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Financial security in Singapore plain and simple.

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AK asks HDB-HIP-VERS can eat or not? Baojiak?

Sunday, August 26, 2018



Single or married, if we are looking for a home in Singapore, the best value for money option is still a brand new HDB flat (i.e. BTO HDB flat), if we are allowed to buy one, of course.

Heavily subsidised, brand new HDB flats pass the Rule of 15 test with flying colors.

Don't know what is the Rule of 15 test?

See:
Rule of 15.



Singles weren't always allowed to buy new HDB flats.

Although allowed to buy only a one bedder (i.e. 2 room flat), allowing singles to buy new HDB flats is progressive thinking as many more young Singaporeans are staying single.

Space wise, having lived in a shoebox apartment for 4 years now, unless we are hoarders of material goods, I believe there is enough room for a single person in a 2 room HDB flat.

See:
My home is a hut in the sky.





As for HIP and VERS, for those who are not familiar with these acronyms, you are so unpatriotic lor.

Didn't watch National Day Rally 2018, right?

Bad XXX! Bad XXX!

"All Housing Board flats can expect to be upgraded twice during their 99-year lifespan under the newly-expanded Home Improvement Programme (HIP), as part of the Government's public housing redevelopment initiative.


"In a nutshell, all flats will be upgraded when they reach about 30 years of age, and again when they are about 60 to 70 years old."


Read article: 
HERE.


"Under the new Voluntary Early Redevelopment Scheme (VERS), owners in flats aged 70 years and older can vote for the Government to buy back their homes before their leases run out, if their precinct is selected for VERS.

"They can use the proceeds to buy a new flat, while the Government redevelops the precinct. If they vote against such a move, they can continue to live in their flats till the leases run out."


Read article: 
HERE.





Many things have been said by many people about HIP and VERS since NDR 2018.

I was afraid readers might ask me about them and my fear came true.

Why afraid?

Apart from the fact that I am really lazy, I am really unimpressed by HIP and VERS.

To me, HIP and VERS are simply attempts to allay fears of people who happen to be owners of older flats, especially those who might have bought a resale flat that is quite a bit older than they are.


Purely from a value for money perspective, I think it is silly to pay full market prices for much older flats if we have the option of paying a much lower price for new HDB flats which, of course, have fresh 99 year leases.

See:
Affordability and value for money.





HDB flats come with a 99 year lease.

In case you don't understand what that means, it means that we will enjoy them for a maximum of 99 years.

As they age, the remaining lease becomes shorter and shorter.

If we are sufficiently clear headed, it would be quite obvious that HIP and VERS do not address the core issue of a decaying lease.






HIP

HIP simply makes old flats look new again.

The looks are upgraded but the leases are not.

It is like repackaging something with an approaching expiry date to sell to an unsuspecting consumer.

Or imagine an 80 year old granny going for plastic surgery to look young again but it does nothing to extend her lifespan.

Alamak, AK why liddat say?

Bad AK! Bad AK!






VERS

What about VERS?

Surely, it must be a good thing, right?

Well, it is 20 years away and we can't really tell what the compensation quantum is going to be like.

However, we can make an educated guess.

My guess?

VERS is going to be like selling the tail end of the lease to the government (i.e. HDB Lease Buyback Scheme) except that, this time, you get kicked out of the flat.

See:
HDB Lease Buyback Scheme.





You will have to look for a new home.

The monetary compensation from VERS should be higher than selling the tail end of the lease to the government under the HDB Lease Buyback Scheme.

However, the compensation cannot reasonably be expected to be enough to purchase a new home with the same attributes with a much longer lease.

You will most likely have to downgrade or downsize or top up to buy a new home.

What does this sound like?

Sounds like your old home with a much shorter remaining lease which you sold to the government under VERS was less valuable.

See?

It is free market economics.






You cannot reasonably expect to exchange an older batch of produce which is going to spoil soon for a fresh batch that will stay good for some time to come.

Hmm.

Wait, actually, you can.

How?

If you meet a "gong giah" (i.e. "stupid fool" in Hokkien) of a buyer lor.

So, what is the moral of the story?

Look for a "gong giah" buyer lah!

Aiyoh, no lah!

You so terrible!

Moral of the story is don't be the "gong giah".






For some reason, if you are set on buying a resale HDB flat, "bochap" (i.e."ignore" in Hokkien) the hype around HIP and VERS.

They are just noise.

Remember, you must have very good reason to give up the option of purchasing a new HDB flat if you are actually lucky enough to have that option.

Focus on what you need and if only a resale flat will do the job, try not to buy a very old flat.

See:
Buying properties with short remaining leases.






Although you are being a "gong giah", don't be more "gong" than necessary.

See also the related posts at the end of this blog.



OK, I am packing and rushing to the airport to catch the next flight out of Singapore now.

Hopefully, it is going to a country that does not have an extradition treaty with Singapore.

Alamak!

Bad AK! Bad AK!







Related posts:

1. Older flats are problematic.
2. HDB flat is 37 yo but son is 8 yo.
3. $1M for 30 year old flat and now?

Another blog was published earlier today:
CPF SA time and income lost!

18 comments:

AK71 said...

Yeo Sen Poh says...
People, initially, all knew about the lease decay associated with 99 year leasehold.

The confusion came about when they were subsequently assured, repeatedly and on many important occasions, that the value of their flats will only increase if economic progress continues.

So it may be less so a pure financial issue like what we believe it to be.

The social compact is now being tested.

Radical said...

Thank you AK! For explaining it in simple English.

AK71 said...

Hi Radical,

You are welcome. :D

I see what some people say, I also blur.

I am a simple minded person.

Simple works for me. ;p

AK71 said...

Reader says...
I don't understand why you say this about VERS:

"You will most likely have to downgrade or downsize or top up to buy a new home."

En-bloc sales should make money for us, right?

AK says...
If you are referring to getting a sum of money that is more than your purchase price of the flat 70 years ago as making money, you are probably right.

However, whether you would be able to get a newer replacement property with the same attributes with the monetary compensation then is the question.

I asked readers to read the related post at the end of the blog.

If you read related post #3, you will get an idea of what I am trying to say. ;)

Ben said...

Hi AK,

I am of the supposed few who do not watch the National Rally. In fact, I have yet to watch any of the Rally before. Does it make me feel unpatratoic? I do not think so.

It is not my preference in watching the Rally. I can still obtain the gist and bits from the open source news. I take the news and announcement as a pinch of salt and will apply my strategy to react to the announcement accordingly. Most of the time, I do not take any action as the announced news do not seem to address my concern. It's all right as the announced policies are supposed to cater to the majority of Singaporeans.

Ben

AK71 said...

Hi Ben,

If you have not realised, it was a tongue in cheek comment for comic effect. ;)

AK71 said...

Raymond Ng says...

HDB ownself check ownself...

I mean HDB is market maker, they set the VERS price.

So don't expect VERS to be like enbloc...

Ben said...

Hi AK,

It does not affect me. No worries. I have known beforehand lah. One will know whether he/she likes his/her country.

Ben

Ben said...

Hi AK,

My take is that such measures might or might not have the impact. It depends on the people.

I quote the following:

1) Right from the start, people have been made aware that the lease for HDB flat is 99 years. Yet, people treat them as assets with the assurance by the Government. The rise of the flat during these years shows that people are confident that their property will be asset of increasing values. I won't be surprised that the price of the flat rises once again after this announcement. It is all in the belief of the people. The skyrocket value of the flat might become a reality and the price can go up to $2 to $3 million. Do not rule this out.

2) The en-bloc thingy might also play a part in the rise in property price once again. Once again, it's all up to the mindset shift in the people.

3) Peer pressure. As mentioned before, the peer pressure among the people in owning bigger and bigger property will propel the rise in the property price. I already hear comments from my peers that the future of Singapore is rosy once again. People should go to buy more property. This is the best time for asset enhancement and the wealth are there to be earned. The ABSD and related tax are neligible and can be addressed by the improbable price increase in the property with the Government's announcement. Is this a sign of another property rise and favourite by the people? I have no idea.

Ben

AK71 said...

Hi Ben,

When the tide goes out, we will know who were swimming naked. ;p

AK71 said...

PK Jan says...
The 1st hdb flat I stayed back in 1977 appreciated 10X when sold after 20yrs.
The 2nd hdb which I am still staying now appreciated only 0.8X after 20yrs ๐Ÿคง


Raymond Ng says...
Merdeka generation is lucky bcos our flat grow with economy.

AK71 said...

Desmond Sim says...
simple maths
29yrs out of 99yrs lease times market value.
no matter, it can't fully pay for another home.

AK71 said...

Christopher Lee says...
There is all this talk about HDB 99 yr lease.
But wouldn’t 99 yr leasehold private property face similar situation in future?
Or there is some difference that I am missing out here? ๐Ÿค”

AK71 said...

See:
Buy 99 years leasehold or freehold property in Singapore?

AK71 said...

See:
When the lease on my HDB flat ends.
What happens to our CPF money used to buy a HDB flat when the lease ends?

AK71 said...

Jack James says...
No idea why so many people KBKB about such topic.

Adele Wong says...
The topic the high likelihood of zero value which is stark contrast with previous political stance that your house is your financial nest egg which will increase in value. what some "above average" people say can echo for eternity.

Jack James says...
Echo for eternity ! ๐Ÿ˜…
If really so scare the value turn to zero , have an exit plan la , adui. If you can’t change that law , change your strategy to beat the law ! ( talking to those scary cats ) .

AK says...
Who are the "above average" people? Who? Who? :p

Jack James says...
Any such kind of news published at CPF or news channel FB , you can see many wonderful , marvellous comments .

AK says...
Lucky no one publish my blog posts there.
I scared later I kena flamed.
AK BBQ? Alamak!

Adele Wong says...
AK, those special people who earn >500K per annum and get to drink tea in their white robes. :)

Jack James says...
AK , won’t la , they will tell you 70% vote for it . Haha

AK says...
๐Ÿ™ˆ๐Ÿ™‰๐Ÿ™Š

betta man said...

My daughter was born within 1 year after I collected the keys to my BTO flat. The 99-year lease should be enough to last her entire lifespan as well. Theoretically, she does not need to pay a single cent to have a roof over her head which means that she will have more monies in the CPF for her retirement.

Now, whether my BTO appreciate or depreciate over time, it does not matter. I just need a roof over my head. I treat my flat as an expense item. Keep life simple.

AK71 said...

Hi betta man,

Absolutely.

You have planned well. :)

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