In Singapore, the home ownership rate is close to 90%. It is something Singapore is lauded for globally and Singaporeans are really proud of.
However, many of you would have come across the debate on whether Singaporeans actually own their homes or are merely leasing it from the country for a period of 99 years. The government has come out reiterating that Singaporeans and Singapore PRs are owners rather than renters, while opponents continue to poke at the definition of home ownership.
Do We Own Our HDB Flats Or Merely Lease It From The Country?
Gov.sg, a Singapore government website, has come out to clarify the situation for HDB owners. On its website, it clearly states that it is false that HDB flat owners are simply renting their HDB flats. It even provides several reasons why this is so.
# 1 Owning homes on shorter leases is also common in other jurisdictions such as Hong Kong and Canberra in Australia. It goes on to state that Singapore has a 99-year lease system mainly because it is land-scarce and require such a leasehold system to “allow land to be recycled and redeveloped to meet the needs of future generations of Singaporeans”.
# 2 We are able to rent out our flat and keep the proceeds from it. This would not be allowed if we were simply renting our HDB flat from the country.
# 3 We are able to sell our flat and keep the proceeds from it. This allows us to choose to upgrade to a bigger flat or rightsize to a smaller flat. We can also sell part of our 99-year lease under the Lease Buyback Scheme to generate cashflow in our retirement. If we are renting a flat, we cannot sell the flat.
# 4 We are able to renovate and redecorate our HDB flat without having to seek permission. On rental, we are often restricted by the landlord on the kinds of modifications we can make in the flat.
# 5 We do not pay a monthly rental to the government or country to live in our HDB flats. If we were renting our flats, it is typical to have to fork out a monthly rental.
There Are Still Key Differences Between Owning A Private Property And An HDB Flat
Despite this, we cannot ignore the fact that owning a private property, such as a condominium or landed property, is significantly different (and advantageous in many respects) to owning an HDB flat. Here are four differences between our HDB flats and private properties that we should know about:
Difference 1: You Don’t Own The Land Around You
It is worth noting that HDB owners do not own the land around their HDB blocks. This is very different to owners of private condominiums which are strata titled. This means their unit size and share of the land within their estate is defined in their ownership.
It is also this fact that allows them to take part in the hugely profitable en-bloc scheme, enabling owners to come together to sell their home and land entitlements.
On the other hand, HDB owners do not own any of the land in their vicinity, including the common areas, the playgrounds, carparks or any other amenities within the HDB estate. This also means they cannot (and will never be able to) come together to sell their flats via the lucrative en-bloc scheme. This is another reason why older HDB flats may lose their appeal (and very possibly their value) much faster than older private properties.
Sure, there is the SERS (Selective En bloc Redevelopment Scheme) in place for HDB flats as well. However, HDB has a monopoly over the market and does not have any incentive to submit the most attractive price it can as it is not competing with any other developers for the site. The worst part is that participation is compulsory and residents do not get to a vote to reject SERS.
Another glimmer of hope is how the VERS (Voluntary En bloc Redevelopment Scheme), announced by the government during the National Day Rally 2018, is going to unfold. Again, it looks like HDB will also have monopoly over this market, although it has not ruled it out. However, it is unlikely that VERS is going to be a more profitable scheme than the existing SERS.
Difference 2: Maintenance Of Facilities
While this can be thought of as an extension of the first point, it holds slightly different significance in some aspects.
Firstly, the amenities within an HDB estate do not have to be maintained by HDB owners. This includes any routine maintenance, repair or upgrading works to the common areas, playgrounds, carparks, and any other amenities. For private property owners, they have to fork out for any works to the facilities within their condominium.
Secondly, this also means that residents do not have to fork out for maintenance of facilities in their blocks, such as the lifts, repainting the HDB blocks, security (in the form of sensors or cameras), or any other works outside of their own flats. Again, private property owners have to fork out for all of these works.
In addition, HDB owners may enjoy perks such as the Neighbourhood Renewal Programme (NRP), the Estate Upgrading Programme (EUP) or the Home Improvement Programmes (HIP) aimed at upgrading their HDB estates and homes, at subsidised or no cost. No such perks exist for private property owners.
One contention to this may be that residents are required to fork out for certain upgrading programmes such as the Lift Upgrading Programme (LUP). The question could be asked about why HDB owners are required to pay for upgrading works on amenities they do not own. However, this could be a grey area – and may also be thought of as co-funding the upgrading works on amenities that only benefits them. In some cases, those who rent flats may also fork out for some renovation works that make their lives better.
Difference 3: Selling/Buying Restrictions
When we purchase HDB flats, we have to comply with certain restrictions. These restrictions do not extend to private property owners.
HDB buyers have to complete their Minimum Occupation Project (MOP) of five years before being able to sell their flats. Of course, there are no such restrictions for private property owners. However, we need to note that private property owners have to fork out a hefty Seller’s Stamp Duty (SSD) when they sell flats within three years of purchasing the property.
Another rule that HDB flat owners have to contend with is the ethnic integration policy (EIP) quota and the SPR quota. On its own, these quotas are not a bad thing – promoting racial integration and harmonious living for everyone living in Singapore. However, these limitations do not apply to private properties.
Firstly, when we are buying flats, either via BTO (Built-To-Order) or resale, there are limits to the number of households that can be owned by any race within the block/neighbourhood level. The SPR quote limits the number of non-Malaysian Singapore Permanent Residents that can buy HDB resale flats within the block/neighbourhood level.
Another restriction is that we cannot own multiple HDB flats. For obvious reasons, this is a sensible rule, given that HDB flats are public housing. Private property owners also cannot buy HDB flats. For private properties, there is no limit to the number of properties we can buy. However, we have to fork out for the Additional Buyer’s Stamp Duty (ABSD) and are limited by the Total Debt Servicing Ratio (TDSR).
Difference 4: Cashing Out On Your Asset
Another important point to note is that our ability to cash out on our HDB flats are much more limited compared to private property owners. Unlike private property owners, HDB owners are not able to get a second mortgage or home equity loan from a bank for our HDB flats.
This puts HDB owners at an unfair disadvantage as private property owners can take cash out of their properties to invest when lucrative opportunities arise or when they encounter significant financial difficulties. HDB owners do not have the flexibility to channel their savings to their home, and cash out when they require it.
HDB Flats Are Public Housing
Whether we agree or disagree with the rules and limitations put on us, we have to remember that HDB flats are public housing meant to put a roof over our heads. Certain restrictions are to be expected.
Even though the government strongly rebuts the fact that HDB flats are not leased, the restrictions make it such that HDB owners are not on equal footing with private property owners, in terms of their rights.
With the cost of HDB flats nearing $1 million today, we also need to think about ensuring HDB flats can continue providing affordable housing to Singaporeans as well as ensuring they remain a good store of value. They should also provide liquidity for someone who has potentially paid up an amount close to $1 million for their HDB flat the chance to use their money in ways they deem fit.
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