Introduction of SERS Plus, Universal Sale and Lease Back Scheme among proposals in WP’s new housing policy paper

Singapore Public Housing Apartments in Punggol District, Singapore. (Image by happycreator /

The introduction of SERS Plus and a Universal Sale and Lease Back Scheme (USB) are among several alternatives listed in WP’s new housing policy paper to the Voluntary Early Redevelopment Scheme (VERS) introduced by the Government this year.

VERS, which was mentioned by Prime Minister Lee Hsien Loong in his National Day Rally speech this year, will grant residents living in certain precincts and residents whose flats are older than 70 years old to cast a vote on whether or not they would like to resell their flats to the Government prior to the expiration of the 99-year lease.

In WP’s Working Paper on HDB resale prices titled Counting Down to Zero: Are There Alternatives to VERS?, which was released on Fri (29 Nov), the Party listed the four following guiding principles in formulating its housing policies:-

  • HDB flats are primarily an affordable housing option in comparison to private property;
  • Consequently, the resale value of HDB flats should act as a form of wealth protection for retirement and legacies;
  • Wealth appreciation — if any — should be in tandem with economic growth and be inter-generationally fair to both citizens and the State, as the custodian of the interests of future generations; and
  • More housing options beyond owning HDB flat 99-year leases should be made available to Singaporeans to allow them to make informed housing choices that suit different needs at different stages of their life.

The extension of the USB scheme, according to the WP paper, will apply to all HDB property types and all HDB lessees after the Minimum Occupancy Period (MOP), and at least 80 percent of loan repayment has been completed.

Additionally, the HDB lessee should not be an owner of any private property at home or overseas.

HDB Flats lessees can opt for the USB at any time after their unit reaches 30 years of lease tenure left.

Compensation for the USB, said WP, is to be determined via a published formula that is pegged to the 10 year moving average for rentals at the time of USB application, pro-rated by lease tenure and taking into account the time value of money.

“The formula has been drawn up to ensure greater stability in pricing, to deter attempts to make gains by shrewdly timing the market,” according to the paper, adding that “an alternative formula can also be considered that is based on inflation and GDP growth”.

Comparison between USB and VERS. Source: Workers’ Party

Lessees exercising the USB option can choose to receive compensation either via monthly payments, or via a lump-sum dispensed in full but with repayment of loans from the CPF still being required, as with any resale transaction.

“Aside from topping up for CPF OA withdrawals, compensation need not be paid into the CPF unless the lessee chooses to do so,” said WP, adding that “there will be no cap on cash payouts”.

Flats purchased under USB will be used by the government to provide HDB flats for rental, for resale under Sale of Balance Flats (SBF) exercises or for sale of shorter lease lengths.

“This will create a market for shorter leases,” according to WP.

Other proposals put forth by WP in its housing policy paper include pegging BTO flat prices to median incomes and reassessing the way land being sold to the HDB is priced, and introducing a commercial Public Rental Market (PRM) scheme as an alternative housing option for many Singaporeans.

Given that the government has “significant power” to control pricing as “the largest customer for the construction sector and the largest owner of land”, WP suggested that the way BTO prices are set should “reflect the goal of keeping housing prices within a reasonable range of median income”.

“Past Parliamentary replies suggest that land pricing is undertaken by the Chief Valuer on the basis of multiple factors. The details of the approach taken are not fully transparent.

“To help the public understand the pricing, HDB should give each buyer the breakdown of land sale costs, developmental costs and subsidies.

“The government has room to rethink the pricing formula for selling land to the HDB so that it enables the HDB to sell flats at a reasonable price relative to wages,” read the working paper, adding that changing the pricing formula will not “deplete the reserves”, but will “only slow its rate of growth”.

HDB owners “lessees” with no strata titles, unlike owners private residential property such as condominiums: WP

The Party also pointed out in its working paper that HDB flat owners are “not owners in the traditional sense”, and are “in fact lessees with no strata title to their homes, unlike private condominium dwellers”, and thus do not have the power to “initiate collective sale” to the flats’ developers.

This, the Party suggested, is contrary to what PM Lee mentioned in his National Day Rally speech last year, in which he assured Singaporeans that “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,” added Mr Lee.

“HDB flats are sold on 99-year leases. Their owners are therefore, in legal terms, tenants who own these long-term leases,” WP noted, adding that “HDB titles deeds describe the “owners” as tenants or co-tenants, with the HDB as proprietor”.

Source: Workers’ Party

Minister at the Prime Minister’s Office Ms Indranee Rajah in Aug last year disputed the widely circulated claim that HDB flat owners are merely “tenants” as a result of the 99-year lease, stating that owners actually have a right to sell their HDB flats and pocket the profit made out of their sale.

In response to a query from a member of the Indian community at a People’s Association dialogue at The Grassroots’ Club in Ang Mo Kio on National Day Rally, Ms Indranee, who is also Second Minister for Finance and Education, said: “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.”

Replying to the member’s question of whether the 99-year HDB lease indicates that the purchaser is indeed, in practice, a long-term tenant, Ms Indranee 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,” she added.

However, she reminded the participants that HDB flats do have a “life cycle”, like any other property, in which the value of a flat would appreciate before beginning to depreciate, particularly as the 99-year lease inches closer to its expiry date.

Ms Indranee added that the inevitable depreciation of HDB flats became the basis for the introduction of VERS.

Minister for National Development Lawrence Wong has also rejected the widely circulated claim that HDB flat buyers are not owners but are “tenants” in practice.

Speaking at the HDB’s Peak Forum for property experts at HDB Hub a month after Ms Indranee’s statement on the HDB tenant-owner debacle, he said that such a claim is “factually and legally wrong”, as the same principle of ownership throughout the stipulated period of lease applies to all buyers of leasehold residential property, regardless whether the property is private or public.

Mr Wong said that buyers of leasehold property have the liberty to sell their property and to keep the profit out of the sale, and even to rent out said property if they wish to do so.

“Since the beginning of the Government land sales programme in 1967, all sites for private residential land have been sold on leases not more than 99 years”, he said, the reason being that Singapore has “limited space, and we need to recycle land to create housing for future generations”. 

“Lessee” status of HDB flat buyers possibly a factor behind potential increase in price premium gap between private leasehold properties and HDB flats

WP, in its working paper, also highlighted — based on the observation of property analysts — that the price premium gap between private leasehold residential properties and HDB flats “will widen in coming years” as as result of the former’s ability to carry out collective sales to developers using their ownership of strata titles.

“This may also lead to a growing share of private property in Singapore’s residential sector,” WP added.

HDB flat “ownership” may not, as a consequence, continue to be “a hedge against inflation and a retirement nest egg as it has been touted to be”, said WP.

Source: Workers’ Party

WP’s prediction echoed a Credit Suisse report published on 19 Sep last year, which predicted an increase in the price difference between private apartments and HDB resale flats in the foreseeable future.

The report cited the decrease in the proportion of residents living in HDB flats in comparison to those living in private apartments, that is, from 88 per cent of households ten years ago to 79 per cent just last year.

“Rising affluence and household incomes” as well as a “steady private residential supply” from the government have contributed to the falling percentages.

Louis Chua and Nicholas Teh, the Credit Suisse research analysts who penned the report, said: “We believe it will likely take some time for residents to understand the evolving narrative on the nature of HDB flats — from one where HDB flats are a good store of value and attractive investment class that will continue to appreciate, towards one where we are likely to see a steady diminution in value as we approach the end of the 99-year lease, following which the flats will revert to the government.”

Developers of private leasehold residential properties are required to obtain the permission of at least 80 per cent of owners in the estate, which indicates that such properties are more likely to sustain greater value than HDB flats will, even as the leasehold private apartments’ leases depreciate.

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