Minister for National Development, Lawrence Wong, commented in Facebook that the Housing & Development Board (HDB) flat is a “good store of asset value”. His comments come hot on the heels of his recent blogpost where he said that for the “vast majority of HDB flats, the leases will eventually run out, and the flats will be returned to HDB, who will in turn have to surrender the land to the State.”
Mr Wong’s earlier comments cast doubts if the Government was scaling back its Asset Enhancement Programme. Donald Low, an Associate Dean at the Lee Kuan Yew School of Public Policy, commented on the news of Mr Wong’s blogpost saying: “This is as close to an admission of the mistakes of that policy from government as we’re ever going to get.”
The Government implemented market pricing and the asset enhancement policy for public housing in the late 1980s. The aim of this programme was to allow heartlanders a chance at enjoying the appreciation of their HDB flat – which is a key asset for most of them. The programme led to more than 10 fold increase in the price of HDB flats in the past 30 years.
In his Facebook post Mr Wong gave several examples why the HDB flat was still an asset which can be monetised for retirement, but he made no mention of the Asset Enhancement Programme.
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Socio-economic commentator Chris Kuan responding to Mr Wong’s Facebook post said that there no getting away from the “gorilla in the room”, which is the fact that HDB’s value will be $0 at the end of the 99-year lease period.
“The depreciation of HDB flat over time will still be driven by the reversion to zero at the end of lease. That in turn will always drive the amount of money extracted from monetization of the flat. The worse outcome is a double whammy of the depreciation effect of reversion to zero in the lease coupled with a sharp fall in real estate prices…the MND may try to avoid that issue but it is what drives the amount of money HDB owners can get out of their “good store of value”. ” – Chris Kuan
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