The Truth About HDB Flat Ownership that Nobody Wants to Remember

HDB Singapore is an enigma. When I was a young boy I could not understand the logic of '99 years' whenever the adults discussed about HDB flats. According to my parents who bought their HDB flat in the 70s, the agreement with HDB was that every flat 'owner' was allowed to occupy their flat for the period of 99 years after which the state has full rights to repossess the flat at no cost. 


That arrangement wasn't what I couldn't understand. It was straightforward enough just like how we buy cars in Singapore. There is a Certificate of Entitlement (COE) and that runs for 10 years. When the time is up, we say goodbye to the car unless we purchase a new set of COE at market price of that year. Simple enough. Whether or not we feel it is a fair system, we buy cars, lots of cars, to the extent the planning officers in the Land Transport Authority are tearing their hair apart under pressure from the government to regulate the ever increasing vehicle counts on road. Transportation is a key issue for elections, but so is housing.


Our private property market seems to be functioning fine, a standard model of demand and supply. Our problem lies with public housing. Unlike ownership of cars where the relationship of entitlement ownership was clearly established right from the start, HDB seems to have misled their consumers regarding their rights of 'flat ownership'. That is because the government is unwilling bring Singaporeans back down to earth by reminding them they are owners of their HDB flats for only 99 years. Whether this is an act of compassion or the reluctance of giving up a political advantage remains to be seen.


Each HDB flat 'owner' signed an agreement of lease. Not a strata title, not a land title. It is a fact. We are renting the flat from the government for 99 years. Even so, that is a benefit for every Singaporean because we are allowed to lock in a fixed rate rental for 99 years. That means each leaser is insured with the rental rates of the year they purchased their agreement no matter how the cost of land and building spike in future. If Singaporeans can not understand the benefits of such a scheme, just ask any Singaporeans renting a house in Australia how they have to cope with a rental increment every 6-12 months.


So where did the problem lies? Remember, when you sell a car in Singapore, the value of the car will be less the amount of depreciation of the COE. Therefore (though it happened twice in recent history), it is very unlikely that a car owner is able to make a profit by selling a car he used for a few years. Shouldn't the selling of a lease-owned HDB flat follow the same logic?


No. That will be cruel. That will mean that Singaporeans will have to be told they don't actually own a property but a lease which is transferable at purchase price less depreciation. The government therefore allows the dream to go on and even allow huge profit making for the transferring of lease which include a unique property phenomenon called Cash over valuation (COV). From there, Singaporeans are addicted to profiting that wasn't meant to be. To make it worse, they come out with the concept of Selective En-bloc Redevelopment (SERS) in which existing flat leasers have been given the benefits of surrendering the remaining value of their HDB flat lease at more value than the original 99 years lease in exchange for a new 99 year lease, at times with a modest amount of cash top up. That was the final nail to the coffin. From there, each Singaporean (and foreigner) is conditioned to believe that they can own a HDB flat forever and that one will never lose money by buying a HDB flat.


The HDB has forgotten its role of a public housing provider. Today, it is just a political tool used by the incumbent to create the illusion that every Singaporean who owns a HDB flat is asset rich. In reality, the value of their lease is depreciating as we speak. Alas, every illusion has a sustainability issue. The only solution is creating an imploding population count and relying on the greater fool model to buy time. It will be interesting how it will turn out at the end.

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