Ravi Chandran
The Singapore Government promised that it would ensure HDB flats remained affordable for young Singaporeans. National Development Minister Lawrence Wong reiterated the longstanding Government promise that it would ensure HDB flats remained affordable for young citizens in a recent, nearly three-minute long video.
In his promise to ensure HDB flats remained affordable for young, Mr Wong said that public and private properties on a 99-year lease are “clearly assets owned by the homeowners”.
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He further shared that his parents bought their first HDB flat in Marine Parade for $25,000 in the 1970s and that they had to set aside half of their monthly salaries to service their housing loan.
“While HDB prices have gone up, household incomes have also increased considerably over this period.”
The Government would ensure HDB flats remained affordable for young by offering a “generous price discount”. Mr Wong in saying that a flat buyer who takes a loan to purchase a HDB flat at a non-mature estate will receive a mortgage servicing ratio of less than 25 per cent, added “that’s well below what my parents had to pay in the past.”
He further said that the “vast majority” of flat buyers are able to service their loans fully from their CPF without using cash, and this Mr Wong said is a measure to ensure HDB flats remained affordable for young Singaporeans.
In his National Day Rally Speech last year, the Singapore Prime Minister likened the 99 year leasehold of HDB flats to private residential developments. Prime Minister Lee Hsien Loong explained why his Government cannot extend the leases of HDB flats easily.
“(If not for 99 year leasehold for our HDB flats), our society would split into property owners and those who cannot afford a property. I think that would be most unequal, and socially divisive. So, that is why 99 year leases are not just for HDB flats. In fact, for private housing also, the Government only sells land on 99 year leases.
“There is also a practical reason why we cannot extend the leases easily. If you look at older buildings today, some look rather worn down, even before they are 50 years old. Some condominiums are like that, private property. After a century, I am sure the mechanical and electrical systems will be obsolete. The concrete will have deteriorated in our tropical climate. And even if we could fix all that, the recurrent maintenance costs would be very high. So it is better to let the leases expire, take the blocks back, demolish them and rebuild afresh.”
Responding to PM Lee’s speech that 99 year leasehold applies to both HDB flats as well as private residential apartments, veteran architect Tay Kheng Soon pointed out that there was a key difference between the two types of properties.
Writing in his Facebook, Mr Tay said:
“Since the issue of redevelopment is topical it is necessary to differentiate condos and HDB flats since both are on 99 year leased land. In the case of private condos, many are on 99year leases but all the units have a strata title. A strata title defines the unit size and its undivided share of the land.
“For example, lets say there are 100 units in the condo, therefore each unit strata owner has a 1/100 share of the land should the condo be sold en bloc to a new developer. Say there are 50 years left of the lease. The new developer pays to Singapore Land Authority (SLA) a top-up sum based on a formula to bring the lease back up to its original 99 year tenure status.
Usually developers do en bloc purchases because Urban Redevelopment Authority (URA) has assigned increased plot ratio. This enhanced plot ratio is a privilege that has to be purchased. It is not an entitlement.
The simple difference is one is a strata title and the other is only a lease even though both lands are 99 year leases. It will be interesting how the compensation will be computed in VERS.”
HDB flat owners have only purchased a 99 year lease and have no share of the land unlike private condos sold under strata title. That is the reason why they are not able to sell their 99 year leasehold HDB development en bloc. It is also unclear if VERS will include the common areas when compensating HDB flat owners at the end of their lease period.
https://www.icompareloan.com/resources/vers/
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