National Day Rally 2014: Lease Buyback Scheme extended to four-room flats

National Day Rally 2014: Lease Buyback Scheme extended to four-room flats
View of Punggol estate as seen from a studio apartment in Punggol Walk. The Housing Board may soon "incentivise" parents to move out of mature estates, so they can join their children in new ones.

SINGAPORE - The Lease Buyback Scheme is being extended to four-room Housing Board flats, allowing owners of such flats to sell part of their lease back to the Government to supplement their retirement income, Prime Minister Lee Hsien Loong announced on Sunday night.


Get the full story from The Straits Times.

With this new extension to four-room flats, the move will cover more than half of all flat owners in Singapore.

The Lease Buyback scheme was previously restricted to three-bedroom and smaller flats, and allowed flat owners to sell part of their 99-year lease back to the Government, keeping only a 30-year lease.

Using a hypothetical example of a couple in their mid-50s who own a 4-bedroom flat, Mr Lee showed that in 10 years' time, the couple will be 65 years old, and will have two-thirds of their lease left.

They will probably need their home for another 30 years, so HDB will buy back the remaining 35 years of the lease. In return, the couple will get a lump sum of $27,500 in cash, plus $900 a month (on top of their CPF LIFE payouts).

The couple can continue staying in their flat with no need to move to a smaller one.

Mr Lee said HDB decided on extending the scheme after feedback from last year's Singapore Conversation, as many seniors living in the larger flats asked to be included in the Lease Buyback scheme.

Other options. such as right sizing, moving to a Studio Apartment and taking the Silver Housing Bonus, may be attractive, but most elderly Singaporeans also gave feedback that they still preferred to age in the comfort of their own homes, in familiar surroundings amidst their old friends and neighbours.

 

The rise of the public flat as an asset
By: Janice Heng
Monday, 31 March 2014

Public housing in some countries often takes the form of rental homes for the less well-off, such as Britain's council estates or "the projects" in the United States.

Although owning such property is an option, it is not seen as the default there - unlike in Singapore.

Singapore's model of home ownership allows people to buy such property as an investment which they can sell or let out.

As well as being an option for those on low incomes, the public flat here is also seen as a source of income too.

Yet it was not always thus. The public flat's role as an asset is one that emerged gradually.

When the Housing and Development Board (HDB) was set up in 1960, its role was to provide basic permanent housing for people previously living in slums and squatter settlements.

Initially, rental housing was provided but within half a decade, the HDB moved to encourage home ownership instead.

Having a nation of home owners, rather than tenants, opened up more possibilities.

In 1971, public flats were allowed to be resold for the first time. Previously, they could only be sold back to the HDB at fixed prices.

A resale market was created and, as property prices rose, selling one's HDB flat at a profit became a possibility.

Another avenue for income opened up in 2003, when HDB home owners were allowed to sublet their whole flat. Residents could upgrade to private property while letting out their HDB flat for additional income.

Previously, subletting was allowed only under special circumstances, or for those aged at least 65 who had lived in three-room or smaller flats for at least 25 years.

Schemes have also been set up to let elderly flat owners tap the value of their homes for retirement income.

Introduced in 2009, the Lease Buyback Scheme allows people over 63 to sell part of their flat's lease back to the HDB.

The proceeds go towards topping up the owners' Central Provident Fund Retirement Accounts, with any excess up to $100,000 being paid to them in cash.

The Government has made it clear that its top priority is providing homes. But the role of the public flat as an asset is inescapable.

As Prime Minister Lee Hsien Loong put it in last year's National Day Rally speech: "The HDB programme is not just about the roof over our heads. It is also a valuable nest egg."

JANICE HENG

 

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