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As the Narrative of HDB Changes, Will the Relationship with CPF Changes?

Ng Kok Hoe, an assistant professor from the LKY School of Public policy have a good article out in Today discussing that home ownership and retirement should be re-looked.

Kok Hoe explains that there should be more clarity of the role and direction of both home ownership and retirement in light that more voices have come out to say that HDB leases do expire and SERS is not a given.

The worry is that many of us based our retirement on strong asset appreciation.

When this premise is challenged, what will happen to our retirement?

This article have less to do with wealth building but more philosophical. If you do not like these kind of stuff, do kindly move on to other reading materials..

The most incredulous thing is when people expects compensation when the situation is clearly spell out. They cannot believe that the house would eventually be worth nothing.

This thinking is prevalent because not many understand the difference in the different level of ownership (read who owns the property in this case?). Heck, I don’t profess I got this figured out as well.

This is our fear speaking.

If you do not earn a lot and you devote your cash flow to build up your financial asset in one single asset, you will be scared that after 40 years, you been putting your money in some thing that will depreciate in value over time.

But trust me, we are not alone with this fear.

One of the silent unanswered question is: After the land lease ends for the properties in Hong Kong, what happens? Those properties are at even higher value than our HDB flats relative speaking!

Don’t blame us for thinking this way.

If the establishment felt that this is the wrong way of framing home ownership and retirement, they have the muscle of the media to help us re-frame.

They didn’t.

Until perhaps now.

In my article about how you can win with HDB despite the expiring land lease, I brought up what our former prime minister Mr Goh Chok Tong stance on this:

“It is in your interest to ensure that the value of your flats continues to rise.”

So now, based on Mr Lawrence Wong’s narrative, he has the challenging task of shifting us not to rely so much on our HDB flats appreciating in value.

Kok Hoe provides some history on the changing stance of home ownership and retirement.

I think he is right. I will probably label this as crosscurrents.

Home ownership is suppose to be good for us. Yet our CPF is suppose to be meant for retirement.

The result is that people hear that CPF takes care of our retirement and since it is in government’s interest to ensure property appreciate in value, these 2 goes hand in hand.

Kok Hoe highlights how difficult it is for the government to change this. And I think it is a futile effort to talk about change.

The machine is too big and complex.

What came out from Mr Roy Nerng’s good work is a re-look into the adequacy of CPF for our retirement. Part of the proposal seems to be private pension investment schemes.

We have not heard much recently. Proposal is easy to come out but CPF has too much interfaced into it.

If HDB does not Depreciate, why 3 Different Mortgage Criteria?

Finally, Kok Hoe highlights further validation that home prices do depreciate.

There are some fail safe put in place to prevent citizens from using too much of CPF for their home:

  1. No CPF can be used if the remaining lease of a property is  < 30 years
  2. To use CPF, your age + remaining lease must be >= 80 years
  3. The maximum amount of CPF that can be used is capped at a % of the lower of the purchase price or the value of the property at the time of purchase

These rules are put in place to guard against CPF depletion. If your home always appreciates, there is less need for such guardrails.

The Joys of Renting, Versus Owning a Short Lease HDB Flat

Kok Hoe highlights that renting might turn out to be better for the quality of life.

To relate to this topic, you don’t have to be stressed that your home is losing value and you have to find a buyer (which is a smaller pool as people have to use cash to purchase).

The home in this case might be pre-paying rent.

I cannot disprove this but I find it hard to believe renting would be cheaper than buying a flat on a short land lease.


I got to thank Kok Hoe for this piece about his perspective on this issue. However I find that you need some strong character in the government to see that there is a problem here, and there is a need to change, and bring about change.

There is nothing much we can do.

We can only do what is best for ourselves.

Understand the rules, and see if you can profit from it. If you are too lazy to understand the rules, others cannot help you when you make the wrong decisions.

Putting all your net worth in a single asset can be lucrative if the speculation works out. If not, you might want to be a bit diversified.

Rely partly on properties to build wealth, but also one or two other areas.

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Monday 2nd of October 2017

Issues of lease decay & ultimately zero value is not new in S'pore --- it has been for leasehold private property for the past 100+ years. It's just that the mindset is different e.g. eyes opened big big especially for commercial & industrial land, or that there are ways out e.g. enbloc & redevelopment for private housing. Property booms happen about once a decade in S'pore --- hence leasehold condo owners have recurring opportunities for enbloc as their estates ages.

But for HDB buyers, there isn't a "Get Out Of Jail Free" card, other than offloading your HDB before it gets too old. SERS is only at the whims & pleasure of govt i.e. only when govt can get much more revenue/profit from redevelopment. With only 4% of HDB getting SERS so far, there's high chance of 90+% HDB not getting it. Even if govt was willing to redevelop all 12-storey HDB into 100-storey skyscrapers, the cost will be too prohibitive to govt vis-à-vis the amount of subsidies they have to give & the pricing that they can charge to people.

As I always maintain, LKY opened Pandora's Box with the liberalization of CPF money for private property & resale HDB in the late-1980s. OK, so he was responding to all his good buddies in the banks & property developers, a S'pore economy in the doldrums, and heightened level of unemployment & increased crime such that I can still remember my mum telling us to close & lock the main door at all times (this was a time when it was standard to leave open the main doors of your flats during the day). But it was still a knee-jerk response without long-term consideration by the govt.

Govt can't turn off the tap now without crashing the property markets. I foresee the govt being able to only slowly reduce & making it harder to use CPF money for property. And probably making less generous terms for SERS --- it will be common in future for SERS recipients to NOT being able to afford the replacement flats, unless they do major downgrade e.g. from existing old 4-rm to replacement 2-rm.


Tuesday 3rd of October 2017

Hey Sinkie, agree with your points there and thanks for making it very clear to me. Correct if i am wrong but SERS will still need you to buy a flat at a subsidized price in the market. this means you have to set aside a sum of money to purchase as well

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