HDB for retirement financing? Think again...

I have written about Minister Mah's idea of turning HDB flat into retirement instrument as DANGEROUS in my last posting. Some people has ponder over it and realize that it is indeed a "look good but infeasible" idea. As I have mentioned, it is an idea that lacks basic economic sense.


You can read something interesting abt HDB-CPF-Retirement Financing at the following blog:

En Bloc Block - Block Collective Sales @ - Trilogy : Part C PM said, I am saying


The following is a comment left by a reader "Now Not Talent Anymore" in Temasek Review about how the idea of HDB flat as a means of retirement financing is a total flaw:

By 2030, there will be at least 900,000 65 year old and old retired Singaporeans.

Assuming an average of S$500 pm CPF Life payment, or S$6,000 per annum.

It means there is a drain of S$5.4-billion per annum from CPF Corporation. In 2030, has PAP Government got the fund to service this CPF Life annual payout?

Assume PAP Government agreed to apply Reverse Mortgage Scheme for 2-room, 3-room and 4-room flat as a means to help out retired Singaporeans.

Assume 500,000 HDB dwelling units are eligible in 2030.

Assume an average of S$10,000 per annum payout to each HDB dwelling unit.
It means an annual outlay of S$10,000 x 500,000 = S$5-billion per annum.

America is now using 17% of its GDP for medical and healthcare.

Presently, the budget for healthcare is about 3% of GDP.

Assuming that due to ageing baby-boomers, healthcare budget doubels up, meaning about S$4-billion per annum is needed just to take care of teh need of an ageing population in terms of subsidised medicine, hospitals, community hospitals, geriatrics polyclinics, nurisng homes and hospices.

And of course, by 2030, PAP Government can easily spend about S$1-billion per annum for LUP, MUP and SERC.

Add up the future burden in 2030 due to our ageing infrastructures and ageing HDB estates, plus 900,000 unproductive consumers of 65 year old retired SIngaporeans, and we have to find money of at least:


5.4 + 5 + 4 + 1 = S$15.4-billion.

7% GST = S$7-billion collection.

And dear Singaporeans, I envisage that GST will go up to 15% (on par with European countries today GST rate) by 2030 just to service all those soical welfarism which we enjoy today…cleverly packaged as Workfare, Progressive Payment, etc.


And the above S$15-billion is a piffy sum as compared to the looming financial disaster, starting in 2030..and yes, the very foundation of PAP Government Success Story – our very own HDB Estates.

I dimly remembered a reinforced cocnrete handbook that I read which indicated that reinforced cocnrete strength starts to deteriorate after 75 years; and worse if it is post-tensioned (PT).
And we use lots of PT slabs and PT beams due to our prefabricated methid of construction.

Imagine you are leaving in a 3-room HDB flat built in 1965. It will be 65 years old in 2030.
You bought it from resale market in 2010 at S$300,000; hoping that it will increase by at least 50% to S$450,000 by 2030.

And if you are lucky and there is another Property Bubble, you can sell it for S$600,000!!!

But the Seller forgot one little fact.

Can the prospective buyer gets a bank loan for a 60+ year odl flat with only 39 of lease remaining?

So, poor Seller is “asset rich, cash poor” as he or she simply cannot find any buyer and may very well have to lower the selling price to attract buyers!!!

Therefore, Mah Bow Tan’s assumption of a continual upward curve of appreciating values hold no water for those poor saps snapping up all those 30+ year old HDB flats – built in the 60s – to the tune of S$250,000 to S$350,000 in 2010.

Then, the chain reaction starts.

There is a large overhang of 60s and 70s HDB flats with no buyers, and will certainly depress the HDB resale market – meaning there is no asset appreciaiton for HDB flats by 2030.

Instead, there is price stagnation due to thsoe unsellable 60+ year old HDB flats in the market.

Then, how will those affected – say 300,000 to 500,000 HDB householders retire if they can’t cash in their “asset appreciated” HDB flats to downgrade to a smaller HDB unit?

Imagine 500,000 60+ year old HDB flats that no buyer will want.

And PAP Government has no choice but to Reverse Mortgage those 500,000 HDB units to enable retired SIngaporeans to have a decent pension funds.

Assume an average price of S$300,000 per HDB unit.
Then, 500,000 units = S$150-billion!!!!!

If the payout is S$5-billion per annum, then those 500,000 HDB house owners will receive their payment during a 30 year period.

Now, what if in 2030, your HDB block is declared struturally unsafe and must be demolished?

Then, force majuere comes into play and you may end up with zilch as your expected asset appreciation of S$450,000 instantly ebcomes worthless as your home is no more, demolished and the land revert back to HDB, i.e. PAP Government.

At one stroke, you are 65 year old, hapily looking froward to retirement.

Then, WHAM! BAM!

You “asset apprection” of a HDB flat is no more but a pile of rubbles and you become an instant pauper with 30-year of hard earned CPF money just turned into conrete dust.

Therfore, Mr. Mah Bow Tan, has you ever think of a 60-year old, and rapidly ageing year by year – HDB flat will ever appreciate on an upward curve when buyers will hesitate, not because they can’t get a bank loan, but becaue of the inherent nature of reinforced concrete strength starts to deteriorate after 75 years or more?

Apparently the only solution to ensure continual asset appreciation I can think of is sadly that for 60 year old HDB blocks (and even private dwelling units), is en bloc, demolishment and re-building.

Meaning that HDB ownbers will need to fork out money to pay for:
- to renew the land elase bakc to 99-year.
- to pay for a newly constructed HDB flats.

I trust you all can see the fallacy of Mr. Mah Bow Tan’s lovely advice of “your HDB flat will appreciate and you can then sell it, downgrade to a smaller unit and retire on the capital appreciation”.

And of course, it is always better to buy brand-new HDB flats.

The frist batch was in Queenstown in early 60s..maybe 1963.

Toa Payoh at Lorong 1, 2, 4 & 5 are in 1965.

Lorong 7 is 1965, and my fmaily moved in in 1969, Block 13 – and it is still standing there.

That is, the first batch of HDB blocks are now 45 to 47 year old.

And in 2030, they will be 65 to 67 year old where P65ers are 65 year old and start to retire.

Now, when a 3-room HDB flat is 60+ year old, and you want to sell in the resale market at say S$450,000 for yoru retirement needs, the question is will there be buyer for a HDB flat with 39 leasehold year remaining?

Adn will commercial banks willing tyo loan out a 30-year mortgage loan for this 60+ year old HDB flat?

And what happen tot hat 2nd buyer who paid S$450,000 for a 60-year old HDB flat; only to see it worthless in another 30 to 40 year time?

Asset appreciaiton of course will not work for the 2nd buyer.

Of coruse, if you are unfortunate and perhaps afetr moving in in 2030 and then 10 to 15 years later, the HDB block sid eclared strucuturally unsafe…..and where those affected fmailies move to?

As I said that if a 50 year old HDB flat is udner SERC and completely demolished, then those affected HDB residents will either move away or wait 4 years for rebuilding ebfore moving back to the ned HDB blocks.

But who will fund all these rebuilding works under SERC?

Imagine throughout a 30 year period, an average cost of building one dwelling unit is S$200,000.

Then, just to rebuild new 500,000 dwelling units starting in 2030 – and ending in 2060 – the funds required is 500,000 x S$200,000 = S$100-billion.

Or about S$3.3-billion per annum, starting in 2030.

That is, which ever way you look at it, if PAP Government plans to put all 60 year old HDB blocks under SERC to rejuvenate ageing HDB estates, funds are needed.

And under SERC, say you want to cash in by selling yoru 3-room, 4-room or 5-room back to (and downgrade to 1-room or 2-room) PAP Government, then PAP Government will need to fidn billions to pay out these “asset APPRECIATIONS” to 65-year old SIngpaorean retirees.