Photo of Lee Kuan Yew with HDB flats from property guru

HDB leasing is ownership, HDB value will appreciate forever. This is the perpetual lie flooding Singapore’s 153rd-ranking propaganda media the past two weeks, with Lee Hsien Loong spearheading the disinformation campaign.

A small minority of Singaporeans previously living at Geylang Lorong 3 who had their HDB housing confiscated can attest to that. These Singaporeans had their 60-year lease finished, and they were not compensated a single cent. Many of them, being retirees, were ruined financially after the roof over their head were taken away by the government. Some 250,000 Singaporean households will be facing the same eviction 20 years later, when their HDB lease is up.

The HDB end-of-lease issue is however not new. The 99 year lease has been present since day 1 HDB was implemented, but Singaporeans in the past simply placed blind faith in their esteemed leaders and kicked the can down the road – only to find out today that the younger 4G leaders are indeed leaving them to die. Singaporeans now find themselves asking the hard questions they should have done a long time ago, but few are able to pinpoint the discomfort as they continue to be bombarded by waves of propaganda articles published by the state media and their “independent” affiliates. States Times Review bring you the in-depth concerns:

Loss of inheritance wealth
Property wealth is usually a huge significant, if not the only, wealth Singaporeans would inherit from their parents who paid for with a 30-year mortgage debt. The three decades of financial hardship is however destined to be repeated every generation, effectively keeping Singaporeans forever in the rat race. The loss of inheritance wealth is a major concern for middle-aged Singaporeans today, whom many are relying on the inheritance money for their own retirement.

VERS return to be reduced further after HIP2
(If you are asking what is VERS and HIP2, you should find out more prior to reading this section. I will skip the explanation and definitions.) The VERS programme on the surface appears to be a government bailout for those with end-of-lease HDB property, but the Ministers have highlighted that market rate would not be paid. The market rate is determined by the Annual Value or rental potential as per IRAS’s calculation on property tax. Returns of VERS will not match SERS, as confirmed by the dictator PM himself. Henceforth, it is a sign that the government will likely valuate VERS return based off a percentage of the remaining lease over market value. Say for example, if your HDB apartment has 20 years left of its 99 year lease, the VERS return will likely be 20/99 of the market value. The VERS return however will likely be reduced further as the government will factor in the cost of HIP2 upgrading, so they could fund HIP2 programmes in other estates.

Century-old HDB is structurally sound, sales profit is what Lee Hsien Loong after
A bulk of the HDB pricing is land pricing, and land sales have been a steady stream of income in the range of S$14 billion (2017’s figures) every year for the ruling party government. Putting a lease on the land sales will guarantee that the government will continue to receive this land sale income every year until the end of time. The end recipient of these hundreds of billions is GIC, where Lee Hsien Loong sits as Chairman, and it is clear from his tax increases that he needs a lot of money to cover his investment losses at GIC. Aside from land sales, the dictator PM also sells HDB BTO flats at inflated pricing. There is no figures revealing how much is HDB’s margin as the construction cost price is not publicly available, however, the estimate is at least 25%.

Another lopsided argument presented by Lee Hsien Loong was that HDB housing that reached 100 year age would be electrically and mechanically unsound. This is untrue. Telecom companies had no problem rolling out their fibre optic cables to every household, and replacing power cables and pipes is just labour work. Structure testing is not a high cost engineering feat either, and neither is interior household renovations (windows, flooring and painting etc.) Everything can be done in a major upgrade and the HDB flat is good for the next 30 years at least.

99 year-lease model waste more land and resources
In his National Day Rally speech, Lee Hsien Loong misled everyone by saying that the lease model is necessary to get back land so the government can build new flats. The ignorant PM said that Singapore will run out of land when Singaporeans continue to buy flats on top of their inherited ones. This is totally hogwash. HDB regulation stated that a household (specifically: husband and wife) can only own one HDB property, and multiple ownership is not allowed. Singaporeans who had inherited a HDB flat will not be allowed to purchase a second HDB flat, and vice versa, those who intend to buy a new BTO flat will have to sell off their inherited property. Those who have siblings would split the sales proceed among themselves equally too.

Ownership or rental is just a distraction
Lee Hsien Loong is just playing with words and distracting the people with the two terms. “HDB ownership” is an oxymoron, but it would be a waste of time to debate with those whose salaries depends on denying the rental nature of HDB. Let’s just leave it at that. The real problem is asset depreciation, caused not by market forces but rather government policies.

In essence, HDB have none of the upsides of both ownership and rental. In a true ownership model like everywhere else in the world, there is inheritance wealth, appreciated by market forces. This is not true for HDB, which only lose its value as the time goes by. In a true rental model like everywhere else in the world, there is financial freedom and the freedom to relocate anytime. This is not true for HDB, which demands a 10% deposit following a 30-year mortgage debt. More than 47% of the Singaporean elderly are unable to meet the CPF Minimum Sum today exactly because they overstretched their lifetime earning capabilities. Their next generation and the ones after are similarly doomed on the same path of poverty. The HDB also mandates a minimum 5 year Minimum Occupancy Period (MOP), so unlike rental properties elsewhere in the world, you can’t move out because you are facing financial stress, want a upgrade or downgrade, or simply a change of living environment.

The HDB lease has been poorly handled by the ruling party dictatorship, and many of their supporters have now a second gripe on top of the 28% GST increase. Singaporeans who voted for the ruling party in GE2015 are now faced with the reality that their problems require a change of political will. Knowing Lee Hsien Loong, he won’t change. The dictator and his 4G ministers are happily swimming in the millions they receive each year, status quo is all they seek.

Alex Tan
STR Editor