I was also buying during downturns when property was cheaper. Thus, I took a smaller bank loan.
What do you do to “protect” your investment? I am realistic about the fact that whether HDB or private, a 99-year lease will run out ultimately. But the Government will assist affected residents in ensuring a roof over their heads. Always buying newer flats to safeguard this situation is not a good solution. These may be flats in a worse-off location, which will then bring day-to-day stresses like long travels to work and school. I feel that my current home is the best buy of my three flats so far, even though it is older than my previous home in Choa Chu Kang.
Just a thought: When Minister Lawrence Wong spoke about high resale prices and 99-year leases, he was apparently trying to encourage buyers to be prudent. But could it also be a way to move the BTO flats, or to justify the high pricing of new HDB flats in mature estates? Elaine Toh, 53, owner of a new three- room flat in Ghim Moh Do you think we’re flat owners or tenants? Compared to other countries, we are not “homeowners” according to the common understanding of that term. I read another letter about how it is somewhat misleading to term HDB buyers as “homeowners” rather than “lease owners”, since homeowners own the land outright and never have to return it or pay rent on it, while leaseowners exclusively possess the flat for only a specified time, after which the flat returns to the State for free. It is the difference in the definition of “landowner” that seems to be the problem. Do you think your flat is a worthy asset? Yes. My previous two-room resale flat at Tanglin Halt was chosen for Sers and was valued at nearly $300,000. I bought my new three-room flat at Ghim Moh through the Sale of Balance Flats exercise for $320,000. With the $15,000 grant from the Government, the prices come close, although renovation was a large additional cost. What do you do to “protect” your investment? I haven’t thought about this, but I do not see myself affording resale flats ever again – and definitely not freehold property!
While the cost of HDB flats is much too high (mainly because the quality has deteriorated), we have to acknowledge that the Government’s efforts in housing our population has been largely successful over the decades. However, things change and we now face a problem akin to the situation in Hong Kong and Japan. Compared to Western developed nations, home ownership here is much harder, or even unattainable, if we go by the definition that homeowners never have to give up their land. The real issue is this: How will the next generation realise their dream of owning their own homes, with these skyrocketing prices? It’s a valid concern and the Government hears it. Perhaps it will change some policies. Otherwise, the population will probably shrink further. Tang SH, 52, shopping for an executive apartment in Bukit Panjang Do you think we’re flat owners or tenants? I have mixed feelings, like we are neither here nor there. Do you think your flat is a worthy asset? Yes. I paid $29,000 for my first threeroom resale flat in 1989, and sold it 30 months later at $79,000. My next two homes, a four-room flat and a five-room room flat, were sold at a smaller profit, as I had spent a large sum on renovation. However, I benefitted from a CPF grant of $50,000 because my last flat was near my parents’. After moving to and selling three other private properties, I’m now downgrading to an Executive Apartment for my retirement.
What do you do to “protect” your investment? Honestly, amenities and proximity to my family are more important than the flat’s age. The unit I’m interested in is 28 years old and marketed at $650,000. I viewed a newer 18 year-old unit, but didn’t like that it is smaller and much more expensive. But I do wonder, will I get back even 70 per cent of what I paid if I were to sell the flat in 20 years? If the current policy continues, my children suggest that I sell within the next 10 to 15 years while the flat still holds its value, and stay with them. Diana Daisy Lau, 27, shopping for her first four- room resale flat in Bukit Panjang with her fiance Do you think we’re flat owners or tenants? It’s more like leasing. What we are buying is the 99-year lease of the flat, which may not even be a full 99 years, because the Government has the right to en bloc the building. The land deed still isn’t ours. Do you think your flat is a worthy asset? It is a worthy investment rather than an asset, provided we have the capacity to buy and sell after five years to profit from it. What do you do to “protect” your investment? I believe most Singaporeans would like to own freehold land someday, but the soaring prices make it impossible for the majority of us. I don’t think the Government should simply extend the lease of HDB flats; this is to ensure that the old buildings are safe to live in, and also for progression and development’s sake. But they could try adjusting the housing policies or ownership policies. Jessica Sim, 39, owner of her first five- room flat in Jurong East Do you think we’re flat owners or tenants? We’re lessees. The Government has drilled the idea of home ownership in Singaporeans and it was a very successful nation-building notion. My parents’ generation benefitted from it when they bought cheap and sold high. Do you think your flat is a worthy asset? I thought it was when I bought my now 34-year-old flat for $568,000 in 2013. I saw how others around me enjoyed gains on their earlier investments. I’d felt assured about buying an older flat as the Government had sold us the notion of our flat as an asset. But now that Minister Lawrence Wong has said that not all old flats will be selected for Sers, what will happen to the majority of us who bought flats that are over 30 years old? The Government needs to eventually address this or it will be a growing problem. It will worsen if the economy is not growing and your asset becomes a loss. What do you do to “protect” your investment? No plans yet. I just know it’s a ticking bomb. I feel stuck. I was single when I’d bought my flat and thus didn’t qualify to buy a two-room Build-to-Order (BTO) flat even if I wanted to, as I would have busted the income ceiling. The newer resale ones were priced out of my budget. I don’t expect to make much profit the way the earlier buyers did. Perhaps I can rent it out to cover my bank loan. It’s no use for me to aim for a freehold house either, even I can afford it. In Singapore, if the Government wants to acquire your property, it really doesn’t matter if it’s freehold or not. Pauline Wee, 40, owner of her first four- room resale flat in Boon Keng Do you think we’re flat owners or tenants? Most days, I think I own it, at least for the foreseeable leasehold period. But when I reflect on it, it’s clearly a lease. Do you think your flat is a worthy asset? Yes. Leasehold is the predominant structure of our property market even for private properties, so the risk of owning leasehold properties is normalised. I paid $640,000; I’m considering selling it after hitting my Minimum Occupation Period soon. Whatyour investment?do you do to “protect” Nothing special, except not to buy a property that was too old due to potential loan restrictions, especially if I want to resell. Even then, it was admittedly not a key consideration. Thus far, developers have been able to top up leases and rejuvenate projects. As a young 52-yearold nation, nobody has seen a case where a lease is actually fulfilled. I believe that in time, provisions on how to rejuvenate leases to protect the valuation of very old properties may need to be introduced. Otherwise, in 10 to 20 years, there will be a batch of flats that cannot be flipped anymore.
( A FLAT) IS A WORTHY INVESTMENT RATHER THAN AN ASSET, PROVIDED WE HAVE THE CAPACITY TO BUY AND SELL AFTER FIVE YEARS TO PROFIT FROM IT.