Ho Ching says HDB flats can be a “retirement kitty that is inflation linked”

Ho Ching says HDB flats can be a “retirement kitty that is inflation linked”

SINGAPORE — Former Temasek Holdings CEO, Ho Ching, in her latest response on Friday (16 Dec) to a netizen’s remark to her earlier Facebook post, asked the netizen not to put words into people’s mouths to claim they say the value of HDB flat will go up forever, or will never fall.

Noting that she could not reply to the netizen’s comment and hypothesizing that she may have been blocked, Mdm Ho went on a rant on her own Facebook page to justify how an HDB flat can appreciate but yet at the same time, noting that its value will decrease as the lease nears to zero.

Mdm Ho explained that the stream of the rental model, which was presented in her previous post, was meant to be a “very very simple sanity check on the value of the property” that property owners are purchasing, no different from someone who is considering whether to purchase a shop or a factory.

“Sure, it is not sophisticated financial calculation, like what a CFO would do, but it is a good first cut feel of whether the price is worth our investment.”

While a property has to be returned when a lease runs out, such as an HDB flat, Mdm Ho notes that there is still residual value until the last day.

Value or no value depends on the government but still no value when close to end of lease

Mdm Ho wrote that value can appreciate or depreciate with the owner taking the gain or loss during the life of the HDB flat.

The wife of the Singapore Prime Minister, Lee Hsien Loong, proposed that an HDB flat is a good store of value for a 20-30-year-old buyer of a new 99-lease Build-To-Order HDB flat which is longer than the buyer’s expected lifespan — provided there is a stable society with a good government.

She added, “More than just a store of value, the flat could be an appreciating asset within his lifetime, and so could be a retirement kitty that is inflation linked!”

However, emphasising that “the most important being stable and safe society and good govt with solid credit ratings.”

Mdm Ho wrote that the residual value of the HDB flat will get closer and closer to the imputed stream of rental income in the market as it comes closer to the end of the lease, “this is most likely and most obvious in the last 10 years of leasehold balance.”

“And eventually, it will be zero at the end of the leasehold, but this is likely to be after the first purchaser has passed on.”

She points out that it is buyers who purchase flats that are left with 60 years of lease who need to be reminded that the leasehold does run out, so they do not expect a windfall extension of leasehold for free.

Mdm Ho claims that what late Lee Kuan Yew and Mah Bow Tan said about “the value of keeping the flat and not lightly sell them for the original owners”, and what Deputy Prime Minister Lawrence Wong alerted buyers of shorter leasehold resale flats, are both correct because they were discussing different aspects of flat ownership.

“I am quite sure none including Mr Goh Chok Tong would ever say things like the value of HDB flat will never go down. Mr Goh is trained as an economist and was running a shipping company, and would certainly know there are no such guarantees of value in the real world.”

“So here again, Serene, don’t put words into their mouth to claim they say the value of HDB flat will go up forever, or will never fall, lah!”

While Mr Goh never said the value of HDB flats will never go down, he said the same thing as Mdm Ho on how to prevent the fall in the value of HDB flats, which is to ensure the stability of its government and its economy continues to expand.

Mdm Ho further claims that HDB flats bought new with 99 years leasehold, or non-HDB 99-year leasehold flats for that matter, could appreciate in value as median incomes increase, and infrastructure improves over time.

“So with a stable society and good govt, our homes are like an inflation linked asset which can form part of our retirement kitty – we can sell and downsize when we retire, or we can rent out spare rooms when kids have their own families and homes, to get add’l income for our retirement years on top of CPF savings and private savings.”

“With a prudent govt that doesn’t spend beyond its means, and a people who are also financial prudent, we will have the means as a country to continue to upgrade and improve our infrastructure, both hard and soft.”

“These will help boost value of our homes, and would add to the asset value of a flat for retirement.”

She, however, cautioned those who are 30 years old and buying a leasehold property with 50 years leasehold balance, that they are cutting it fine, given the life expectancy of around 80 years old.

And also, to anyone who is 45 years old, buying a unit with 25 years of leasehold left is not likely to enjoy a large uplift in asset value from the HDB flat to fund their retirement.

HDB flats are better because of improvements by Government

Mdm Ho argues that HDB flats, in many ways, are better than private flats, not just because of the initial subsidy at purchase, or at other points of life like downsizing for empty nest seniors, or a fresh start for those who went into financial difficulties for health or other catastrophes.

“And it is not just the redistribution goodies that govt supports using its own taxes or the infrastructure investments like coastal protection or MRT lines, hospitals and schools, or the SAF, submarines, police or teachers.” wrote Mdm Ho, without explaining why private properties do not benefit from these as well.

She notes that it is also the clear policy stance of the Singapore government that property assets need to be kept up to date, with mid-life upgrades every 15-30 years.

This is because the Singapore government does not want to see HDB precincts degenerate into slums like public housing in many parts of the world. Hence, HDB flats are more likely to keep their value longer than, private housing developments.

Both HDB and other leasehold properties will drop off to zero value on the last day of leasehold, but Mdm Ho notes that the shape of the rise and the final depreciation shape of the asset value over their lifetime would likely be very different.

Part of the reason is the scale that HDB has, and the depth of engineering and the level of investment into research and new ideas, suggests Mdm Ho.

For instance, HDB has the scale to do district cooling for its HDB towns. This will save energy and lower the lifecycle cost for owners.

Private developments will likely need to tap into nearby commercial districts or HDB townships if they wish to have planet-friendly infrastructure like district cooling.

What Mdm Ho did not mention in her post is that Temasek and its wholly-owned SP Group are retrofitting seven existing buildings to plug into a distributed district cooling network (DDC), which is targeted to be completed and operational in the first half of 2025.


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