MND Exploring Low Cost Housing With Restrictions

National Development Minister Khaw Boon Wan exploring lower cost HDB alternatives is probably the hottest topic right now. If done right, it can allow for more affordable houses for the young and future generation. If done wrong, it could have a disastrous impact on the current HDB owners.

He has made it clear that the low cost HDB will not affect the existing owners, but there would still be an impact no matter how distinctly different it is, just like how HDB prices can affect EC and private condo prices. It affects the demand and supply of resale HDB as well since there is a new “alternative supply.” He proposes 3 ways to distinguish the new low cost alternatives from the current HDB.


Longer Minimum Occupation Period

This is a possibility as the new owners will be locked in for a longer period with less flexibility. It should also have the least effect on the current resale market. 5 years is already considerably long, how much longer can it go? 8 years? 10 years? The downside is that some people may need to sell their house before then for various reasons and anything more than 5 years is really difficult for anybody to forecast.


Shorter Lease

By reducing the lease period, the cost goes down accordingly. However, is the cost necessarily cheaper? Current HDB have 99 years lease, if they introduce say 60 year lease, the value of the HDB will depreciate much faster. It contradicts the vision that HDB should be an appreciating asset for Singaporeans.

On the flipside, if we argue that Singapore is becoming like HK, where leases of less than 50 years are the norm, then perhaps it still carries some weight.


Separating It From Resale Market

This is a very vague proposal as it does not specify a specific method. Should this low cost HDB be considered a new class, just like when they came up with ECs with its own rules? Even if it is called a new name, there will still be a resale market when the units come off MOP eventually. Unless the owners can only sell it back to HDB, market forces will take over after that as well.


Should HDB be an appreciating asset which every Singaporean should aspire to own? Or should HDB just simply be an affordable housing which depreciates over time like a car. If that was the case, people will just rent rather than buy since there is little value in owning the asset.

However, if left to market forces, inflation will almost definitely drive up the prices of even these low cost HDB to a point where they are no longer considered affordable to the future generation. It’s a tough choice to make, but you can’t have your cake and eat it too.



For further reading, you may be interested in:

White Paper on Population What It Means For Investments

60 Year Lease Residential Site Awarded for $73.8 million

Beating Inflation With Savvy Investments and Prudent Spending

Investment Ideas In Relation to Property Cooling Measures

Comments on the UOB 50 Year Housing Loan

Further Comments on the 50 Year Loan

The Trouble With Shoe Box Homes

Property Cooling Measures Jan 2013

Additional Stamp Duty For Singapore Properties


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