Yes, you own, not rent, your HDB flat

In 1970, my parents moved into a new three-room HDB flat that they bought for $7,200. “We were so happy to have our own home,” recalls my 71-year-old mum. A decade later, they sold it for $22,000. My grandmother, on the other hand, lived in rented accommodation most of her life, until she moved in with a son. All the rent she paid for decades came to nothing.

“That’s the difference between being a homeowner and a tenant,” says my mum. “You get to keep your profits when you sell your house. I don’t understand why people these days say we are tenants!” Indeed, disgruntled Singaporeans have accused the Government of wrongly selling the idea of HDB home ownership, when we should be considered tenants. Like my mum, I disagree.

In his National Day Rally message, Prime Minister Lee Hsien Loong explained our founding fathers’ ideals behind the home ownership scheme launched in 1964. “They wanted every citizen to benefit from the country’s growth and prosperity. As a result, generations of Singaporeans have been uplifted by home ownership.” One family, shared PM Lee, bought a $25,000 four-room flat in Ang Mo Kio 40 years ago. It is worth $400,000 today.

Our housing policy is not perfect but it has made many Singaporeans rich and even spawned HDB millionaires. Singapore is not the only country that builds and sells homes on leasehold land. China’s lease is just 70 years, though they are drafting laws to extend it unconditionally. In Hong Kong, some old properties have had their leases extended automatically, but are charged an annual rent. Although PM Lee will not extend leases here beyond 99 years, in order to give future generations the chance to own property, I’m grateful that there are schemes in the works.

Good to know: Of the one million flats built in Singapore since 1960, 70,000 units are more than 40 years old, with leases expiring in about 50 years. According to HDB, only 4 per cent of flats have been chosen for the Sers scheme to date.

The Government will upgrade more flats that hit their 30-year and 60-year marks, and buy back flats at the 70-year mark in a collective sale called the Voluntary Early Redevelopment Scheme (Vers) if owners vote for it. I’m still keeping my fingers crossed that my flat will be chosen for the Selective En Bloc Redevelopment Scheme (Sers), though my chances are not great; only 4 per cent of HDB flats have been picked so far. These new schemes may be as good as it gets for the majority of HDB flat owners.

“Even if you have to return your old flat at the end of the lease, don’t worry because the Government will help you to get another flat to live in,” promised PM Lee. You can buy a BTO flat with a new 99-year lease, a resale flat with a shorter, cheaper lease, or a two-room flexi flat for retirement. Whichever you choose, you will have to pay for your lease. “This is only fair because you bought your original flat knowing when the lease will run out and knowing that the flat will then have to be returned to HDB.”

We may not like hearing it but he is right. We all bought our HDB flats fully aware that they are leasehold, not freehold. Of course, we hope to make a profit or at least get our capital back on our most expensive asset but, frankly, nobody is obliged to guarantee us that. Perhaps it is time we accept this truth, no matter how inconvenient it is.

The Final Say: Hard Truths from a Trend Guru was first published on Home & Decor October 2018.