Do You Own Your HDB Flat? That’s Not the Real Issue


SINGAPORE: Do you own your HDB flat or are you merely a lessee? This has resurfaced as a hot button topic in recent weeks.

Here is a summary of the main arguments to each camp, with some counter-arguments.

Why HDB Flat Buyers are OWNERS

  • HDB flat buyers have the right to sell, rent and renovate their flats, within HDB guidelines. However, some have argued that tenants can also have the same privilege if their contracts permit – to sell their lease for a fee, to sublet, or to renovate.
  • HDB flat buyers pay a lump sum for their flats, and do not pay a monthly rent that is subject to fluctuations in the market rate, unlike lessees.
  • HDB flat buyers can make money off their flats by selling at a higher price, or by renting them out. Again, some have argued that technically a lessee is also able to make money off the lease by assigning it to someone else at a fee, or by subletting it, as long as the contract allows.
  • HDB flat buyers are required to pay property tax, just like private property owners. Opponents to this argument question why they need to pay property taxes if they are indeed lessees.
  • It is common for properties to be on leasehold, even in other countries. So HDB flats are not an exception. When the leases expire, it is understood that residual values become zero. Notably, countries like UK and Hong Kong have mostly leasehold properties.


Why HDB Flat Buyers are LESSEES

  • The legal document for the purchase of an HDB flat addresses the buyer as a “lessee” and HDB as a “lessor”. For private condos, the contract is typically between a “buyer” and a “seller”.
  • HDB flats are sold on a 99-year lease, not freehold. But this is a weak argument – it would make leasehold private property buyers lessees too.
  • The residual value of an HDB flat is zero at the end of its 99-year lease. The same thing could be said of a leasehold private property.
  • HDB flat buyers need to return their flats to HDB at the end of the lease. Again, private property owners similarly need to return their condos to the state upon expiration of their lease.
  • Unlike private property owners, HDB flat buyers cannot initiate collective sales of their homes, unless picked under the Selective En Bloc Redevelopment Scheme (SERS).
  • HDB flat buyers also do not own a strata title for the land, and have no share of the land unlike private property sold under strata titles. This explains why HDB buyers are not able to sell their flats en bloc, unlike private property owners (see differences between SERS vs en bloc).

IF HDB flats are leases, not ownerships, does that mean we should all sell our flats to buy private condos in Singapore instead?

Of course not – and here’s why:

  • HDB flats cost less for a reason. Yes, HDB flats do have some restrictions when it comes to buying, selling and renting out. But this is because they are meant primarily for occupation, not for speculation. And these restrictions are reflected in HDB prices, which are much lower than comparable leasehold private property.
  • HDB flat prices can still appreciate along with inflation. Prices will only start to depreciate towards the tail end of the lease. Otherwise they can still appreciate along with the wider property market, just like in the past few decades.
  • HDB flat prices will always be supported by their rental values. With its relatively high rental yield, HDB flats are still a very good rental investment, should buyers decide to rent them out.
  • There are a lot of subsidies with HDB flats. Whether you are buying a flat from HDB or from the resale market, there are a lot of CPF housing grants available for HDB. Moreover, HDB upgrading programs also come heavily subsidised, while private property owners do not enjoy the same perks.
  • Private property can also suffer the same fate as HDB flats. Leasehold private property owners could also see their property values become zero when their leases end, should the government reject their application to either top up their lease, or to collectively sell the land to a developer. So far, it remains to be seen if this would happen to any private property.

Ultimately, whether you see your HDB flat as an ownership or a lease is a matter of definition.

It is understandable that the authorities insist HDB purchases constitute “ownership”.

To label HDB flat buyers as mere lessees would mean a political blow to the government, as its bragging rights to Singapore having one of the highest home ownership rates (above 90%) would be shattered.

There is also a psychological comfort in owning your home. But if HDB ownership were to be redefined as leasing from the government, that could break the social compact between the government and its people.

Whether you call HDB buyers as owners or lessees, that is not the real issue here. The real issue is whether Singaporeans truly understand what they are getting into when they buy a leasehold HDB flat.

These are the facts surrounding HDB flats:

  • HDB flats will revert to the State for free at the end of their leases
  • The value of HDB flats will depreciate leading to the end of their leases
  • SERS is not a given, in fact only 2-3% of the HDB flats are earmarked for SERS
  • VERS is still an unknown, and the devil is in the details (which will only be clearer some 20 years later)
  • HIP 2 may help prop up HDB flat values, but will not stop them from depreciating to zero

Unless there is a policy change to how we treat leasehold property, the critical challenge is to educate HDB buyers on what leasehold means to them, and how they should plan their finances and retirement around their leases.

All the discussion about ownership or not, or about ambiguous new schemes like VERS and HIP 2, only serve to obfuscate the matter, or worse, kick the can down the road for the next generation of leaders to fix.


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