While letting owners of four-room Housing Board flats sell part of their lease back to the Government is a good move, it will probably appeal to only a small section of the population, said property experts and academics.
They do not expect a spike in applications in response to this extension of the Lease Buyback Scheme, which was previously for three-room and smaller flats. Rather, the scheme will continue to have a limited appeal, they said - to low-income households who are short of retirement funds on the one hand, and savvier owners on the other.
Under the scheme, flat owners sell part of their flats' lease back to the HDB. The proceeds from selling the lease are used to top up owners' Central Provident Fund (CPF) Retirement Accounts, for larger monthly payouts under the CPF Life scheme.
The required top-up level is the Minimum Sum for those aged 70 and younger, and slightly less for older flat owners. The owners will receive the funds in excess of this as cash.
Response has been lukewarm since the scheme's launch in 2009. As of last month, just under 800 households have benefited.
"There is likely to be a better take-up than the current state of things, but we do not expect a surge," said ERA Realty key executive officer Eugene Lim.
One obstacle to a wider take-up is the fear of outliving one's lease. Under the scheme, flat owners keep the next 30 years of their lease and sell the rest back to the HDB.
The HDB has said that "no elderly flat owner will be left homeless" and that "appropriate housing arrangements" will be provided for flat owners who cannot pay for a lease extension.
But it is unclear what this means and the big fear is that the flat owner will get chased out of his home, said experts.
Another obstacle is cultural. Many Singaporeans wish to keep their flats so they can leave them for their children.
"This bequest motive is a very strong motivation," said National University of Singapore Associate Professor Chia Ngee Choon.
It is thus the "more open-minded, more educated or investment-savvy" home owners who may be comfortable with this option, said R'ST Research director Ong Kah Seng.
But investment-minded owners have other reasons to be reluctant. Flats under the scheme cannot be wholly sublet or resold, thus limiting their options, noted OrangeTee head of research Christine Li.
"Subletting out the entire flat for rental income would probably derive greater returns compared to payouts by CPF Life," she added.
The median rent for a flat was $2,300 last month.
About one in 10 flat owners above 55 either sublets a room or the entire flat for income, said the HDB.
It added that the scheme is aimed at low-income owners with limited monetisation options, which is why it was not previously open to larger flats.
Civil servant Lim Swee Leong, 59, owns a four-room flat and could qualify for the scheme when he retires. But he, too, sees it as being chiefly for the lower income.
"For me, it's quite different because I don't need the money," said Mr Lim.
There is the off chance that the scheme will generate a lot of demand, which would mean that the Government has to buy back many leases, which will cost it a tidy sum.
But NUS Associate Professor Albert Tsui noted that the Government is buying an asset which it can resell or use as rental housing.
"You can see it as just a transaction. It should not be a big problem," said Prof Tsui.
This article was first published on August 19, 2014.
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