Reflecting on “Reflections” – A review of Mah Bow Tan’s book (Part 5 of 9)

This is a review from a statistical perspective, wherever possible, of the book “Reflections on housing a nation”, launched on 22 March. (You can read it here for free and save yourself ten dollars. – Editor)


Leong Sze Hian/

In Part Five (“Pricing Flats According to their Value”), the Minister for National Development wrote:

“Today, we have built a unique public housing system that is based on home ownership”

Since HDB flats are 99-year leasehold properties, like all leasehold properties, the land will revert to the Government when the lease on the land expires. Although the overwhelming majority of HDB flats today are far from expiry of their leases, this may not allay the concerns of the 85 per cent of Singaporeans who live in HDB flats, who may fear that their lifelong investment in a HDB flat may diminish in value, as they approach the end of the 99-year lease.

Will a flat will be worth nothing at the end of the lease?

HDB flats have been touted by the Government as an asset enhancement that can even be monetised for retirement or passed on to the next generation.

The HDB has said that “To maintain the value of older flats, the Government has also introduced various upgrading programmes such as the Home Improvement Programme and Lift Upgrading programme”.

What is the use of various upgrading programmes which flat-owners have to pay for each time, when the end  result is that the albatross of the 99-year lease still hangs, and remains unchanged?

Why should I or anyone vote to accept upgrading and pay for it, when I know that I may get nothing, when the lease ends?

Market or cost-based price?

“If market-based pricing is fairer, why do some people argue for cost-based pricing?”

The Government has consistently refused to provide the break-down of the costs of building public housing (HDB flats), despite questions being posed in Parliament and newspaper forums almost every year.

By pricing new HDB flats under a “market-subsidy pricing” policy, which pegs prices of new flats to a purported discount to resale market prices, the affordability of public housing has increasingly become an issue.

HDB prices have been allowed to grow at arguably the highest rate of increase for public housing in the world, under the HDB’s convoluted market-subsidy pricing policy.

Singapore has arguably one of the highest public housing loan delinquency rates in the world, with about seven per cent of public housing loans being in delinquency of over three months, as well as one of the highest public housing prices in terms of the ratio of prices to median wages.

The lack of transparency over the pricing of public housing and the amount of profits made by the Government has undermined Singaporeans’ access to affordable public housing. It is also a failure with regards to the accountability and transparency of the national housing policy.

Asset to help you to retire?

The Minister also wrote:

“the liberalization of the CPF regulations enabled Singaporeans to make use of their CPF savings for home purchases”

CPF members are allowed to pledge property that was bought with CPF funds toward the Minimum Sum, with the value pledged capped at 50 per cent of the Minimum Sum, which is now $123,000.

In the past, what this means was those who reach the age of 55, can withdraw more of their CPF as their HDB flat was counted as half of the Minimum Sum.

However, this “property pledge” has been changed such that it will only count against the shortfall of your Minimum Sum. This means that your HDB flat no longer helps you to withdraw more of your CPF at 55.

Let me illustrate this with an example:

A person with $100,000 in the CPF Ordinary (OA) and Special Accounts (SA) can withdraw 20 per cent, which is $20,000, at age 55.

Under the new “property pledge” rule, the Minimum Sum shortfall of $43,000 (current Minimum Sum of $123,000 less the $80,000 retained in the Retirement Account (RA)) will automatically be pledged with the HDB flat.

Under the old “property pledge” rule, this person would have been able to pledge the full 50 per cent of the Minimum Sum, which is $61,500. This means he or she would be able to withdraw $38,500 (from the $100,000 in his or her OA and SA, less $61,500), as compared to just $20,000 under the new rule.

By the way, I highly recommend that you read the article, “The Hot Doctor House:  They call him ‘tua lo kun’ (chief doctor).  They come from all over to see him.  Does Minister Mah have the hottest MP seat in S’pore?” (New Paper, Mar 27)

End of Part 5

Also read Part 4 here

Mr Leong has beaten Mr Mah by publishing a book in 2008. It has no pictures but at 186 pages (with Chinese translation), is more value for money. You can buy it here!