Is the HDB public housing scheme like a runaway train, waiting to crash?
The “nobody stay for 5 years” HDB flat units, may just be another symptom that our public housing system is akin to a runaway train which will run off the tracks only in a matter of time.
We cannot, arguably, continue to live in a state of denial to insist that HDB flats as public housing are affordable and use flawed arguments to claim so.
HDB owners are able to finance their HDB flat mortgage
The Government have said HDB flats are affordable as many Build-To-Order (BTO) flat buyers service their mortgages entirely via their Central Provident Fund (CPF) contributions with little to no cash outlay, while using less than 25 per cent of their monthly income to pay for their housing loans.
But in the first place, those who can not afford it would not buy and cannot qualify to buy. And those who cannot afford to pay the monthly mortgagees after they bought, would have given up the flat by selling it off.
With this sort of flawed reasoning, HDB flats will always be deemed affordable.
Few foreclosures of HDB flats
The Government have said HDB flats are affordable because there are very few foreclosures of HDB flats, and it is not expected to increase by much in the near future.
But nobody, in his right mind, would wait for foreclosure.
This is because of the typical bank loan penalty interest of 9.25 per cent once you are late or unable to pay your monthly mortgage fully.
Even if you were to take the Housing Development Board “low valuation” compensation for eviction and foreclosures, it may be better to sell in the open market when one is unable to pay the mortgage.
Therefore, one would choose to sell their HDB flats the moment they know they are no longer able to afford the monthly mortgage. So the Government’s reference to only having a few foreclosures of HDB flats is not helpful in backing its claim that HDB flats are affordable.
Are HDB owners paying value for money?
Even if we were to accept that HDB flats are affordable, can we say that the price is justifiable for public housing?
In a TOC article, it is questioned if the development cost and land costs of an HDB BTO project cover not just the HDB flats but also facilities and land that the HDB flat owners do not own.
If HDB flats are priced directly or indirectly based on the development cost of the BTO project, then would HDB owners be then overpaying for their HDB units?
PRs arguably distort resale market price of HDB flats
In response to a parliamentary question filed by Non-constituency Member of Parliament Leong Mun Wai, it was revealed that between 2011 to 2021, between 58,700 and 51,052 units (or between 7 per cent and 5 per cent of HDB flats) were owned by households where owners with Singapore Citizens with a non-citizen or Permanent Resident (PR) spouse.
Out of these, the number of flats owned by PR households fell from about 47,000 units (or 6 per cent) in 2010 to 44,000 units (or 4 per cent) in 2021.
Despite the relatively low numbers of HDB units held by PR households, it is not farfetched to say that purchases by PRs contribute to the escalating prices of resale HDB flat prices as BTO flat prices are linked with resale flat prices of the surrounding vicinity.
Reasons why PRs would not hesitate to pay more for their resale flats, are that those who just got their PRs and settling down in Singapore, generally earn more than Singaporeans, paying for a mortgage for HDB flats is still cheaper than paying for rent in private housing or HDB, and they know that when they cash out their property, they can take out all the monies from their CPF account by leaving Singapore permanently, unlike Singaporeans.
Are there countries in the world that allow non-citizens to buy public housing?
Retained or declining value of HDB flats?
And Mdm Ho Ching’s assertion in her recent series of Facebook posts about how HDB flats are still “value for money” is questionable when we consider that typically flats over 40 years old may be declining in value, until zero value at the end of the typical 99-year lease, when all the CPF and cash utilised may become worthless.
The Selective En bloc Redevelopment Scheme (SERS), which used to be a jackpot for HDB owners, will gradually become the last thing an owner would want to be faced with in Singapore.
This asset appreciation narrative is shattered by how residents at the four blocks in Ang Mo Kio Ave 3 were forced to leave their paid-up homes under SERS, and some affected residents had to pay up to $100,000 for a replacement flat.
Even though the Ministry of National Development said that no extensive review of SER is needed as not many more eligible sites are expected, the truth is that many HDB flats in the mature estates will eventually face the same issue in the next couple of decades. And worse, if the HDB flat prices continue to escalate in the current trend.
It is also stated in another article about how one has to sacrifice the build-up of retirement funds for the sake of owning an HDB flat.
Can elders get a replacement BTO flat after selling their HDB flats?
The Government claims it is not so difficult to apply for a BTO flat, especially for 1st-timers which would appear to be the case based on statistics provided by HDB.
But, what about 2nd-timers, who followed the “asset enhancement” narrative in the last few decades, and are trying to downgrade to monetise their HDB net profits for their retirement funding?
According to HDB’s website, the public flat supply set aside for second-timer elderly applicants in the BTO balloting exercise is at 40 per cent of the supply of 2-room flats but none for 3-room flats and above.
Just this itself would assume that the elderly is expected to downgrade to a two-room flat. In any case, the median applicant rate for the 2-room flats as of June 2022 is at 2.6 times the number of units available.
So referring to all that has been said above, should we be assured by what the Government has been saying thus far about HDB flats, or should we be worrying for the current and, especially, the future generations of HDB owners?