The Enviable Position of Singaporeans

"Having an appreciating asset is certainly better than not owning anything. Fifty years of continuous progress and compulsory saving through the Central Provident Fund and home ownership have put Singaporean families in an enviable position as compared to their counterparts in almost every other country. This is a legacy which we should appreciate and treasure.

Listen up Singaporeans. If you think you own your HDB flat, you don't. You really don't. The government has already admitted that the value of your HDB flats will be zero at the end of your 99 year lease. If you still would like to think that you are owning something, all that you own is a depreciating asset like owning a car in Singapore.

Would you believe it is possible to make money buying and selling a vehicle in Singapore? I did. When I bought 2005 Renault Kangoo 4 years old in 2009, it had 6 years COE left then. I paid $14,500 for it. I used it for work for the next 2 years. In mid 2011, I sold the van for $15,000 because in my preparation to move overseas. Though insignificant, I still made a profit on this deal, which is generally inconceivable because as a rule of thumb, everyone knows you lose money the moment you buy a depreciating asset like a car. How did I make a profit on that? Raising COE. During my 2 year ownership of the vehicle, COE prices spiked. Thus by the time I was selling it, I was able to recoup much of my vehicle depreciation and even make a small profit on it. Does this mean a car is an appreciating asset? Definitely not. Clearly, I was just lucky buy it at the right time.

Am I suggesting a HDB flat is a depreciating asset like owning a car in Singapore. Yes. The key difference is a 99 year lease is way longer than a 10 year COE. So there are more chances for owners to land themselves at the right place, right time to profit from their leases transfer. Remember, it was the COE appreciation that made money for me. When you make money from selling a HDB flat, your profit comes from transferring your lease ownership that appreciates faster than its yearly depreciation to your buyer. The yearly depreciation of your flat is constant but the appreciation is subjected to valuation by buyers in the open market. One reason why the value of your HDB flat has been rising is the demand/supply equilibrium is tilted towards demand. I've explain how demand has been controlled by the HDB in the previous post [link] by implementing the BTO scheme. The second reason is the illogical behavior of HDB buyers in the open market.

Many Singaporeans do not factor in depreciation of the HDB flat. Many have no qualms buying a 40 year old HDB flat, paying the same price of its 20 year newer counterpart on the opposite street. One reason is that most of us will not live in the house for more than 50 years. We will never live to see the end of our 99 year lease. Still, it doesn't make any sense. Would you be paying the same price for a 2 and 5 year old car because you will be selling them at the 7th year? No way. That is because no buyer is going to pay you the same price for an older car. Why are flat buyers willing to pay premium prices for a very old flat then? Most of us still think the government will bail us out in the end. Due to the fact it has been done before, we believe the government will give us a good 'en bloc' package or a good placing in a SERS somewhere at great price. Trading in or whatsoever. That might have been a possibility when old flats were few and far between. Remember what they said about the problems of an aging population, where a large percentage of the population ages and the working population is insufficient to support them? Think about what happens when the bulk of our flats are aging. To date, there is no talk about addressing the problem. What  we can be cock sure about, HDB will expect their lease holders to honour the contract. The next generation be given nothing for a flat that we think will be worth more than a million today.

Khaw called this arrangement "an appreciating asset" and is "certainly better than not owning anything." He isn't wrong, if we play our cards right. But bear in mind that amazing housing bull run in the 2010s happens once in a blue moon. It will be a folly to expect our flats to give a similar performance in the near future. Currently, what we are doing is playing musical chairs in an illogical market with a clear advantage - we know when the music is going to stop. But for the poor sods of the next generation, they will be left holding the bag when the party ends. 

Sure, I can agree with Khaw that Singaporean families are in an enviable position as compared to their counterparts in every other country. That explains why so many foreigners have tried gotten a Singapore citizenships, a HDB flat, profited, renounced their citizenships, take the money home to pay up for their 2 houses with change to spare, 1 house to live in, 1 house to rent out. Meanwhile, Singaporeans are trapped in their highly valued flats, with CPF below the minimum sum, nothing to withdraw at retirement age. An enviable position indeed.


  1. That's why 65% to 70% for the white undies.

  2. Some places on this earth are for people who cannot tell the difference between freehold and leasehold.