Unwinding HDB Asset Enhancement Time Bomb - Viable Options

Unwinding HDB Asset Enhancement Time Bomb - Viable Options

I am re-posting this Mind Map of HDB problems here to examine what are the options which are commonly put up but not viable at all.

Most people would jump into giving "solutions" to HDB problems without examining carefully the whole matrix of the problem in the first place. Housing problems are extremely complex, complicated and involved a whole web of direct and indirect linkages with multiple segments of market forces.

Properties are "durable" goods but at the same time, with a "long expiry date" aka leasehold. Along with financial rules, it makes the market pricing mechanism extremely complicated and in HDB case, we have at least THREE markets to deal with, apart from the private property markets.

Within the three main HDB markets. there are sub-market differentials like Rental, Studio Apartment, 3-room, 4-room, 5-room. Executive Flats, Executive Condos etc. The administrative and financial rules applicable to different market segments make the whole context even more complex.

As we can see in the diagram, the three RED shapes are the fundamental problems of HDB. The THREE KEY PROBLEMS are:

A) Over Consumption of Housing/HDBb

B) Inadequate Retirement Financing in CPF

C) Massive Expiry of HDB flats with 99 Years Lease.

Most people missed these three key points, focusing on something which only touches the surface of the problems.

For example, one may suggest lowering HDB BTO prices but that will still leads to Over Consumption of HDB because people may switch from a 3 room HDB to 4 room or even 5 room HDB flats when prices come down, using the same amount of money from CPF and mortgage. This can happen when a 5 room HDB flat price is reduced to a 3 room HDB flat at current price.

Problem A and B are linked. It is due to the excessive use of CPF money for Singaporeans to purchase their HDB flats which leads to both Over Consumption of Housing as well as resulting in shortage of CPF funds for their retirement 30-40 years later.

Unfortunately, ALMOST NONE of the political parties or so call "experts" has the courage to take the bull by the horn and suggest a drastic cut in allowing Singaporeans to utilize their CPF to buy properties like HDB!

Technically speaking, a 99 year lease hold of HDB or any other property will have little material impact on Singaporeans if they are only buying these properties for their own consumption as housing or as a HOME to stay. Nobody could presumably live beyond 120 years old, so to speak.

The only problem will arise when you over consume or over bought housing with hefty price, either in BTO or resale market. The problem will become more acute when PAP keeps selling you the idea that your 99 lease HDB flat is some marvelous ASSETS that can make money for you, even help you to finance your retirement as an "investment asset".

People will throw in all their money into buying HDB flats and hoping to make a pile of money out of it without much thinking. A 99 Lease Hold property, be it private or public housing HDB, will depreciate in value over time. This is even more so for HDB when you do not really own the land and cannot make decision on private enbloc of your flat.

That is why I am totally against the Asset Enhancement Scheme and consider that as a very bad policy scam which mess up the whole HDB concept.

Extending the lease of HDB will not solve this problem but in fact, aggravate the problem further by influencing the pricing of HDB both in BTO and Resale market going upwards.

We have a rather very unique problem in Singapore:

1) A massive 300K to 400K of flats were built within 15 years period from 1970 to 1985. This would mean that these flats will have their lease expired within 15 years in the future, starting from 2070 to 2085. Imagine 300K to 400K of HDB flats expiry within a short period of time that would create a massive housing shock.

2) Singapore is a tiny land scarce island. There is only that much of land we could reclaim from the sea without impeding on our strategic logistic hub status. It means that if we do not have a solid land redistribution plan or managed property market, the property prices will run out of control. This will turn our economy into a highly rent seeking economy

3) Our financial rules make it extremely difficult for HDB flats with less than 60 or 50 years lease to be sold in resale market. This will create an under-priced market for these old flats. It will create market inefficiency.

Whatever solutions or options anyone wants to put up, they will have to take all these into serious consideration.

The basics and fundamental problems need to address is:

1) In order to address the Over Consumption of Housing and Inadequate Retirement funds in CPF, the amount of CPF allowed to be used in buying HDB or other properties will need to be capped.

2) The impact of a massive expiry of 300K to 400K of HDB flats within a short period of time frame of 15 years will need to be addressed else we will experience a supply shock in the HDB markets.

3) The inefficiency of the Resale market for old HDB flats with less than 60 or 50 lease will need to be addressed. This is to correct the market bias against old flats, instead of creating an unnecessary price hike in this market, creating over consumption again. It will be a correction to fair value pricing for these old flats.

4) A reduction in BTO prices must be accompanied by a reduction in the use of CPF money in the purchase of HDB and private properties. This is to prevent Over Consumption of Housing.

5) Most of the HDB flats built in 1970s and 1980s cannot last more than 70 years or 80 years. This is due to the mass production process back then which compromised quality. The reinforcement concrete may not last 100 years at all.

All policy options should have minimum undesirable impact on the three main HDB markets, BTO, Resale and Rental markets. These impacts will indirectly hit the private property markets.

I am not saying my HDB policy will be the best but at least, it will address the fundamental problems to begin with. It will also take care of various variables which may create unnecessary impact on the HDB markets.

We must start with the right concept and public perception of HDB as a public housing policy. It is NOT an investment asset for anyone to make big money from because it will become a Zero Sum game. Either you will suffer insufficient CPF funds for retirement or your future generations will suffer exorbitantly high property prices.

The HDB Resale market is for Singaporeans to redistribute HDB flats through a fair pricing mechanism to cater to their needs, not a market for they to reap great profits.

Ultimately, if you want to make more money than your current job, invest in businesses or equity, bank shares or stock market or simply start a business etc.

Last but not least, asking people to sell off their HOME and live in other cheaper country, is really NOT a HONEST solution but a raw demonstration of National Policy Failure at the highest level!

A nation will cannot take care of its own people's basic needs of housing when they get old, is really not a nation worth fighting for.

Goh Meng Seng

The Cheated Generations

The "Cheated" Generations

From 1970s till early 1980s, one can buy a 4 room HDB flats for a mere $20K-$30K. They introduced the inclusion of land price some time in mid 1980s and the prices of HDB flats started to climb.

By early 1990s-1995, GCT came up with the Asset Enhancement Scheme which entice Singaporeans to spend more of their CPF to buy HDB flats. They relaxed the rules on the secondary market for HDB flats. By 1990s, some of the HDB flats were about 20 years old and they started the HDB upgrading.

Unknown to many Singaporeans, they had also started to peg the price of new HDB flats to the "market prices". It was not until a couple of years later, they made known to public that they were giving "market subsidy" for new HDB flats. There is a VAST difference between "Market Subsidy" vs "Real Subsidy". Basically it means the Government can now earn profits from the sale of HDB flats (as a whole) but at lesser amount from market rates.

The impact of such Asset Enhancement Scheme has multiple dimensions.

1) From cashflow perspective, it reduces or even eradicate the burden of the government in providing the return for CPF.

2) If Singaporeans used up half of their CPF to buy their HDB flats taking a loan from HDB, it means they will have to pay 2.6% interests to HDB. To the government, this can be transferred to pay for the interests accrued to the other half of the CPF money which was deposited in CPF.

3) When Singaporeans sell their HDB flats, they have to pay back the amount of CPF money they have spent in paying their mortgages PLUS the accrued CPF compounded rate of 2.5% as return for these CPF money they had used. In effect, Singaporeans are paying 2.6% Plus 2.5% in total interests if they sell their HDB flat. If they only use half of their CPF money to pay their mortgage. it means that Singaporeans are actually paying for ALL the returns of their CPF money and Government didn't need to pay a single cent for their retirement financing. Mortgage rate from HDB is always pegged 0.1% above CPF rate.

4) It means that in reality, Singapore Government basically do not need to pay any Interest to most of our CPF money and in fact, had earned quite a substantial amount of money via land sales and price above the cost of building the flats. These are thrown into Temasek Holdings and GIC. These are basically "Interest Free" money right from our CPF! The buying of government bonds from government by CPF is just a formality.

It was only later that Singaporeans were allowed to take mortgage from private banks for their HDB purchases. On the other hand, CPF was allowed for the purchase of private properties. These policies were made to help boost the banking and private property market.

5) For my generation, we were sold the dream of 5 C and HDB as a "valuable asset" which we could depend for retirement financing. The whole plan is basically flawed.

6) MAS has already fix the rule for the limited loan that financial institutions could make to anybody who is buying a flat which is more than 40 years old.

7) All lawyers know what the 99 year lease means. The value of the property which reached 99 years will become ZERO. How could our HDB flats be growing in value forever?

8) HDB is the only asset most Singaporeans will have. The only way for us to "monetize" HDB for retirement is to either rent it out or downgrade. However, selling an asset which is reaching 40 years old will be challenging unless rules are changed.

9) PAP government has not changed the rules but misled my whole generation and the future generations of Singaporeans after us that HDB could really be a good "investment" asset.

10) In the end, we were made to pay almost 10 times of the price which older generations in 1960s and 1970s had paid, without any promising "investment value" for retirement financing.

11) Singaporeans who bought their flats in 1960s and 1970s, or even 1980s won't understand my generation's anger. We have been misled and felt cheated, suffered high HDB prices and in the end, many of us left very little for our retirement.

12) Asset inflation doesn't really create value but in fact, only create Rent Seeking Economy which only kick the problems down the road. It is basically transferring the problems of retirement financing to the future generations in terms of extraordinary high property or HDB prices.

13) HDB prices for a 4 room flat rises from $20K to $200K in 1990s and continue to rise. Who suffers? Only those who bought early in 1970s and 1980s "enjoy" such wealth effect (most of them cannot just sell their HDB flats off) while their children, grandchildren and future generations suffer.

14) The inflation of HDB prices have outstripped salary increase over the last few decades. This could only mean that we are paying more, maybe not in cash but eating into our CPF savings.

15) If you take any average guy from my generation, those who are late 40s to 50s who are staying in HDB flats, ask them whether they could make money out from their HDB to finance their retirement in 15 years time, the answer is definitely a NO. on average, if they bought their flats when they were 27 years old, by 62 years old official retirement age, their flats would reach 35 years old. They couldn't possibly sell their flats for a profit or with any cash left after repaying the 2.5% CPF compounded interests over 35 years.

16) It would be even worse if they bought their flats from the secondary market.

17) Thus, has the so call Asset Enhancement Scheme helped them?

18) It doesn't need a super Mathematician to calculated in advance how much one would need to sell their aging HDB flats in order to have any cash available for them to retire after 35 years. Was it a deliberate plan to mislead or just a deliberate negligence?

19) As far as I know, we have been misled and cheated by PAP government because the results are obvious. What has been promised, claimed and sold to us, will collapse in time to come.


Goh Meng Seng

TOTD: HDB Issue - Never Populist, No Longer Lone Voice Again

Thought of the Day - Never Populist, No Longer Lone Voice Again

I was having a discussion over the Asset Enhancement Scam and all the issues involving HDB in my High School Whatsapp group and one of my friends wrote that I should not harp on the truth of HDB lease ownership and by reading the comments on social media, see what they want and sing their tune to get their support.

I paused for a while and I replied, I have NEVER been populist in my approach and most of the time, I turn people living in fantasies and myths into reality.

Unlike some politicians who would be that opportunistic and even agree with a BAD policy like Asset Enhancement Scam just because popular opinion of GREED was in support of it due to short sightedness, I chose to walk the less chosen path of going against the grains of popular opinion.

I would call a spade a spade, nothing else.

Asset Enhancement Scheme is a scam and it is important to make the point that you don't own any asset when you buy HDB LONG TERM TENANCY agreement because...


1) You don't even own the HDB flat as a property nor the land, what "assets" are you talking about?

2) In all normal TENANCY agreement, it is the responsibility of Landlord to do major maintenance and upgrading, so why are Singaporeans asked to pay for upgrading?

3) It is total Bullshit to say "GOV subsidize" your upgrading but the reverse is true, Singaporeans are subsidizing the GOV in upgrading!

4) You may think you would gain great "profits" when HDB prices are pushed up but at whose cost? At the cost of the buyer of your HDB PLUS the cost of higher HDB prices for your children and grandchildren!

5) Who are the ultimate Gainers from high HDB prices? SLA via higher land sales, HDB via more interests earned from loans and as the monopoly supplier of HDB flats and banks that make mortgage loans!

That's the reality of Asset Enhancement Scam.

I was the lone voice in the past fighting against HDB policy but not anymore. Glad that many have awaken.

I am so happy to read many other Singaporeans are speaking up about the Truth of HDB “Ownership”, against the PAP’s misleading narrative which is built on a total lie.

All scams are built upon ignorance and GREED of the victims, that’s why scamming lies could become some sweet tunes to these unsuspecting people.

It is my mission to exposed the bad scam of Asset Enhancement Scheme because it would be disastrous to our future generations for it to continue.

I am not against HDB as a PUBLIC HOUSING and I am even okay with the fact that there is no REAL OWNERSHIP of assets but just a prepaid long term lease of tenancy.

But I am against PAP political sophistry to turn HDB into an evil weapon of mass destruction of Singaporeans CPF retirement financing plan just for its own political self interests.

It is a total oxymoron idea to pursue a policy that will inflat HDB prices forever when the main aim of Public Housing is affordable housing for all Singaporeans!

The reason why I was so pissed off with MBT back in GE2011 was that he kept claiming HDB is “affordable” despite the fact that majority of new generation Singaporeans were made to pay more than 25% of their salaries for 30 years mortgage and yet he still claimed it is affordable! The direct consequence is, they will have less than 11% of savings in CPF for retirement funding! Any financial planner would tell you that this is definitely not enough for middle lower income earners!

Moreover, after paying their 30 years mortgage, they will find themselves stuck with a depreciating HDB value with totally insufficient CPF for retirement!

It is a huge time bomb of massive destruction in the making, all because of PAP’s manipulative moves in hoodwinking Singaporeans into believing this Asset Enhancement scam.

It always pains me when I read ignorant young couples forking out huge amount of money up to a million to buy a HDB lease of tenancy which s less than 80 years! We have to continue fight the PAP evil propaganda of HDB flats is an asset that will appreciate forever in order to drill it down to Singaporeans, it is nothing more than a paper that let you live in that flat for a time frame.

Singaporeans should change their mindset about HDB as investment. It is just public housing. All public housing are literally OWNED BY GOVERNMENT and they should be misguided and misled by PAP that they could use it to earn huge profits. It is your home, not an investment.

And as public housing, it should priced as such, Cost Plus, instead of “market price”. Only then, we could normalize and stabilize housing cost to all Singaporeans.

I hope that more and more people will have solid grasp of these HDB issues and help to spread the words so that we could build the Right social cultural mindset towards HDB as public housing.

Goh Meng Seng

Truth of HDB Ownership - 99 Year Leasehold Tenancy

HDB 99 Years Leasehold Tenancy Purchase

The Prime Minister has tried to confuse or sidestep the FUNDAMENTAL Question of "HDB OWNERSHIP". What types of Ownership are we having when we buy a HDB flat?

Many people have correctly pointed out with FACTUAL illustration of that little paper you sign when you purchase your HDB flat, regardless whether it is new BTO or resale HDB flats.

It is a purchase of HDB 99 year TENANCY OR WHATEVER is left of the tenancy agreement. This is NOT the usual property sake and purchase agreement.

This is why you will NEVER be issued a strata titles because what you have bought is only a long term, paid in advanced, tenancy agreement.

This is also why when you want to SUBLET out your flat, you have to get permission from the REAL OWNER, HDB.

Thus, PM Lee is Totally wrong to say that HDB "ownership" is the same as private property ownership because they own DIFFERENT things altogether. HDB ownership refers to the long term tenancy agreement while the private property ownership refers to the ownership of property, including the land.

This is also why when Gov wants to take away your car park or any space under your block to build anything, they don't need to pay you single cent because you don't own it! But if it is from private property, they will have to pay the private owners!

Similarly, all car park revenues from your HDB car parks will go to HDB, not HDB tenants, while for condominiums which decided to collect car park fees from visitors, the revenue will go to the management committee collecting on behalf of owners which is used to supplement maintenance fees.

HDB LONG TERM TENANCY ownership is the first of its kind in the world which hoodwinked people into thinking they are really owning a property or land but the hard truth is, they own nothing but the long term tenancy agreement!

This is the REAL truth of HDB "OWNERSHIP".

Goh Meng Seng

Rebuttal to PM Lee's comment on HDB Leasehold is the same as Private Property

Rebuttal to PM Lee's comment on HDB Leasehold is the same as Private Property

Our PM Lee has made the following comment during a book launch:

"I find this argument frankly amazing. Many private properties are held on 99-year leases too, and yet nobody argues that they are merely being rented," said Mr Lee. "HDB lessees have all the rights over their flats that owners of such leasehold private properties have. You can live in it, you can transact it, you can bequeath it to you children. In fact HDB owners enjoy extra privileges because HDB flats get upgraded from time to time, with generous government funding."


1) Manay Private Properties are held on 99 year leases but they do have FULL rights to their properties and LAND. Eg. they could FENCE up their properties, decide on their own landscaping, rent out their properties without much restrictions, decide on their own when and how much they could sell their properties and do Enbloc redevelopment.

2) Private Properties owners also own their land for that leasehold period with strata tittles accorded.

3) However, HDB lessees DO NOT own their land with strata titles. Could PM Lee provide the proof that HDB lessees own their land with strata titles?

4) HDB lessees DO NOT have FULL rights to their HDB flats. They only have LIMITED rights, restricted by all the HDB rules, regulations and law.

5) HDB lessees cannot decide anything about the land their HDB land sits on. They cannot fence their blocks up or employ security guards.

6) Even when it comes to Enbloc, only HDB could decide when it could be done and only HDB could buy back all the HDB flats for Enbloc.

7) HDB Lessees cannot even sell their flats FREELY to anyone, unlike Private Properties.

8) Ironically, since HDB is the LAND LORD which owns the all the land that HDB flats sit on, why should HDB lessees be asked to pay part of the upgrading fees? It is the responsible of the LAND OWNER to maintain the infrastructure built on the land, is it not? How could PM Lee turn around and said that HDB lessees are enjoying some "privilege" of "heavily subsidized" upgrading when it was the other way round, HDB lessees made to subsidize the upgrading work which is supposed to be the Land Owner's aka HDB's obligations?

9) Fundamentally, there are GREAT differences between the 99 Year leasehold between a Private Properties vs HDB flats.

Goh Meng Seng

TOTD: STOP Living in Self Denial!

Thought of the Day - STOP living in self denial!

I read quite a number of remarks, articles and comments over VERS and felt pretty amused and sad.

People are still living in self denial of the massive scam of asset enhancement scheme initiated by PAP.

People should STOP thinking that PAP is coming to your rescue and giving you great money with VERS!

PAP has screwed up badly over the Assets Enhancement Scam and there is no way out of it without great pain to many Singaporeans. Please do not live in self denial.

VERS is not about giving a great deal to Singaporeans but an attempt to avert a sudden supply and demand shock to the HOUSING market when a massive over 200k flats come into expiry within a few years.

Sink that in and stop hoping for PAP to come to your rescue from a real rapid depreciation of your HDB flat.

Goh Meng Seng

TOTD: Credits Due

Thought of the Day - Credits Due

Well, I have to give due credits to the Minister of National Development for the willingness to consider my comprehensive solutions to the HDB-CPF mess and adapted some of the important policy options stated in my proposal.

Although he didn't give me due credits for my inputs for the obvious reasons, but still, I think he is sincere in solving the big mess of HDB instead of living in self denial like his predecessors, especially MBT.

For the good of our Nation's future, we need people like him who is willing to look at problems and situations objectively and apply or adapt good policy options, regardless of whether it comes from the opposition camp or not.

But one word of caution to him, my solutions provided must be looked at in totality and not in selective adoption else he will risk having incoherence in his policies.

I was quite reluctant to write that article to provide my policy options at first because these policy views are the accumulation of more than 20 years of in-depth study and understanding the HDB issues in and out, through and through.

But a friend of mine, who is helping the government in crafting housing development policies, had urged me to contribute, write, publish and share my views, for the benefits of our nation. He said the committee will take serious consideration of any good proposals and views.

After much considerations, I decided to write. The reason is simple, since Lawrance Wong has the moral courage to openly declare and correct misperception of public on HDB by declaring your HDB flat will have zero value when the 99 year lease expired, I believe that he is sincere in his approach, unlike MBT who would continue to misled Singaporeans on "assets enhancement".

I know my article was passed around the members involved in the policy committee

I would rebut PAP or anyone who claims we don't provide sensible and credible policy views or options in future. We may not earn $1 million, but we are no less talented than anyone.

Goh Meng Seng

Comprehensive Set of Policy Options for HDB-CPF Mess

The HDB-CPF time bomb will blow up in 10-15 years time with a sudden surge of HDB flats passing their 40 year-lease mark. My estimate is that about 50% or more of HDB flats would have less than 60 years to their expiry by 2035.

As I have mentioned, the HDB problem cannot be tackled without tackling the CPF policies. They are like twin babies right now and the problem is magnified with such linkage between these two entities.

The following are the gist of the time bomb:

1) Inadequacy of Retirement financing due to over-consumption of Housing effected by the devious link between HDB and CPF.

2) PAP has misled a few generations of Singaporeans into believing that they could use their HDB flats for retirement by "monetizing it" and treating it as "pure asset" instead of consumption item. Nothing with an expiry date could be considered as a long term perpetual asset which one could depend on decades later in life.  Due to ageing population, there will be higher supply of old HDB flats than demand of these flats which are above 30, 40 or 50 years old. The financial regulations and illogical HDB rules restrictions have aggravated the situation.

3) Ageing population will result in potential oversupply of HDB flats in the long term if it is not kept in check. This is especially so when young couples are "forced" to buy BTO or HDB flats with longer lease while the HDB restrictions basically prevent them from buying old HDB flats with shorter lease left.

4) HDB rules also restrict Singaporeans from buying smaller and cheaper BTOs if their income level is high. These artificial rules will implicitly create over consumption of housing. 

5) The valuation system that HDB used has an inherent upward bias when it doesn't include the balance of lease as key consideration. This will create a market with pricing but without demand.

6) The massive problem of having huge number of HDB flats expiring their 99 year lease all within 5 to 10 years time will have to be dealt with careful planning decades in advance. PAP's refusal of initiating Enbloc for old flats will create an even bigger problem later.

The set of solutions are as follow:

A) De-link CPF from HDB or property purchase and Lowering of Employee's CPF contribution

CPF should be kept strictly as a fund catering for retirement. For a good financial planning, 20% of income should be saved for retirement. It means that while CPF could be de-linked from HDB purchases, Singaporeans could lower their Employee's CPF contribution from 20% to 3% while the Employer's CPF contribution shall remain at 17%.

Singaporeans should decide what to do with the excess cash as a result in the lower CPF contribution. They could use it for renting a flat, save it up, invest it in business or other financial products or use it to buy a property (HDB or otherwise) and pay the mortgage.

Such radical policy change will correct the past PAP's mistake in deliberately and artificially channeling Singaporeans' money into buying HDB flats, using more than what they should use of CPF money in paying the down payment and mortgage, resulting in over consumption of housing at the expense of retirement funding. Such problem will only surface decades later as more and more Singaporeans in my generations will realize.

Such social engineering to create an illusion of wealth and property ownership is extremely harmful to the Nation as a whole.

B) Dismantling of Restrictive HDB Rules of Social Engineering Manipulations. 

There are many HDB rules which are the results of social engineering attempts, should be removed. Rules that dictates high income level cannot buy smaller flats should be totally abolished. Housing consumption should depend on needs, not on income level. Whatever subsidies the government wanted to give should depend on income level and not HDB flat size. Thus, there is absolutely no reason why Singaporeans should be prevented from buying flats according to their needs.

Rules that dictate singles could only buy HDB flats after they are 35 year old should also be abolished. Such rules are based on "family-centric" reasoning but these rules are too restrictive and not helpful for singles to seek independence in living before they look for their lifetime partners. It also excludes people from other segments of the society to seek independence and privacy for their housing needs. As far as the government is concerned, each and every citizen will only enjoy grants or subsidies once, regardless of their age or whether they bought their flat before or after their marriage.

Rules that dictate young couples cannot buy HDB flats with short lease left should be abolished as well. If HDB flats are treated as a consumption goods, there is absolutely no reason for such rules to exist. Shorter lease, old HDB flats may cost much lesser and with the grants given by the government, young people could well afford to buy their first CHEAP old HDB flat to start their marriage life earlier. This will also encourage them to have children earlier with lower expenditures on housing.

Liberalization of the HDB rules will enhance market efficiency and liquidity, especially for the resale market of old HDB flats which have less than 60 years lease.

C) Re-configuration of Financial Rules and Valuation Methodology

At the moment, there is really an abnormality in the financial rules. For car purchase financing, although the COE restrict the car life span to 10 years, banks and financial institutes are still allowed to finance buyers for up to 7 years of mortgage. However, for some strange reasons, HDB flats with 60 years lease left will face a drastic drop in financial options and the purchase of flats with 20 years left, could not be financed at all!

If we just treat HDB flats simply as a consumption goods, there is no reason why there is a discrepancy in financial treatments by the banks and finance companies.

For owners of HDB flats with less than 60 years lease, they could not "monetize" or sell their flats mainly because of mismatch valuations of their HDB flats as well as liquidity problem due to such financial rules.

Re-configuration of the financing rules of old HDB flats based on the fact that it is just a consumption good like car, washing machine or any hire purchase items would allow adequate liquidity to flow into the resale market of these old flats. Of course, this must be accompanied by a revamped property valuation system which will give a more realistic valuation of old HDB flats based on the leasehold factor. It is just an old car. The older a car is, the lesser its valuation is.

Sellers of HDB flats should not be asked to repay back all the "lost CPF interests" due to their use of CPF funds to finance their HDB flats when they were young. Else, those elderly people who decided to sell their HDB flats to supplement their retirement financing will find it totally meaningless in their attempt to "monetize" their old HDB flats.



D) Kick Start a Redevelopment Plan for old HDB estates 

In anticipation of the impact of an ageing population with ageing HDB flats and estates, the government should start planning for the Redevelopment of these old HDB estates in stages. Instead of limiting SERS to 4% of total HDB stock of flats, there is an urgent need to kick start a Total Redevelopment Plan for ageing HDB estates.

This will of course involve enbloc of HDB flats in phases.

Although it is going to be an expensive ever-lasting process but it is a necessity to pre-empt a total chaos and collapse of the whole HDB resale market.

As the ageing population would mean that some land acquired via enbloc can be released for private development use while the resulting higher pricing of the redeveloped flats would make older flats with less than 60 or 50 years lease more attractive. This will create a new equilibrium which will effect a more efficient use of land and housing stock.

Redevelopment of old HDB estates will have to be carried out in phases, most probably stretching over 20 to 30 years time frame for one estate. Such staggered redevelopment plan will prevent a sudden chaotic situation whereby the whole old HDB estates with lots of HDB flats expiring within a short span of time resulting in a sudden shock shortage of housing stock to provide for those who are going to give back their HDB flats to the government.

It is totally irresponsible for PAP government to say that they will only redevelop 4% of HDB flats via SERS while just waiting to take back all other HDB flats from Singaporeans when their lease expired. Such method may save the government lots of money but it will create a great turbulence to the whole resale market for HDB.

Conclusion

The above outline of the combined policies needed to address the HDB-CPF Axis of Evil Problems will not prevent some Singaporeans from losing great amount of money from their misguided belief in PAP's Asset Enhancement Scam, especially so when they use lots of money to buy from the HDB resale market.

However, at the very least, we could achieve the objective to create a viable resale market demand for their old HDB flats which have less than 60 years lease left. This is done through liberalizing rules on HDB flats purchase, expanding the potential pool of buyers of these old HDB flats to singles and young couples with viable financing plan achieved by re-configuring of financial rules and valuation system based on rational reasoning.

While some Singaporeans will have to suffer a huge and painful cost  of greatly depreciated old HDB flats, the government should also bear the big bulk of the cost in creating this whole mess via a rational staggered enbloc redevelopment of those old HDB estates.

This is a very painful lesson for all Singaporeans that property transactions and speculations on your only residential home are simply a Zero Sum Game eventually.  Anyone's gain will be somebody's loss.

Goh Meng Seng

Solutions to HDB-CPF Mess MUST Address These Issues

Solutions to HDB-CPF Mess must address the following few issues:

1) Provide stability to the HDB resale market, preventing big crash or huge hike in prices.

2) Solve the inadequacy problem of CPF for retirement due to HDB purchase

3) Solve the insolvency problem of old HDB flats above 40 or 50 years old.

4) Guard against oversupply of HDB flats in the long run

5) Tackle the potential problems of massive expiry of 99 year lease in less than 60 years time.

6) The system of Valuation of HDB Flats has to have realistic reflection of leasehold terms of flats.

7) Cater to the needs of an ageing population with changing social-housing reconfiguration.

8) Choice and options for Singaporeans should be widen.

9) Re-calibrating social mindset and financial system to treat HDB as public housing, a consumption good instead of investment good.

This list may not be exhaustive but the Core of problems which need immediate solutions to address the short-mid-long term needs of the Nation.

Goh Meng Seng

The FATAL Mistake of PAP

The FATAL Mistake of PAP

Well, the Fatal Mistake fell upon Singaporeans while PAP made use of such manipulation of CPF-HDB financing to boast its own political capital built upon the great cost on Singaporeans' retirement financial adequacy as well as future generations of Singaporeans' housing needs.

Many people do not understand why I call Asset Enhancement Scheme as an outright scam. Let me explain in simple terms.

If someone forced you to put 50% or 40% of your salary into his safe keeping, promising you a miserable return of 2.5% per annum but tells you that you could use a big bulk of it to purchase only a precious stone from him and nothing else. He claims that it will increase in value forever, 10 times, 15 times, 20 times...

Else, you will have to wait until you are 55 years old before you can take back your money... then, it increases to 65 years old and then, he says, you cannot take out whole lump sum but only bit by bit....

What would you do? Of course you will use whatever amount of money you can get from these money you kept with him to buy this supposed precious stone!

Then, he inflated the price of this precious stone artificially because he is the monopoly supplier of these stones, under the slogan of "enhancing the value of the stones"... in fact, made you pay money to "upgrade" the stone with beautiful boxes.

However, right from the start, this guy knows that these stones could only last 99 years and by then, it will be zero value and under the contract, he could take the stones back from these buyers.

What about the promise of "Asset Enhancement"? What about the Empty rhetoric that these stones will rise in value FOREVER?

Anyone with a good mind would conclude that this is a scam. The contract drafted by that guy has specifically said that the stones will expire and have to be returned to him but yet, he is telling everyone that it is an asset to them and it will rise in value forever!

Now, this is just the beginning of the problem. If it is just a bit of money lost to a scam, that's not a big issue. But in the case of CPF-HDB, a few generations of Singaporeans' retirement financing is at stake!

It is a deliberate scam whereby money, your money, is deliberately channeled into a dead end with only one outlet available. i.e. buying HDB flat (later on private property but that is another issue). It is just like an irrigation of water. PAP had made use of your money, to make its HDB 80% ownership successful and claim credits for it. But it is in fact, a manipulation of your money which results in over-consumption of HDB public housing.

The fundamental Fatal Mistake made here is that in its zeal to get Singaporeans buying its HDB flats which continues to be inflated in prices as compared to 1970s and 1980s, PAP government has encroached into the core CPF funds meant for Singaporeans' retirement.

A prudent financial plan for retirement would require a person to save at least 20% of his or her income for retirement at anyone time. With prudent investment return about 5%-8% above inflation rate, it would provide a decent retirement for everyone.

A balanced financial plan would mean that a person should only spend 20% of his or her income on housing. This would mean that 40% of his or her income would be set aside for retirement as well as housing. 60% would be available for daily consumption.

However, PAP has screwed it up with its manipulation of the CPF which supposedly acts as function of retirement saving but they have mixed it up with housing financing, apart from other usage.

Only 11% of a person's salary are kept as fixed savings for retirement... inclusive of Medisave for healthcare. To make it worse, the returns for this 11% of savings is just 4%. Hardly meet the requirement of 5%-8% above inflation rate.

Thus, it is not surprisingly at all that most Singaporeans will not be able to afford a comfortable retirement just depending on the CPF savings.

The "solution" that PAP gave initially, is that HDB "is an asset" which Singaporeans could "monetize" for retirement. This was what MBT said during GE 2011 when I questioned PAP rigorously on the principles of having high HDB prices which created insufficient CPF savings for retirement.

I was hoping he would take up my challenge of an open debate on HDB-CPF back then because I would have hantum him with the basic fact that HDB is a 99 leasehold PUBLIC HOUSING which Singaporeans do not have a say on whether they could enbloc their flats. This is basically because, in legality, Singaporeans as HDB dwellers, do not own the land which their flats sit on! They have no legal rights over the land and cannot make any decisions on what to do with it, unlike private property owners.

And if HDB flat is an entity with an expiry date while PAP government apparently is not interested to do SERS for all HDB flats, then how could it be an "Asset" at all in the first place?

HDB flat is a Consumption good, not an Investment good. Period. It is totally misleading, dishonest and irresponsible for PAP to tell Singaporeans that their HDB is some sort of super investment which will rise in value forever!

And if HDB is a consumption good, it is totally unreliable to depend on it for retirement financing at all! Well, first of all, the value of HDB is destined to drop when its lease is running out!

I am explaining the CORE problems of the HDB-CPF axis before providing any viable solutions. It is basically a bad policy of funds manipulation which has gone wrong, resulting in bad financial planning for 80% of Singaporeans.

I am angry at PAP for its reckless and imprudent policy manipulations with total disregard of Singaporeans' welfare and prudent financial planning.

It is a foregone conclusion that most Singaporeans who have paid inflated prices for their HDB flats will suffer when they eventually find that there are insufficient funds in CPF for their retirement. You will see more elderly people pushing carts, washing dishes and cleaning tables in the years to come.

What made me extremely upset is despite of the obvious enslavement scheme of a 30 year mortgage for buying a HDB flat, MBT and PAP back then still blew their trumpets that HDB is still "AFFORDABLE"! Over-spending on mortgage of HDB, resulting in insufficient retirement saving in CPF and sometimes, with additional cash payment to finance a 30 year mortgage but yet, PAP is still blowing the trumpet of "Affordability"?! That's the most irresponsible remarks and political statement made by MBT and PAP.

Wait for my subsequent postings here... I shall touch on what are needed to correct this horrible HDB-CPF axis of evil.

Goh Meng Seng

TOTD- No Quick Simple Fix for Asset Enhancement Scam

Thought of the Day - No Quick Simple Fix for Asset Enhancement Scam

There are quite a number of people trying to offer quick fixes to the HDB Time Bomb without understanding ALL the problems and BAD impact created by the Asset Enhancement Scam which ultimately linked HDB to CPF, retirement financing.

It is a complex problem which involves multiple dimensions with complex tensions and competing needs. PAP's mistake in its Asset Enhancement Scam has pushed every Singaporeans in HDB towards a narrow dead end which entangles everything in a massive mess.

The fundamental problem of Asset Enhancement Scam is that PAP had changed Singaporeans' mindset and perception towards public housing, HDB. Instead of viewing HDB as a pure consumption commodity which serves as a mere safe roof over our heads, PAP had evoked the Greed factor by treating such basic needs of housing into some Grand Scam of treating it as an "Investment Asset" and releasing huge liquidity of FORCED retirement savings from CPF into HDB.

This created a "self-fulfilling prophecy" that your HDB will increase in price and value which was merely a short term phenomenon rather than a REAL high quality long term investment return. The excess liquidity forcefully released via CPF has created inflationary impact on HDB prices that created that delusion.

Furthermore, it has also transformed our CPF retirement financing model from "Self-sufficiency" towards "Cross-Generation Funding" via the inflation of HDB prices which CPF funds were poured into. i.e. our children, grand children and future generations will be the ones who will suffer and indirectly become the ones who financed the retirement finances of the older generations/our generation due to higher HDB prices!

However, such inflationary path of HDB cannot be sustainable due to the very nature that IT IS STILL PUBLIC Housing in essence and HDB dwellers DO NOT OWN the land at all. The eventual ZERO valuation of HDB flats while they approach their end of lease is INEVITABLE.

This will create a great silver tsunami that would overwhelm Singaporeans.

They must face the reality that PAP has scammed and fooled them into believing something that will never work nor come true.

I will provide a multi-prone approach solution to this mess in time to come. But this will come with a cost to most Singaporeans and please remember, such second best solution will have huge cost and PAP should be made responsible to it politically.

Goh Meng Seng

People's Power Party Labour Day Message

People's Power Party Labour Day Message

First and foremost, our deepest condolences to the family of Pte Dave Lee Han Xuan who had died of heat injury. PPP takes a serious view on such death of our NS men as they are all underpaid service men without proper insurance coverage by their direct employer, SAF.


We have heard of constant boast of the SAF on how advance their medical service is, especially in dealing with common problem of heat stroke among our soldiers, but yet, we are still losing a good soldier like Pte Dave Lee. Such Death is really one too many and it shouldn't happen in the first place if proper protocols are observed. We urge the authorities to hold an independent inquiry into this incident with external audit on the processes and protocols.

Work place safety seems to be neglected in many other places as well, including GLCs. The recent case of technician bringing PSA to court for exposing him to cancer causing substance asbestos resulting him to develop lung cancer is one fine example. We would not speculate how the court will make their judgement on this case but the fact that PSA had brought its defence based on technicality (of 15 years legal claim time frame) instead of admitting its management neglect and make good of its mistake, is a glaring display of irresponsible corporate culture and management. We condemn such irresponsible management culture which disregard work safety practice that put our workers at great health risk. It is totally unacceptable for a Government Linked Company to attempt brushing its corporate responsibility towards its workers' health safety aside via mere legal technicality.

For all workers in Singapore, we only want to earn our money in a safe environment and return to our home safely to enjoy the fruits of our labour. On top of that, we want to protect the value of the money we had earned but it seems that PAP government has been creaming off our hard earn money through increasing prices of electricity, water tariff, gas, etc. Inflation is the number one enemy to workers and inflating prices on basic necessities is the most damaging to our workers.

To add salt to injury, PAP government has announced that they will be increasing GST from 7% to 9% in the near future! We do not see the need for PAP government to increase GST when it continues to enjoy hefty surplus throughout the years. We do not even see the need for PAP to have GST at all when they are creaming off the returns of our CPF money which was invested in the two Sovereign Wealth Funds; they reportedly earn huge returns more than 4% but we are only given 2.5% to 4% for our CPF savings!

PPP would also urge financial prudence to many Singaporeans who are pouring huge money into their HDB purchases. Whenever there are reports of record high transactions of HDB flats in the resale market, we are very worried. Contrary to what PAP has been propagating throughout the decades, HDB is largely a consumption item rather than an "investment nest" which will help you to fund your retirement. The mis-selling of Asset Enhancement Scheme is politically motivated but financially misleading to all Singaporeans. Any increase in HDB price should NOT be celebrated but be feared as INFLATION on our consumption. The truth is, you will be paying more "property tax" on your HDB if the prices in the resale market continued to increase! But ultimately, our HDB flats will be ZERO in value when its lease expired and there will be little chance of SERS.

We would urge Singaporeans not to be misled by PAP's propaganda into treating your only home as some "great investment" for retirement. Paying huge amount of money, up to million dollars will only increase the cost of your consumption of housing and will not make you rich at all.

While PAP had always boasted about how well our GDP has grown, we would urge all Singaporeans to do a reality check of your salary increase in comparison with GDP growth rates. If there is a shortfall, it would mean that all these talks of good economic growth are quite meaningless.

Last but not least, we wish all Singaporeans a Happy Labour Day.

People's Power Party Singapore

TOTD: HDB-CPF axis Time Bomb, the glaring failure of PAP and WP LTK

Thought of the Day - HDB-CPF axis Time Bomb, the glaring failure of PAP and WP LTK

I have said, the Asset Enhancement Scheme is actually the biggest self serving scam of PAP to hoodwink Singaporeans into believing only PAP government could guarantee their HDB flats could increase in value forever, defying the basic logic and economic/financial principles. LKY even boasted about PAP ability to make your HDB rise in value of 10,15 or even 20 times.

The most problematic with HDB is that it is linked to your retirement fund CPF. IF HDB is going to depreciate towards ZERO value, then whatever CPF money you put into it, will be totally wiped off. Your retirement plan will be hurt!

One of my initial resolve in joining opposition politics is to fight PAP against its Asset Enhancement Scam, which is extremely difficult because like any scam, it feeds on people’s greed. Most people are short sighted and didn’t see the full picture while only focus on their short term gain. They didn’t realize that HDB Price inflation may let them gain in short term, but whatever gain they get, is at the expense of their children’s future, as well as many future generations to come.

This greed which Asset Enhancement scam built upon, burnt like fire in the 1990s and even into 2000s. It was a perfect scam that helped PAP to hold on to absolute monopoly of power for three decades.

When I joined WP, on a few occasions. I had raised this issue to LTK and said that this is the most important issue we need to raise. He brushed it off saying that what’s wrong with Asset Enhancement Scheme? It is good what!

Needless to say, I was completely disappointed that the leader of the opposition party which has one of the two seats in parliament, couldn’t see through such a scam.

I tried to explain why this AES is wrong but it just couldn’t get through him. Apparently, the lack of a good Economic training is the key weakness of LTK.

After I left WP with disappointment, NSP approached me to join them. This time round, I didn’t bother to try to explain why AES is bad. I just threw the issue out during the GE and challenged MBT on his Monetizing HDB for retirement concept.

I found out later, apparently this so call brilliant idea was created by a respected professor teaching sociology in NUS. Deep down, I guess it is totally bad idea to have a sociologist to meddle with Economic policies after all.

And I believe LTK didn’t believe AES is bad basically because it was backed by such academia.

Goh Meng Seng

TOTD: HDB Circular Contradictions

Thought of the Day - Circular Contradictions

We have heard about Circular Argument but this is the first time I have heard about people going in Circular Contradictions!

This actually comes from the Chief of HDB. It is good that she has talked about people should pay according to the lease remaining in a resale HDB flat but she still insists that HDB could be monetized as an asset for retirement!

One of the key method of monetizing HDB for retirement is to downgrade to smaller flats. But wait! If people follow her advice on paying much lesser to flats that are old, the. How would the retirees selling their old flats for good money in order to downgrade to a smaller flat, the new studio apartment but yet have excess money to get out from the deal to finance their retirement?

Besides, most people would have PLEDGED their flat to HDB and I guess there would be very little money left for them to cash out from the downgrading, if there is any at all!

And studio apartment isn’t that cheap at all! For 30 years lease, HDB made you pay $60k to $80k depending on locations but if you calculate prorated according to lease, it means this one room studio apartment actually cost $180k to $240k for 90 years! Please remember, it is just a studio apartment!

So if you can sell your three room or four room flat at $250k, if you could actually sell it off in the first place when the lease left is merely 60 years or less, half of it goes to CPF due to the pledge, at least $60k goes to the new studio apartment, in the end, after netting transaction cost, you get $50k or $60k after all that trouble but how long could this last for retirement?

The other option is even more kind of a joke instead of real option. Selling back the lease to HDB. How much would HDB pay? Definitely much lesser and most probably ended up with a couple of hundred dollars per month.

To rent out their flats? The truth is, PAP doesn’t value your privacy at all. And when the grey tsunami waves set into motion, I don’t know whether there is high rental market to make money from when you start to have lots of supply of rental flats from both HDB and private apartments.

Of course, those staying in three room HDB may have to sleep in living room in order to get enough rent to live on ...

The whole problem started when PAP sold Singaporeans the FALSEHOID and FAKE dream that Asset Enhancement Scam could do wonders and make your HDB rise in price forever. That’s why people are throwing huge amount of their CPF into this scam. Now they are stuck.

With graying population, who will buy old HDB flats with dwindling lease? The situation will be worse when many baby boomers who have stupidly believe in PAP Asset Enhancement scam, try to sell off their old HDB flats to cash out for retirement because they have very little left in their CPF after paying a great deal for their current HDB flats.

There will be oversupply of resale HDB flats with very small demand... who would buy after hearing the confirmation from PAP that these flats will have zero value after lease expired and now, these flats have less than 60 years and they would not be able to sell them off for retirement?

The price for these flats will face a spiral downward price pressure and in fact, most of them will have problem selling.

It is an amazing Circular Contradictions which the HDB Chief tries very hard to sell. She is just like that sociologist, who only look on the overly simplistic micro level instead of looking at the macro level of possible market conditions.

Don’t ever allow sociologists to meddle in Economics policies again. We will end up with never ending Circular Sufferings.

Goh Meng Seng

TOTD: Greatest Falsehood and Fake News from PAP ...

Thought of the Day - Greatest Falsehood and Fake News from PAP ...

FORGET about Operation Coldstore or Operation Spectrum. Singaporeans are just pragmatically selfish and self serving. They won’t be bothered about what injustice had happened to a few tens, hundreds or even thousands of people as long as these don’t affect them directly. We are cultivated to be reaped off of any sense of Social Justice but only taught to focus on our own short term selfish well being.


That’s the harsh reality of being a Singaporean.

The biggest, greatest Falsehood and Fake News that were cooked up by PAP Government is Asset Enhancement Scheme and HDB for retirement financing.

What they have done were just a tiny bit of Enbloc with some upgrading which were politically motivated as pork barrel politicking and in the end, Singaporeans were made to believe that their HDB will be “Enhanced” and thus increase in prices forever! It serves only their agenda of prolonging their monopoly of power without telling the HARD TRUTH that such disastrous scheme will only make them “feel rich” at the expense of their future generations who will be paying for higher HDB prices!

They have messed up the HDB system so badly that there is no way of reversing the bad scam without causing Huge pain to a few generations of Singaporeans.

In the end, Singaporeans were told that not all of their HDB will enjoy enbloc... in fact MAJORITY 96% of HDB won’t enjoy enbloc and their HDB flats will turn to zero value when their lease is up! Did they tell Singaporeans about this critical information back in 1990s when they keep harping on Asset Enhancement Scheme? Half Truth told is no Truth but selective Falsehood!

Singaporeans are fooled in believing in the scam of Asset Enhancement Scheme which is nothing more than making you pay MORE for your HDB flats WILLINGLY, justifying higher and higher prices for New HDB flats through the hedging of prices via the BS OF “market subsidy”, which is not a subsidy at all but effectively just a discount.

At the same time, such fooling scam gave PAP the votes from those who were fooled by them!

Politically speaking, it was the most wonderful "perfect" scam in which you made the voters suffer by paying higher price for the HDB flats the PAP government’s selling but yet, they feel so happy paying higher price and gave PAP votes to maintain their monopoly of power!

But just like any scam, it cannot last forever because it is not sustainable at all. People were made to use up all their retirement fund CPF to buy HDB which doesn’t guarantee forever higher return, not even good as an investment. The time must come when people realize that they have neither the necessary CPF for financing their retirement despite of having the highest rate of contribution in the world, nor the dream or possibility of getting good price for their old HDB flat to finance their retirement.

The situation will get worse and peak when my generation starts to reach 60 years old, which is only 12 years away. At present, the situation is just starting to show the stupidity of the whole scam. For the next two decades, we will see slow collapse of the CPF-HDB scam and by the third decade, most probably the whole system will collapse which most HDB will cross their 40 and 50th year and there is a rapid decline in their prices.

A few generations of Singaporeans will suddenly wake up to the fact that they have been fooled and their hard earned CPF is totally wiped off by the Asset Enhancement scam which was promoted by PAP 30-40 years ago!

2011 was the critical year which we might have the slightest hope of saving the situation but that window of opportunity has lapsed. PAP will NEVER admit their deliberate mistake made in their own interests of self preservation instead of a long term vision for the good and well being of Singaporeans. Many Singaporeans will live to regret for their foolishness in believing in such a big scam and Falsehood propagated by PAP simply because they are blinded by their own greed.

Goh Meng Seng

TOTD: Awakening from the HDB-Asset Enhancement Myth

Thought of the Day - Awakening from the HDB-Asset Enhancement Myth

Several friends asked me "What is Lawrence Wong trying to do?"

They are referring to why Lawrence Wong keeps reminding Singaporeans that your HDB flat will have ZERO value when the 99 Lease hold expires.

They are confused and full of anxiety.

I simply told them, this is nothing new, I have talked about it more than a decade ago!

Almost all of them now consider to sell off their HDB flats in anxiety. Then I ask, where are you going to live?

Some ask me is that the reason why I sold my own HDB flat back in 2010? I said, yes, partly so but most importantly, I need the cash for the General Elections. I have no regrets.

Then they ask me, why didn't my relatives or the flat my mother owns in Ang Mo Kio sold? Here again, I said, where can they live if they sell their HDB flats?

The key difference here is that, my parents bought their flat in Ang Mo Kio, way before this nonsensical "Asset Enhancement Scheme" came about in late 1980s throughout 1990s, Goh Chok Tong's time. They bought it cheap. There is no anxiety of having a "costly HDB flat" turned into worthless ashes in the end.

Unfortunately, many people were caught by that TOTALLY MISLEADING Koyok of "Asset Enhancement Scheme" which was the Theme of PAP back in 1990s till 2000s that kept them in total monopoly of power. A few generations of Singaporeans have been misled into believe in such nonsense. Even up till GE 2011, PAP's MBT still tried to sing song about Asset Enhancement Scheme for "Monetizing HDB Flat" for retirement financing.

Well, lucky for MBT and PAP, he didn't dare to take up my challenge of OPEN LIVE DEBATE over his HDB-Asset Enhancement Scheme Policy, else he will be knocked out and black out totally. But their lucky is Singaporeans' misfortune. Most Singaporeans are still submerged in such devious myth of HDB Asset Enhancement Scheme for another 6 years, until Lawrence Wong broke the truth.

Lawrence Wong is simply telling the Truth, nothing but the Truth. Your HDB flat will become Zero Value when the 99 year lease expires. Why is he talking about this NOW?

This is because PAP government is not going to carry out SERS Enblock for most of the HDB flats, which is the only way to save you from the eventuality of Zero Value, because it is not profitable for PAP government to do it. They are just mentally preparing the massive Singaporeans living in HDB flats that they should not expect much from their HDB flats at the end of the 99 lease. They should be prepared to live with their whole life's saving in CPF being wiped off when the lease is nearing expiration.

The PAP government, if they still exist by then, will not renew your HDB lease at all.

Singaporeans should wake up from this TWO DECADES Myth about HDB-Asset Enhancement Scheme. This is especially so for the younger generations, those who are thinking of paying extraordinary high prices for their BTO or HDB resale flats.

I was amused and worried for those people who are forking out near to a Million dollars for a resale flat in some Prime location. You have to know that even if your HDB flat is located at Prime district or location, IT WILL DEPRECIATE eventually and BECOME ZERO in value when the lease expires.

Your HDB flat will start to depreciate when it reaches 40 year old. No banks will make normal loan when it passes 50 years old. When it reaches 70 years old, basically no bank will provide loan to  any buyer at all, regardless of where the flat is situated.

This is something PAP has been hiding from you while they were singing and praising themselves about HDB-Asset Enhancement Scheme as a political tool of Pork-Barrel politicking!  I would say that over 80% of all old HDB flats will not be Enblock. You just cannot "enhance" your HDB value when the eventuality of ZERO Value is definite!

The faster and earlier Singaporeans realize this FACT and TRUTH, the better it is for them. Else, you will end up destroying your own retirement financing plan.

I have not come to the CPF-HDB financing part yet.... that's for another article another day.

Goh Meng Seng

HDB 99 Year Lease Time Bomb

At least TWO PAP Ministers (Khaw Boon Wan & Lawrence Wong) have confirmed my point about the HDB 99 Year Lease being ZERO in value when the lease expired. This is an important critical fact that most Singaporeans have ignored for decades and despite of such reality, Singaporeans are still pumping huge amount of money willingly into HDB resale market which in turn, pushes up the new BTO HDB flats!

This is one of the important reason why I would insist a TOTAL de-link of new BTO prices from resale market prices because it doesn't make sense at all.

There are two broad ways of analysing the impacts and implications of this HDB 99 Years Leasehold issue. i.e. Macro Level vs Micro Level.

Minister of National Development Lawrence Wong has recently flip-flopped over this HDB 99 year lease issue. First he admitted that when the lease is up, the HDB flat will have ZERO value and the "Leasers" (which Singaporeans always thought themselves to be "owners") will have to return the HDB flat to HDB and HDB has to return the land to SLA. But a couple of days later, in a dismay effort to cushion off the shocking effect on Singaporeans, Lawrence Wong came up with the notion that "HDB is a good store of value"!

How could HDB flats which will depreciate and end up with ZERO value eventually to be a "good store of value"? That's totally nonsensical and illogical.

There are many people and well known bloggers who have written on this topic and got many points right but miss a few critical points altogether.

Micro Perspective

The former MND Minister Mah Bow Tan and up to now, Lawrence Wong, keeps talking about "Monetize HDB flat for Retirement", which is a totally flawed concept. I would have debated against Mah Bow Tan on this point LIVE on TV if he had dared to accept my challenge back in GE 2011 and I would have shot straight into his face with this 99 Year Leasehold issue of HDB and ask him how could it be possible to "Monetize HDB for Retirement" when most Singaporeans would face great difficulty in selling off their HDB flats when it passed the 50 year lease mark?

Yes, the Time Bomb doesn't start to blow up with it reaches 99 Year but rather, when your flat reaches 50 year old. How many people are able to fork out over $3000 or even $2000 monthly to pay their mortgage for your 50 year old resale HDB flat? Or even if they could afford to, why would they want to buy your flat knowing that it is going to depreciate further and become ZERO in value in the next few decades?

I believe the projections by the chart above (by Soh Yun Yee) is just too overly optimistic. HDB flats which pass that 50 year mark, would have suffered a steep fall in value thereafter!

And look at it this way, for HDB flats, you cannot own TWO HDB flats at the time! Thus it means that if your parents passed away and left you their HDB flat while you still own a HDB flat, you will have no choice but to sell one away! i.e. either you sell off your own HDB flat or your parent's HDB flat! Many Singaporeans will face this problem and with the upcoming silver bombing due to aging population, the resale market will be flooded with lots of old HDB flats with lease less than 60 years or 50 years while demand will be extremely small!

Thus, what is the impact? A major collapse of resale market for HDB flats which have less than 50 years lease!

This is the FUNDAMENTAL difference between a Private Property vs HDB flats with the same 99 year lease. For Private Property, you could still keep that property which you inherit from your parents and rent it out, really "monetize" it, but for HDB? You can't.

For Private Property, there is a good chance for you to seek private en-block and monetize it fully, renewing the lease again when you do so. But for HDB? You will have to wait for HDB to initiate that SERS which is basically non-existence now because it is not PROFITABLE for HDB to do so! This is the reason why only 4% of HDB flats had gotten SERS and Minister Lawrence Wong has "hinted" or rather "WARNED" that Singaporeans should not expect their HDB flats to enjoy SERS!

Macro Perspective

Uncle Leong has rightly pointed the following:


There are 1 million HDB flats, of which 70,000 or 7 per cent are over 40 years old. About 280,000 units are 30 to 40 years old. That’s one in three flats 30 years or older.

But what is exactly the implication? It means that by 2020, the problems of 99 Years Lease will start to surface. Yes just 3 more years. Most HDB flats were built in late 1960s, 1970s to 1980s. From 1970s to 1980s, we have housing estates like Tiong Bahru, Tanglin Halt, Queenstown, Bukit Merah, Bukit Ho Swee, Toa Payoh, Hougang (old Hougang), Ang Mo Kio, Bedok, Jurong etc built within this period. It would also mean that many flats from these towns will face the problems when they cross 50 years lease, starting from 2020 (1970 to 2020, it is 50 years)!


It also means that if PAP government just stop doing SERS or do it at extremely slow rate, when the lease expired for all these HDB flats in these towns, where are these Singaporeans going to find another HDB flat to live in? Where to find even HALF the size of these towns (assuming flats will be built double the height of the old ones) add together to house them?

By 2060, we will start seeing these problems exploding.

On the other hand, do you really think your HDB flats could last 99 years? I am doubtful that most HDB flats could even last 70 years while some could not even last 50 years due to poor quality of the material used during the late 1970s to 1980s construction boom. HDB upgrading could only solve parts of these massive problems. Some old HDB flats even have obvious cracks and problems of concretes falling off that walls before they reach 50 years old!

Conclusion

99 Years Lease HDB flats are good policy deal IF AND ONLY IF the flats are kept at extremely low cost and there are continuous efforts to en-block and rebuild them starting from 30 years old onwards. At least 50% of the flats built from 1960s to 1980s should be SERS or en-block and rebuilt before the 99 years lease expired. This will ensure we have enough land for cross generations usage and cater for gradual population growth.


It is not meant to be "Asset Enhancement" nor "Monetize for Retirement" but PURELY cater to the housing needs of Singaporeans of ALL GENERATIONS. 

Unfortunately PAP has strayed too far away from its initial ideology just to insert all means to milk Singaporeans while kicking the cans of problems down the generations instead of maintaining a good balance in providing for the critical basic needs of Singaporeans.

I would not mind to replace my 99 years lease HDB flats with another one when it is near expiry if I have bought my first HDB flat CHEAP at cost plus and continue to buy my second replacement flat CHEAP at cost plus as well!

But the crazy Asset Enhancement Scheme introduced by PAP government during Goh Chok Tong's era has really screwed us up badly with the poison of greed to entice Singaporeans to use more of their CPF funds to pump up the HDB flats while sold the FALSE dream of forever "Enhanced" value of their HDB flats so that they could "Monetize their HDB Flats for Retirement"! It has mixed up and over-drawn, over-stressed our CPF which should be strictly for our retirement needs!

Singaporeans are blinded by the poison of greed of short term gain in buying and selling their HDB flats in one or two generations, but they have unknowingly, sold out their own retirement plan and their future generations' welfare by falling for such poisonous enticement.

Goh Meng Seng

TOTD: Back to Fundamental of CPF

Thought of the Day -
Back to Fundamental of CPF

I was talking to a friend over CPF issues recently and it seems that I have some of the more "radical" thought over CPF.

CPF was supposed to be meant for retirement financing but in the end, it becomes some sort of "piggy bank" for PAP as well as Singaporeans for many purposes.

First, PAP allowed you to use CPF to buy properties. Most Singaporeans are happy with such arrangement as they feel that they will be able to own a property in their lifetime. I also used up all my CPF available to buy property but that is because I do not trust PAP with my money. This is another issue for another day.

Then PAP says that you can use your parents' CPF or your own CPF to pay for higher education. On top of that, you can use your CPF to pay for your parents, children, brothers, sisters etc medical fees!

Singaporeans thought that these are all "good arrangement" but the truth is, it will create two/three problems:

1) Over consumption of housing, education and medical care
2) Depleted CPF for your retirement
3) Kicking the can down the road

On top of that, it will create other problem of another dimension:

1) Over reliance on CPF money for anything, everything
2) Weakening of Financial management skills and planning
3) Total lack of saving habits

Most financial planners will tell you that you will need to save a certain percentage of your salaries every month for future retirement. It is normally set at 20% to 25% of your income, depending on your income level.

But due to PAP's conflicting policy needs, it has totally messed up the CPF system and in the end, it resorts to setting some unrealistic arbitrary "minimum sum" which many lower income earners could not meet mainly due to the over consumption of housing. i.e. they were allowed to buy properties which they couldn't afford and shouldn't buy in the first place, if they were to stick to the 25% savings rule for retirement!

The only right way to due with this situation is set the saving rate for CPF at 25% (contribution of employee and employer add together) while banning people from using it for just any other thing, especially for housing and medical fees for other family members!

Employer's CPF contribution should stay at 17% while employees' contribution should be cut from 20% to 8%. This would mean that employees or Singaporeans will have additional 12% of their income in cash. If they need to buy property and use it to pay their mortgage, they can use this additional 12% cash to do so. However, they should not use any CPF money for mortgage payment.

For young people, they should start to learn how to do financial planning and I reiterate this point that basic financial planning concepts and knowledge should be taught in the common school curriculum! They should make it a habit to save for down payment for their first property purchase and plan for their mortgage payment as well. In general, for middle-lower income earners, they should not be using more than 35% or 40% of their income to pay for mortgage. This will prevent them from over-consuming housing and it will keep property prices in check.

If they intend to start their own little business, they could save up these extra 12% of their income for future business plan!

Our property prices have been artificially pushed up due to the excess liquidity which PAP allows Singaporeans to use CPF in doing so. This applies to prices of Medical care as well. It is precisely that Singaporeans do not "feel the direct pinch" from using their CPF money to pay for Medical care or housing, they tend to not mind spending excessively on these products and services. Of course, HDB and hospitals alike, are also happy to charge higher prices because "it is affordable" to Singaporeans due to the excess liquidity provided by CPF!

PAP has abused the system in skewing the "affordable" argument. It is not affordable when Singaporeans are paying more than 35% or 40% of their salary for a 30 year mortgage. That is totally rubbish argument of affordability because if you purchase your property at the age of 30, by 60 years old, you will have very little left in your CPF account for retirement!

The proper way of inducing better financial management by Singaporeans is to make them manage their finances according to the fixed CPF retirement saving rate (which could be adjusted according to income level) so that they would make better rational choice in their spending in housing, education as well as medical care.

This may sound "radical" to many unthinking Singaporeans and they may just jump up and down denouncing such plan but this is the only right thing to do in the face of ageing population.

Goh Meng Seng