SINGAPORE — Mdm Ho Ching suggests that HDB flat owners think about converting the price of their flats into a rental stream and that they would find it “very very worthwhile” but prefaced that the price of the HDB flats is, however, not advanced rental payment.
Posting her remarks in a Facebook post on Friday morning, Mdm Ho was responding to a post by a Singapore netizen who wrote, “Ho Ching said that we do not own our HDB flats and we are merely paying rent upfront for long term leases. So why are we paying property taxes for flats we do not own?”
Mdm Ho corrected the netizen, “It’s fine if you have a different opinion, but it is not honest to put words into someone else’s mouth, ya?”
The former Temasek Holdings CEO had written in a Facebook post on Tuesday (13 Dec) that HDB housing covers 85% of the population, which means that a whole range of HDB flats suit different levels of income.
With subsidies, the Housing Development Board (HDB) enables the population to afford their housing well below market value.
She pointed out that 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.
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.”
She further 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.
Apple analogy with market prices
Mdm Ho, in her post on Friday, used apples as an example of how value should be perceived.
Suppose we pay $1 for an apple.
If we eat the apple, it’s gone in a jiffy!
If we don’t eat the apple, it may go to rot in a few days and would be gone too!
Or we can slice the apple and bake an apple pie for our family for the weekend.
Either way, we don’t rent the apple for 1 minute, 1 week, or 1 month – we bought and own the apple, even if ithas gone into our tummy with bits converted into our cells and the remnants passed out!
And if we eat the apple, but save the seeds, we could plant and grow an apple tree or more for more apples, provided the climate is right and we continue to care for the apple tree/s.
But how do we value the apple?
There are so many varieties of apples, thousands of them!
So one way we try to put a market value on the apple is to look at recent transactions of similar apples.
Another is to figure out what we can sell an apple pie for and so work backwards to decide if it is worth $x.
Or if we are dying of hunger and there is only one apple available, we may pay a lot more.
Or we like the colour, shape, or other special “good luck” features of the apple and would be willing to pay more?
Mdm Ho said the same applies to HDB flats where recent transactions, whether for land or for flats, can be used to figure out what the current market value would be worth.
Flat owners can also think in terms of converting the price into a rental stream and assess if they are willing to pay for that.
She suggests that if the price of an HDB flat is converted into a rental stream, they will “find that it is very very worthwhile”.
Noting that the price of the HDB flat is not “advance rental payment”, the market price is ultimately on a willing buyer willing seller basis as no two HDB units are exactly alike.
“While we can impute a rental stream, we own the flat that we bought.” wrote Mdm Ho and highlighted that it is the owner that collects the capital gain on the appreciation of the HDB flat if one rents.
Rentee or landlord market
She goes on to suggest that if Singapore has a lousy government or “quarrelsome people”, people will lose trust and confidence, and property prices will fall.
“And we eat the loss in value as an owner, unlike a tenant who would be protected from such capital loss and could even bargain for lower rental!”
“And the converse is true,” wrote Mdm Ho, noting that no owner would do a long-term rental without putting in “some kind of escalation clause or willing buyer willing seller for rental renewal after a few years”.
In conclusion, Mdm Ho points out that a rentee is subjected to rental increases in a rising market, while owners do not have to pay extra if their flats appreciate in value.
No free land for HDB flats, and excuses not to pay taxes
Mdm Ho suggests that a quick estimate of what an HDB flat or private property is worth can be based on the translation of rental flows against its price.
“But that doesn’t mean we don’t own our leasehold property, anymore than we don’t own a freehold property.”
She argued that even for freehold property, in a far-off future, future governments may nationalise the properties, “or there could be a war and all properties taken over by a hostile country”.
“So even for freehold, the right is not absolutely perpetual, much as we hope so.” wrote Mdm Ho and suggested that games should not be played to try to make leasehold property owners unhappy.
She also points out that property owners can all do their own calculations, and no one can force them to pay for their property if they do not think it is worth it.
“So don’t spin cock and bull about land for HDB should be free so that buyers can enjoy a bigger windfall than they already have.” wrote Mdm Ho and added, “And don’t spin an excuse not to pay taxes.” in response to the netizen’s question on the need for property tax for HDB flats.
Mdm Ho notes that taxes are a duty for everyone, to fund and support common essential services for the common good.
“We cannot want low cost housing on the one hand, and free education, while paying no taxes.”
“As old taxi drivers will say: “Xiao ah! Manna oo everything free, gai?””
Mdm Ho had earlier launched two Singapore submarines made by German shipbuilder ThyssenKrupp Marine Systems (TKMS) in Kiel on Tuesday, accompanied by her spouse, Singapore Prime Minister of Singapore.
They are the second and third of four customised Type 218SG submarines built by TKMS for the Ministry of Defence (MINDEF). Militaryleak.com reported that the initial deal for the first two submarines was valued at €1.6 billion (S$2.3 billion), including logistics and crew training.
Land cost should be removed from HDB flats: Leong Mun Wai
Non-constituency Member of Parliament (NCMP) Leong Mun Wai opined on Thursday that the pricing of flats built by the Housing Development Board (HDB) should only account for construction costs and price differences between locations and not include land costs.
This was said by the NCMP from Progress Singapore Party (PSP) in a Facebook post on Thursday (8 Dec) in response to the latest statement by HDB on the breakdown of the development cost for HDB flats over the past three fiscal years.
“This was arguably the case in the late 1980s, when the total land cost accounted for a substantially lower share of the total price of an HDB flat.” wrote Mr Leong.
In contrast, Mr Leong pointed out that the latest data released by HDB shows land costs accounting for almost 60 per cent of the total cost of building HDB flats.
Mr Leong points out that in the 1980s, the subsidies from the government were not only more generous at 23 per cent, but also covered a much more significant proportion of the land cost, especially in the New Towns.
“In my opinion, the pricing of HDB flats should only account for construction costs and price differences between locations. This was arguably the case in the late 1980s, when the total land cost accounted for a substantially lower share of the total price of an HDB flat.” wrote Mr Leong.
Mr Leong lamented that Singaporeans today must pay market prices for the land that was taken away from their forebears and only get a small discount from the government that barely covers one-fifth of the land charges.
“The time has come for us to question whether even our public housing policy has lost its way.”
