After having been repeatedly assured by PAP that public housing prices could only increase, HDB lessees are now left in the lurch.
This is because PAP has reneged on its promise and the pigeon-hole-in-the-sky prices look set to fall, maybe even collapse if accompanied by another global crisis.
Instead of resolving a self-created issue, PAP-controlled CPF Board has increased the number of restrictions on the use of CPF for property, eg “… a member is only eligible to use his CPF if his age plus the remaining lease is at least 80 years“.
Worse, CPF use is also limited for property with a lease of less than 60 years, resulting in demand reducing to a trickle. For a $500,000 property with a remaining lease of 59 years, the maximum amount of CPF that can be used “is $290,000.00 and this is 58% of the lower of the purchase price or the value of the property at the time of purchase”.
Assuming a potential buyer of a $500,000 5-room HDB flat uses up 58% of all his CPF for downpayment, he would still have to fork out $942 in monthly installments for 25 years on the remaining $210,000. (Mortgage calculator)
Owners … I mean lessees of more expensive HDB flats will be hardest hit because most potential buyers do not have much disposable income due to the 37% CPF contribution. Or may be unwilling to use cash while leaving CPF to earn a miserable 2.5 return.
Of the close to 1 million HDB sold flats (excluding HDB rental units), at least 200,000 flats were constructed before 1978, ie older than 40 years.
In 7 years’ time, 264,000 flats, give or take, will be added to this pool of aged flats.
** (1978 – 29742, 1979 – 26709, 1980 – 18421) + 189299 = 264000 flats. Source: data.gov.sg
With every passing year, the shrinking pool of buyers of older flats makes it increasingly difficult to monetize our HDB lease for retirement.
The PAP government which created this mess has no solution, besides happily tweaking legislations and hoping for a miracle. PAP elites have underestimated the impact of falling property prices.
All the hogwash about asset enhancement was just a pack of PAP lies, now fully exposed.
Is HDB flat a retirement nest egg or rotten egg?