Housing Development Board Depleting value of HDB flat
When HDB flats were first build, the flats were sold at very low prices. In subsequent years, under the Asset Enhancement Policy of the government, the prices of the flats appreciated many times. The people who bought their flats earlier enjoyed a large gain. Those who bought the flats at the higher prices were still able to enjoy the appreciation as long as the flats continue to increase in price. 

The government leaders also advised the citizens to buy a flat and enjoy the appreciation in the value.

However, most people do not realize that the HDB flats are sold on 99 year leases and that the flats will have no value at the end of the lease.

Many HDB flat owners were shocked that they are paying a very high price for an asset that will eventually be worthless.

No make matters worse, they found that the value of the HDB flat dropped sharply, by as much as 30 percent, when it reached the 40 year mark. The sharp drop is due to inability of young buyers to use their CPF savings in full to buy the old flats. Most of the prefer to buy the new HDB flats.

What can be done to help the owners of the old HDB flats to get a better value for their flat, in case they have to sell the flat and move to another location or to upgrade to a bigger flat or downgrade to a smaller flat?

I give my suggestions.

a)  We should accept the fact that the HDB flat will have no value at the end of the lease. This is the nature of any leasehold asset. 

b) The goal should be to ensure that the value of the old flats depreciate gradually, rather than suffer a large drop on passing the 40 year mark.

c) The CPF rules should be changed to allow the young buyers to use their CPF savings in full for the purchase of an old flat, in a similar manner that they can buy a new flat. There is no need to have the restriction that the CPF savings should be used mainly to buy a new flat that will last the lifetime of the buyer.

We should not be concerned that the lease of an old flat will run out during the lifetime of the owner. They are paying a lower price for their old flat. This allows them to keep the additional savings in the CPF to be used to buy another old flat when the lease runs out.

d) We should also encourage the young families to rent a flat, if it is more suitable for their needs. They should be given the option to cease their personal contribution to the Central Provident Fund. They can use the additional cash to pay the rental of the flat.

The current situation where the value of the old HDB flat drops sharply on reaching the 40 year mark is bad for the owners and for the economy. We need to change our HDB and CPF rules to address this shortcoming.

Tan Kin Lian

Please vote (agree, disagree) to my proposals.
 

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