One-time extension for ageing flats may be hard to stop, they say of idea put up at forum
A policy proposal for a one-time automatic lease top-up for ageing Housing Board flats may immediately tackle the issue of declining value once the leases of these flats are up, but it comes with long-term drawbacks, observers said.
Topping the leases of all HDB flats owned by Singapore citizens back up to 99 years once they are 50 years old would be “a handout that is extremely hard to stop”, cautioned ERA Realty head of research and consultancy Nicholas Mak.
He was commenting on a proposal by property consultant Ku Swee Yong, veteran architect Tay Kheng Soon and economist Yeoh Lam Keong at a public forum held at the Singapore Management University on Nov 30.
An automatic lease extension was one of several policies that the trio introduced in what they termed a “citizen’s non-partisan policy proposal” to address and offer solutions to key public housing issues.
Mr Mak noted that such a policy would have to run in perpetuity as issues could arise if it is ever scrapped.
For example, if the Government decided to stop the automatic lease extension in 2021, home owners who bought an HDB flat in 2020 would get a 149-year lease, while those who did so in 2021 would get a 99-year lease.
“Can you imagine the level of unhappiness among the later buyers? The extension is just kicking the can down the road,” said Mr Mak.
The trio had also proposed that all new Build-To-Order flats be sold to first-time buyers at around construction cost, with the current five-year minimum occupancy period increased to 15 years.
Economist and Nominated MP Walter Theseira, however, said that this deviates from the “status quo” of Singapore’s home ownership model, where owners hope to make a profit when they sell their flats.
The proposed model could, in the long run, bring the value of HDB flats down to construction-cost pricing, he noted.
This would affect those counting on their flats as retirement assets. About 80 per cent of Singapore households live in HDB flats.
In a separate report released late last month, the Workers’ Party (WP) proposed a Universal Sale and Lease Back scheme for all HDB home owners who have completed the minimum occupancy period and paid off at least 80 per cent of their loans.
This would make HDB the “buyer of last resort” for those who may not be able to sell their properties, for whatever reasons.
Flats bought by the Government can then be either resold with shorter leases or offered under a proposed Public Rental Market scheme.
ERA’s Mr Mak said this proposal would effectively make the Government “a major landlord”.
“Right now, most people own their remaining leases on their HDB flats and enjoy tax-free appreciation of the flats when they sell. But it won’t be the case if it becomes a rental situation,” he said.
“Furthermore, if you can get cheap rental flats, will it make people want to work harder?”
WP also proposed an alternative scheme to the current Selective En bloc Redevelopment Scheme (Sers), called Sers Plus, where the Government need not secure a replacement site before launching Sers.
Sers is typically offered to HDB blocks located in sites with high redevelopment potential, with around 4 per cent of flats identified for the scheme since it was launched in 1995.
Under the proposed Sers Plus, affected residents would be guaranteed new flats elsewhere.
Huttons Asia director of research Lee Sze Teck said the Sers Plus model “deserves some looking at”, particularly in mature towns where there is no available land to serve as a proxy site.
“Affected residents have more housing options and the Government can take over (the site) more quickly and go through the urban renewal process and build better flats in its Smart Nation push,” he said.
Property analyst Ong Kah Seng, however, felt that such a scheme may not be well received, especially by older home owners.
He said: “Generally the objective of Sers is to help residents find alternative flats in an almost similar locality or region… be it for familiarity, convenience or even nostalgia.”
Dr Theseira said that both proposal papers have put out recommendations that require additional government subsidies to address housing issues.
“But there’s the question of what’s the sensible amount of subsidy to provide for housing and how to structure it,” he said.
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