Monday, April 07, 2014

Myth of HDB “Ownership” – Do you really “OWN” your HDB flat?

Recently there was a discussion on “HDB Ownership”. It seems to be a “strange” debate at first look because most Singaporeans have been told that they “own” their HDB flats and how successful PAP was in raising “Home Ownership” for the past decades.

HDB has tried to circumvent the fundamental question on whether we really “own” the HDB flat by saying we can “sell it” to make money etc. (Read article from The Real Singapore )

HDB’s assertion is totally flawed in trying to draw parallel between leasehold private properties vs HDB’s own “leasehold”. Private property owners with leasehold do not consider their property as “rental” in nature basically because in all legal terms, they OWN the land where their property sits on! The same cannot be said of HDB.

For a start, you must understand that there are TWO basic types of leasehold properties in Singapore:

1) Right to rent for 99 years OR
2) Private Ownership for 99 years!

There is a Distinct and VAST DIFFERENCE between the two!

1) Private property with certain number of years of “leasehold”, in which, you are the rightful OWNER of the LAND which your property sits on. If it is a condominium or private apartment, you will be allocated “Strata Titles” on the percentage and RIGHTS of your OWNERSHIP of the land and property in the whole estate.

2) In the case of HDB leasehold, you DO NOT own the LAND where your flat sits on and technically speaking, you are only considered as HDB Tenant without any rights of ownership to the land and property of your flat. This is just like a RENTAL LEASE which, will last for 99 years if you bought it straight from HDB itself. You only sign “Lease Agreement” with HDB when you buy the flat from it, not “Sale and Purchase Agreement” . This Lease Agreement only gives you the right to stay in your flat for 99 years but NOT the ownership of the land which it sits on. 

Prior to 1980, we were not ALLOWED to sublet nor “sell” our HDB flat. By 1990, HDB “ALLOWS” (yes, you need HDB’s consent because technically speaking, HDB is the OWNER of your flat and land!) you to trade your flat or rather, the lease of your flat. Note, you are not trading the land of your flat but rather, only the lease aka the RIGHT of staying in your flat.

HDB’s “lease agreement” may be one of its kinds in this world because it is made to look so similar to “private ownership” but in legal terms; you do no have any “private ownership” of the land nor property.

1)      You are allowed to “trade” on the lease (of rent) for profits and it makes it looks as if you “own” the land and property.
2)      Although you can trade your lease but this is subjected to HDB’s approval as it is the rightful owner. HDB, as the owner, dictates on who you can sell the lease to, which race, which nationality… etc. If you really own that HDB flat and land, they have no right to dictate that!
3)      But you have absolutely no right whatsoever over that land where your HDB flat sits on. Eg. You cannot fence up the place just like what private condominiums do to keep out “trespassers” because you don’t own it in the first place. i.e. it is NOT considered as “private property”.
4)      You can’t have strata titles over the land and property nor decide on whether to Enblock the whole block of flats to sell it to private developers. You can’t initiate that Enblocking but ONLY HDB, the real rightful OWNER of the land could initiate such process to capitalize on the value of the land.
5)      You might have paid for the construction of the carparks for your estate via the pricing mechanism dictates by HDB but you do not own these carparks. i.e. you will have to pay rent for using these carparks.
6)      You cannot form your own management board to decide on maintenance issues or even for simple landscaping decision. i.e. you can’t even decide what trees to plant in your estate!
7)      Anytime the government or HDB want to do anything to your estate, they can just do it without compensation or consent from HDB tenants. For example, HDB can just decide to “monetize” the carpark at the back of your block to build DBSS flats and you have no say nor compensation because you don’t own anything there, though you might have supposedly paid for the building of that carpark.
8)      The reason why you have to apply for HDB approval to “sublet” your flat out is basically because HDB is the landlord. This is unlike private property owners where the government or URA has no say over who you can or cannot sublet to.

Thus you can see from the above, there is basically no “property ownership” to speak of when you don’t own that land where your flat sits on. Then the fundamental question is, what exactly are you buying or selling in that HDB flat? What are you actually buying or selling if you don't really OWN that land your HDB flat sits on? You are just trading on the AGGREGATE RENTS for the balance number of years in the lease in the HDB flat when you buy or sell your flat! That's what you are trading. Nothing more, nothing less. You do not buy any "ownership" in legal terms of any rights to the land and your flat.

This point is further expressed in the various "conditions" on your HDB flats imposed by HDB and the government. eg. Who can "buy" the "aggregate rent" of your flat to stay in that flat. If you "own" anything, you will have the right to decide on what you can do with what you "own". But for HDB flat, even though you have "paid" or "bought" the flat, there are a lot of restrictions put on you, technically by the LANDLORD, HDB aka government! In the past, you can’t even decide on what door or window grills you can put in your flat!

When you sell your HDB flat, you have to transfer the document of the lease to the new “leasee”. It is a very unique arrangement in Singapore and I believe there is no international comparison to Singapore’s HDB in the world.

Now, the fundamental questions emerge, IF WE are considered as mere HDB TENANTS who do not have any ownership or LEGAL RIGHTS over the land our flats were built on, then:

A) WHY is HDB selling flats that include "LAND PRICE" pegged to market rate when we do not own the land at all?

B) The HDB flat prices we pay are already inclusive of the construction cost of those amenities like carpark, landscaping, void deck, roads, etc on the land we do not own! Why do we still need to pay for the land price?

C) After we pay for the construction of carpark, why are we still made to pay for the carpark space?

D) If we do not own the land, why are we paying property tax?

E) When the government wanted to “upgrade” your place, you are expected to pay for such upgrading but in actual fact, you do not own that land! This is something strange because in normal circumstances, it is the OWNER of the property and land who is responsible for all expenditures on constructions or enhancement (eg. Lift upgrading) to the property. But yet, in HDB upgrading case, you are made to pay for something which is NOT of your responsibility and in return, to feel “grateful” to the owner for providing the “subsidies”! So the fundamental question is, why are we paying for “upgrading” on property or land which WE DO NOT OWN?

F) Are we being charged more than we get in reality? PAP has the cheek to make comparison to “market price” of land or property and claim that they are giving “market subsidies” to HDB “buyers” when fundamentally, these are totally irrelevant! Private properties come with private ownership of land and property but not HDB! This applies to comparisons made to housing prices listed in other foreign land as well.

G) Last but not least, it is really very misleading for PAP to use “Asset Enhancement” to sell their high HDB price policy because if we don’t own any land, what “asset” are we talking about?

I believe the reason why, prior to 1980s our HDB flats are cheap because land price was hardly included in the pricing because rightfully, we do not own the land, thus, we do not need to pay for it

You will be surprised with the conclusion. We have been hoodwinked into making that kind of "relationship" between land price and HDB prices for the past decades! For example, it is absurd to to even say that HDB pricing should include "land price" because you are NOT buying the ownership of that land at all!

The right concept is about the "RENT" of that land for 99 years. What's the difference? For example, if you own that land with strata titles, as owner of that land, you could possibly get consent from other flat owners within your flat to agree to ENBLOCK it to PRIVATE Property Owner anytime, WITHOUT the involvement of HDB at all! But no. HDB doesn't allow you to do that because you are not the land owner but just “renting” it.

Seriously, I don't know why people keep paying higher and higher Aggregate Rents for a shorter and shorter lease agreement with no ownership to any land but that's what Singaporeans are doing.

Even for private properties, if the lease is getting lesser, or just left 1 or 2 years, it could well cost less than a HDB flat because the "OWNERSHIP" of the land and private property will cease when the leasehold expires!

And the funny thing is, HDB use such inflated prices to peg the aggregate rents or prices to the new HDB prices! Yes, it is a crazy situation we have here. 

I do hope that Singaporeans should pause and reconsider their “belief” of HDB ownership which may give them the wrong idea which make them decide to pay more than what they get in return. The worst poison PAP has fed to Singaporeans is the misleading notion of “HDB is a good (property) investment”. How could it be a “good investment” when you don’t really own anything from the deal in the first place?

HDB is just meant to be a cheap home to us and our future generations with aggregate rents for 99 years pre-paid upfront. It is not meant to be an “investment”. But over the years, due to PAP’s silly diversion of policy direction due to greed and political agenda (yes, HDB upgrading is a political agenda), we are made to believe in the MYTH of “HDB ownership” which never really exist at all.

Goh Meng Seng


Anonymous said...

It's a case of people believing the propaganda of ownership rather than what the HDB documents are telling them.

Anonymous said...

It does not really matter to the people whether they really own the house/HDB unit if they can get capital gain.

The reality is that only the rich who can afford to buy 2 or more house can really gain from this property game.

Most people who can own a house at a time, only create cash flow when they sell and buy another house.
The only exception is when they down-grade to a smaller unit or less expensive place. For example, sell 5 room flat and buy a 3 room flat or sell a house in district 9 and buy one in other less expensive district.

Anonymous said...

Left unsaid is the fact that even if your HDB flat is paid up for, you cannot use it as collateral for a loan or mortgage because you own nothing. HUDC flats that were privatized are now strata-titled, But if you bought a unit in Neptune Court (Ministry of Finance) and Normanton Park (Mindef) that were transacted between $1.3-$1.5million, you still don't have ownership of the land as they are not strata-titled although you can still sell to foreigners. But you still can't use it as collateral when the land belongs to MOF or Mindef. At Neptune Court, there are anti en-bloc sentiments as most of the owners are old, don't want to move and can't afford the MOF's privatization price that's very high.