Sunday, 26 August 2018

99-year HDB leases: PM Lee Hsien Loong refutes notion that lease is extended rental, not a sale

Home ownership gives Singaporeans a stake in nation
It has improved lives for all, he says, refuting idea that 99-year HDB lease is just 'extended rental'
By Royston Sim, Deputy Political Editor, The Straits Times, 25 Aug 2018

Prime Minister Lee Hsien Loong set out yesterday why home ownership is a key national policy, saying it gives every Singaporean a stake in the country and has improved lives significantly for all.

On the issue of 99-year Housing Board leases, Mr Lee refuted the notion that the lease is "merely an extended rental" and not a sale.

He said he found the argument by some commentators "frankly amazing", as many private properties are held on 99-year leases but no one argues they are merely being rented.

"HDB lessees have all the rights over their flats that owners of such leasehold private properties have. You can live in it, you can transact it, you can bequeath it to your children - it is yours," said Mr Lee, at a book launch held at the National University of Singapore.

In fact, HDB owners enjoy extra privileges, because their flats get upgraded from time to time with generous government funding, he added.

While the Prime Minister did not name the commentators he was referring to, The Straits Times had published a commentary on Aug 14 by property agent Ku Swee Yong, who said people should "recognise that we are merely lessees who rent the HDB flats for their terms".

Public housing was one of the hot-button issues Mr Lee addressed at the National Day Rally on Sunday, when he announced several long-term housing initiatives in response to concerns over expiring HDB leases.

Returning to the issue yesterday, he said home ownership enables every Singaporean to share in the country's economic growth, because as the economy grows, so will the value of their homes.

Nearly every household - even low-income ones - has a substantial asset to its name. This has allowed Singapore to avoid the extremes of privation and poverty often seen even in affluent societies, Mr Lee said.

He noted that the Government could have adopted other policies to house the people, such as having controlled rents like in San Francisco or leaving housing largely to the private market like in Hong Kong.

"But none of these alternatives would have achieved the same economic and social results as home ownership," he said.

He also said rental housing creates a very different mindset from owning a home, as a tenant lives from month to month and has no interest in the property's long-term value as he cannot sell or leave it to his children.

In comparison, a home owner takes responsibility for his property, thinks long term and does his best to protect its value - including upholding the society and system on which the value of his home depends, he said. This is why HDB sells flats at highly subsidised rates, including to lower-income households, rather than offering them subsidised rental units, he added.

Besides housing, Mr Lee also held up the compulsory Central Provident Fund (CPF) saving scheme as another way the Government helps Singaporeans build up their assets.

Instead of a state pension scheme funded by taxes as is done in many nations, the Government has built a unique system to help people build a nest egg for retirement, he said.

Mr Lee also talked about the country's intangible assets, like its commitment to multiculturalism.

"These intangibles hold us together as one people," he said. "They enable our society to solve problems and make progress in ways which are very difficult for others to emulate."

Why the sudden uproar over 99-year leases?

I do not understand why there is an ongoing debate about 99-year leasehold HDB flats, and whether one is essentially a tenant or owner (99-year leasehold flat an owned asset, not a rental: Lawrence Wong; Aug 22).

The idea of a 99-year lease property has been around for decades and it was never an issue before.

People do not blink when paying a million dollars or so for a property with a lease of under 70 years.

However, when reports point out that as a lease shortens, the value of the flat diminishes, there is a great hue and cry.

It is not as if the 99-year lease condition was sneaked into a purchase agreement without buyers' knowledge.

Why blame anybody if one chooses to pay a sky-high price for a property with a short lease period?

As for calling oneself an owner or tenant upon the purchase of a leasehold property - this is a moot point.

It does not affect one's right in any way under the prevailing laws and regulations.

I am sure there are more important tasks for the Government to attend to than to debate about something that has been obvious all along.

Teo Hoon Seng
ST Forum, 25 Aug 2018

Land policy does not favour the rich

The debate over terminology such as "lessee" or "owner" is largely academic and is much ado about nothing.

I recently watched a documentary from Hong Kong which examined why Singapore has been successful in housing its population while people in Hong Kong are facing so many problems.

In an interview with Singapore's former master planner Liu Thai Ker, he highlighted an important difference - that Hong Kong has a lot of land but most is considered private and held in perpetuity by its owners, whereas in Singapore, the majority of the land is used for public housing, and even private land can be acquired by the Government for development if required.

After watching the show, I am greatly heartened by the fact that we have a Government that looks after the interests of the majority rather than catering to only the rich.

In the show, Hong Kongers who live in Singapore expressed great admiration for the spacious apartments and meticulously planned townships here, compared with those in their city.

In short, whether it is a 99-year lease or freehold lease, it is a fallacy to think that one can own something in perpetuity.

Instead of arguing over trivialities, we should count our blessings that the majority of us have a place that we can call home for as long as we live.

Seah Yam Meng
ST Forum, 28 Aug 2018

Intangible assets hold Singaporeans together: Prime Minister Lee Hsien Loong
They include belief in multiculturalism and intolerance for corruption, he says
By Royston Sim, Deputy Political Editor, The Straits Times, 25 Aug 2018

Singapore's approach to building assets, like residential property, emphasises individual work ethic and personal responsibility, supported by government policies and resources, said Prime Minister Lee Hsien Loong.

This is an approach that Singaporeans support, he added.

PM Lee made the point yesterday at the launch of a book that examines Singapore's asset-building policies through a series of essays.

Titled Critical Issues In Asset Building In Singapore's Development, the book was edited by Associate Professor S. Vasoo, a former People's Action Party (PAP) MP, and Associate Professor Bilveer Singh from the National University of Singapore (NUS). It was published by World Scientific.

PM Lee noted that the two editors defined the term "assets" broadly in their book.

The essays look at traditional tangible assets such as housing and the Central Provident Fund, as well as intangible assets which are shared values and social norms that underpin Singapore's society and unity.

The intangibles include a commitment to multiculturalism, an intolerance for corruption and an acceptance of national service as a necessary sacrifice, PM Lee said.

The support from Singaporeans is an intangible asset too, he added. "These intangibles hold us together as one people."

Yesterday's launch gathered four generations of PAP MPs at the Shaw Foundation Alumni House in NUS. They included first-generation leader Ong Pang Boon, former Cabinet ministers Ahmad Mattar and Lee Boon Yang, and current Education Minister Ong Ye Kung.

Speaking to nearly 300 guests, PM Lee recounted how he and Prof Vasoo, a former social work don at NUS, entered politics together in the 1984 General Election - they were fielded in the new Ang Mo Kio constituencies of Teck Ghee and Bowen respectively.

"Politics was a natural extension of Vasoo's passion for social work," PM Lee said. "He brought into politics the same empathy and concern for the disadvantaged that led him into social work in the first place."

Prof Vasoo served in Bowen, and subsequently Tiong Bahru GRC and Tanjong Pagar GRC before retiring from politics in 2001.

PM Lee noted Prof Vasoo continued to be active in community work after retiring, helping to look after the residents in Teck Ghee.

He said he is glad Prof Vasoo and Prof Bilveer have edited the book, as it is important for academics here to study and debate key issues that concern Singapore.

There will be a diversity of views - the academics will have ideas on how things can be done better, or at least tried out differently, he noted.

"We should encourage such debate, and conduct it in a constructive spirit," PM Lee said. "It will help us to understand the issues better, come up with better solutions... and move our debate, our policy and the outcomes forward."

Unlike owners, tenants cannot sell HDB flat: Indranee Rajah
But HDB flat, like any asset, has 'life cycle' over its lease tenure, minister tells PA dialogue
By Charmaine Ng, The Straits Times, 30 Aug 2018

Singaporeans have been able to keep the profit from the sale of their Housing Board flats, and that proves that they are owners, not mere tenants, said Minister in the Prime Minister's Office Indranee Rajah yesterday.

"Everybody who has actually made a profit on the sale of an HDB flat, you cannot say that it's not an asset. Of course it is," she stressed in response to a question from a member of the Indian community at a People's Association dialogue at The Grassroots' Club in Ang Mo Kio on the National Day Rally.

The issue of HDB's 99-year lease was a hot topic at yesterday's session, along with the cost of living and public healthcare - which formed key parts of Prime Minister Lee Hsien Loong's speech on Aug 19.

Together with Ms Indranee, Senior Minister of State for Transport, and Communications and Information Janil Puthucheary and Sembawang GRC MP Vikram Nair addressed questions from around 350 participants from various Indian organisations, and voluntary and grassroots organisations.

One asked whether the 99-year HDB lease means the buyer is really a long-term tenant.

Ms Indranee, who is also Second Minister for Finance and Education, replied: "If you're not the owner, then you don't get to keep the profit either. Owners get to sell because you transfer the right to the property. If you're a tenant, you don't get the right to sell, you just get the right to live in it but you don't have the right to deal with the property."

But she also cautioned that like any asset, HDB flats have "a life cycle". She said that during the early part of the lease, the value of a flat would appreciate. "But towards the end, as the lease gets shorter and shorter, the market value will necessarily go down."

This is why the Government has introduced the Voluntary Early Redevelopment Scheme, she said. The scheme, announced by PM Lee in his rally speech, allows residents living in selected precincts and whose flats are older than 70 years old to vote on whether to sell their flats back to the Government before the leases expire.

Another housing issue raised was how the Government's Ethnic Integration Policy, put in place to ensure a balanced mix of ethnic communities in HDB towns, makes it harder for Indians to sell their flats.

They tend to be allowed to sell only to other Indians, and the smaller market means they may have to accept lower prices despite buying the flat at the same price as the other ethnic groups.

Dr Janil replied that if not for the ethnic quotas, neighbourhoods will be segregated by race across Singapore, and this would make the community "far worse off".

It would also not be fair for the HDB to provide subsidies to address this issue, he added.

Dr Janil also addressed questions on the cost of living, particularly the price of mobile data in a time when Singaporeans increasingly need to be connected at the workplace and in schools.

He said that "the essentials of connectivity" such as text messaging, do not require a lot of data. Instead, it is the downloading of videos and games which ends up racking up data costs, he explained.

Several participants also asked whether the Government can financially sustain schemes announced at the National Day Rally, such as the Merdeka Generation Package to help those born in the 1950s with their medical expenses.

Ms Indranee replied that this is dependent on having good governance, good fiscal policy and a good government.

"None of these things would be possible if you do not have a strong economy, if the revenue generated from the economy is not properly spent, saved, invested and grown."

The evolving narrative on home ownership in Singapore
PM Lee's National Day Rally speech should recalibrate HDB home owners' expectations of their home as an ever-appreciating asset.
By Eugene K.B. Tan, Published The Straits Times, 30 Aug 2018

The recent announcement at Prime Minister Lee Hsien Loong's National Day Rally may have given owners of Housing Board flats with shorter remaining leases a lifeline.

But what is clear is that the grand narrative of public housing is undergoing subtle shifts.

This is by no means unusual, as the meaning of what an HDB flat represents can be said to have evolved over the decades.

The home ownership ideal was conceived in the 1960s. The idea was that helping people buy, not just rent, a roof over their heads could strengthen social cohesion and national bonding.

HDB laid its first pile in Stirling Road within a month of being formed in 1960. By 2010, it had built its one millionth flat. Today, 80 per cent of Singaporeans live in HDB flats and nine out of 10 of these own their flats.

Since the 1980s, the Government and HDB flat owners have regarded the flats as possessing tangible pecuniary value that can appreciate in value and be monetised.

Various HDB upgrading programmes, awarded to voters living in precincts who strongly supported the ruling party at the ballot box, added to this wealth-seeking imperative.

Through the 1990s and early 2000s, HDB flats were thus viewed as tradeable assets. This shifted the focus from ownership to commoditisation, by which quick profits can be made by flat owners when they live in their flat for the minimum occupation period - currently five years - and then resell it to others, usually for a profit.

When HDB flats changed hands for more than a million dollars, it was celebrated, although some wondered about market overexuberance.

But as the 2010s arrived and many HDB flats built in the 1960s and 1970s reached their fourth or fifth decade, questions began to be raised over whether and how these flats could retain their value as their leases ran down towards the 99-year term.

Concerned by couples paying high prices for ageing flats in anticipation of a windfall should they be selected for redevelopment, Minister for National Development Lawrence Wong wrote in a blog post in March last year that very few flats would be selected for the popular Selective En bloc Redevelopment Scheme, or SERS, and that most flats would be returned to the state when their 99-year leases run out.

Since then, the matter of decaying HDB leases has caused much angst and anxiety. Enter Mr Lee and the National Day Rally announcement.

Mr Lee announced two new programmes to keep ageing HDB flats as a good store of economic value, well into their middle age and beyond.

Most HDB flats will be upgraded twice in their lifetime - once at around 30 years of age, and a second time when they reach about 60 years to 70 years - to tide them over till the end of the lease.

And then, as flats reach about 70 years old, the Government may offer a Voluntary Early Redevelopment Scheme (VERS) so flat owners can sell them back to the HDB, which will then redevelop the land. These sellers may buy another flat on new 99-year or shorter leases.

The latest announcement goes some way towards soothing concerns that the value of the flats will taper off to zero towards the end of the 99-year leases.

The recalibration of expectations that should ensue after the National Day Rally speech is welcome. The Government's message on home ownership and the value of HDB flats is also more nuanced - and realistic.

Its main messages are: First, new HDB flats, which are sold at subsidised prices, will appreciate in value, in tandem with the economy's growth. This creates a reasonable expectation that the HDB flat is indeed an asset, and is expected to increase in value in the first one or two decades.

Second, the Government has long committed to rejuvenating older HDB precincts and maintaining the value of older flats.

The first Home Improvement Programme (HIP) upgrading will take place when flats are about 30 years old. But the scale of these programmes will depend on the state of the economy, and also on whether the government of the day continues to believe in such estate renewal.

If upgraded, HDB flats will keep their value, thanks to government-funded maintenance and good governance overall.

Third, as the flats reach 60 to 70 years, the Government's HIP II and VERS programmes provide a guarantee that acts as a price floor for very old flats.

Rather than have the flat depreciate to zero, the Government can offer to buy back flats at the age of 70, and offer flat owners a reasonable compensation.

Of course, the level of compensation will determine how much of a financial safeguard families will have. But at least with this one intervention, the Government is keeping its implicit promise to HDB flat owners that it will take care of the interests of the HDB-owning majority.

The Government also announced last week that the Lease Buyback Scheme will apply to five-room flats. It also said it would look at the use of Central Provident Fund monies for the purchase of older HDB flats.

While the recalibration of the HDB-as-asset message is welcome, I feel that more could have been done to raise some hard truths.

The promise that "every HDB flat can expect to be upgraded twice during their lease" is a bold one given the huge costs involved.

But how will this be funded? VERS may affect most HDB blocks and will entail recurrent expenditures, unlike one-off big-ticket items like the Pioneer and Merdeka Generation packages.

Can an ageing population and a shrinking workforce foot the hefty bills for such HDB renewal?

Similarly, given the huge expense, how can inter-generational equity be dealt with satisfactorily? It does not make sense to offer generous compensation to today's Merdeka Generation by selling flats to the millennial generation at very high prices.

I feel that Mr Lee could have gone further to "right size" the dominant narrative of the HDB flats as appreciating assets. The new schemes help retain fair value for ageing flats as they reach 70 years old, but they do not change the fundamental reality that, at some point, HDB flats switch from being appreciating to depreciating assets. More starkly, they are still likely to revert to the state at zero value at year 99.

Hence, until there is more clarity on the amount that HDB flat owners will get under VERS, or the lease buyback terms, concerns over the decaying lease issue are likely to remain.

At a book launch last Friday, Mr Lee said the longstanding approach is to have a home owner take responsibility for his property, think long term, and do his best to protect its value directly and "indirectly by upholding the society and system on which the value of his home depends".

This is correct. But how will this abiding self-interest in growing one's wealth through the appreciating value of one's home be squared against the fundamentals of social equity - that is, what is fair and sustainable?

This requires a conversation that is open and honest, and has ample details and facts and figures.

Eugene K.B. Tan is associate professor of law at the School of Law, Singapore Management University.


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