Source: Channel News Asia.

Minister of Transport Khaw Boon Wan assures Singaporeans that 50-year-old HDB Flats will continue to appreciate

Minister for Transport Khaw Boon Wan assures the young people of Singapore that 50-year-old Housing Board (HDB) flats will continue to appreciate over the next 10 years.

On 2 September, Mr Khaw addressed claims that the limited 99-year lease on HDB flats means that the properties are not assets, which is a serious concern with the youth and young adults looking to buy a home in Singapore.

He was speaking to an audience of over 200 young people from Sembawang GRC on issues that were raised at the National Day Rally speech last month like housing, healthcare and cost of living.

“If you buy a 70-year-old flat, there is still appreciation potential especially because this Government is prepared to continue to invest in it through Home Improvement Programme (HIP) II and the Voluntary Early Redevelopment Scheme (Vers),” Mr Khaw said.

The HIP II and Vers are some of the new schemes that Prime Minister Lee Hsien Loong announced in this National Day Rally speech last month in an effort to retain the value of HDB flats for longer. Mr Lee noted that HIP will be expanded to cover more HDB flat while the HIP II scheme will see flats being upgraded twice more during its lease with the second round of upgrades taking place when the properties are about 60-70 years old.

Additionally, Vers will afford HDB flat owners a chance to vote for the government to buy back their flats before their lease runs out, which the Minister Mr Khaw says will ‘prop up’ the value of their old flats.

At this audience with the young people last weekend, a question was posed by Sembawang grassroots leader Geralding Yoong, 22, on the compensation terms for the Vers scheme, specifically on the valuation criteria.

In his answer, Mr Khaw said that it is inevitable that an appreciating asset such as flats will begin to depreciate at some point. He did however emphasise that he cannot be sure when that point might be.

Subsequently, Mr Khaw explained that while assets used to appreciate at a much higher rate for the past generations, the same cannot be expected for the current or future generations. Back when Singapore was a developing country, the strong economic growth brought with it significant appreciation value for HDB flats. However, now that the economic growth is steady at about 2-3% per year, the appreciation rate will be much lower as well.

This illuminated PM Lee’s comments on the less generous compensation terms for Vers as compared to the Selective En Block Redevelopment Scheme (Sers). Essentially, Mr Khaw seems to be reiterating the government’s resolve to take appropriate steps to preserve the people’s investments in property, specifically HDB flats.

Editor’s note – Khaw seems to forget that one of the issues is that the loan offered by HDB and the banks is only avaliable for flats that are 40 years and less. Even if the flat were to appreciate, say at 20% of original value, would anyone have that amount of cash on hand?

This is coupled with the realisation that the hdb is worth zero at end of the lease. So would you pay an additional 20% over the original price of a 70 year old flat with cash only to see the value dropping to zero at 99 years?

The sham is up.