SINGAPORE — Mdm Ho Ching has suggested that Singaporeans paying for their 99-year leased HDB flats that are priced at hundreds of thousands of Singapore dollars, think of it as paying for rental upfront as they can assure themselves that they continue to have a roof over their heads and a home even as their income declines post-retirement.
This was said by Mdm Ho in a Facebook post on Tuesday (13 Dec), where the former CEO of Temasek Holdings chimed in with her thoughts on the fiercely debated issue regarding the cost of HDB flats and their land costs component.
Mdm Ho, also the spouse of Singapore Prime Minister Lee Hsien Loong, suggested that Singaporeans could think of housing prices as an upfront payment for the ownership for a certain period of time.
Using an example of a 3-room HDB flat left with 60 years of its lease that costs $360,000, Mdm Ho says it is akin to paying a $500 monthly rental over 720 months.
Similarly, a new $356,400 HDB flat with 99 years lease would like to pay a $300 monthly rental for 99 years in today’s dollars over 1188 months, wrote Mdm Ho.
She noted that today’s dollar means inflation has not been factored in and that paying “$500 today is different from paying $500 in 50 or 99 years’ time”.
Mdm Ho wrote that people would expect to earn more over time, until they hit around retirement age, when they expect their income to decline, and they may end up depending on various retirement savings.
“And a $500 a month rental in 50 years’ time is likely to be much much lower than the market monthly rentals by then.”
By paying upfront, Mdm Ho reasoned that people could more or less assure themselves that they continue to have a roof over their heads and a home even as their income declines post-retirement.
And also to have peace of mind that they don’t need to be subject to unpredictable market forces, and end up paying higher and higher rentals throughout their working life.
If the economy does well, and the island is safe and secure with high stability and trust index, their housing assets will appreciate in their lifetime, wrote Mdm Ho.
But hopefully, one will not meet up with a situation in their life such as that in Ang Mo Kio where some residents are expected to top up S$100,000 to buy a new HDB flat at market value after being forced to vacate their paid-up flats under the Selective En bloc Redevelopment Scheme (SERS).
Affordability Of HDB Flats
With subsidies, the Housing Development Board (HDB) enables the population to afford their housing well below market value, wrote Mdm Ho.
Unlike many places in the world, from less land-scarce, Hong Kong to large cities like London or San Francisco, or even Shanghai, Singapore’s young families are not priced out of affordable homes because the country has an active and comprehensive HDB public housing programme.
She claims that as HDB housing covers 85% of the population, it means that a whole range of HDB flats to suit the different levels of income.
According to Mdm Ho, the rule of thumb on affordability is to go for housing which costs no more than five times one’s basic annual salary.
Therefore, HDB and the Ministry of National Development would need to track not just the lowest price of each housing type but the median price.
Mdm Ho also wrote that the HDB flats become people’s asset wealth, which they can monetise differently.
“We can rent out a room or two, or we can even sell and downsize to a small flexi+ flat, and thus free up more resources for our retirement.”
“We can bequeath our flat to our children or spouse, who can either continue staying rent free or sell and monetise the balance asset wealth.”
While Mdm Ho makes sense in the above, it is both baffling and amusing to see her use “we” in her statements when she stays in a huge landed property with Gurkhas as her door-front bodyguards.
Land Must Be Sold At Fair Market Value
Sharing a post from Senior Minister of State for National Development Sim Ann, who said that the drastic lowering of Build-To-Order (BTO) flats to the extent of disregarding land costs, would end up hurting all Singaporeans instead of helping them.
Mdm Ho also pointed out that Singapore as a small island without resources, and land is a common heritage for all its people, collectively and across generations.
This is why for sustainable and fair stewardship, the land is treated as a past reserve, wrote Mdm Ho
“Under our procedures for managing past reserves, land must be sold at fair market value and the proceeds locked up as past reserves.”
Mdm Ho who had run Temasek for 18 years as its CEO, managed part of Singapore’s past reserves as the sovereign wealth fund’s portfolio.
“Once proceeds are locked up as past reserves, we need to estimate its expected long term returns over and above the estimated inflation over the same period, if we invest the money from land sales.”
She noted that Singapore Government is allowed to spend up to half of the inflation-adjusted expected long-term returns during its term of office and leave the balance to help grow the past reserves.
She describes this stewardship of these past reserves as the government’s duty towards a future Singapore and its future generations.
Another way of using such past reserves is what is described as a past-to-past transformation, which is to transform past reserves in the form of land into past reserves in the form of net sales proceeds at fair market value.
An alternative is to use money in the past reserves to do land reclamation, wrote Mdm Ho and noted that this land will go back as part of the past reserves.
This is something that has been done over the years as it was revealed in a Parliamentary Question that Singapore drew at least 55 times between 2002 to 2013 for land acquisition and development purposes.
Land Compulsory Acquired By Government At Low Cost
A significant portion of the state land which forms the past reserves was acquired by past People’s Action Party (PAP) Governments by paying at a much lower than their present fair market value through compulsory acquisition.
Take for example, the land at Bishan was acquired from Kwong Wai Siew Peck San Theng temple through a compulsory acquisition by past PAP Government.
We know this from an article written by Mr Lim Chin Joo who was the lawyer acting on behalf of the temple, which owned the cemetery land at Bishan before it was acquired and developed by HDB (‘Land acquisition – for the sake of nation building‘, 3 Dec 2010, ST).
Mr Lim recalled that the government was determined to acquire the temple’s land. When the land acquisition gazette notification finally came in the late 70s, the clansmen were saddened by the news and appointed Mr Lim as their legal adviser.
After much negotiations, the government was only willing to pay a paltry S$4.9 million for the 131ha land owned by the temple. “As expected, the compensation did not amount to much. It came to less than $5 million for the 131ha of land – or 30 cents per square foot after appeal,” Mr Lim recalled.
“On behalf of the PST, I wrote to the HDB and the permanent secretary of the Ministry of National Development on two occasions. The replies left no room for negotiations. We were told the decision to acquire the cemetery had come from the top.”
After appealing to then National Development Minister Teh Cheang Wan and more talks with HDB, HDB agreed to let the temple remain where it was, and allot surrounding land to restore it and construct a columbarium. Request for the crematorium was rejected. Finally, the clansmen at the temple had to accept whatever terms the government demanded.
“After due consideration, the clansmen accepted the acquisition for the sake of nation building. Bishan estate was the result. It was a decision that benefited Singapore,” said Mr Lim.
Whatever the case, the government at the time acquired the Bishan land on the cheap at 30 cents per square foot in 1979.
On another note, the HDB BTO estate that was launched in 2020, Bishan Ridges, has 1,502 units and sells a 4-room flat at about S$555 per square foot.
