In the face of the intense public scrutiny on the lease decay issue of aging HDB flats, public housing in Singapore is losing value, leading to a widening gulf to private condominiums, according to Bloomberg in a report on Friday.
More than 80 percent of Singaporeans live in HDB flat, leased from the government for a period of 99 years. Though Singapore likes to boast about its high rate of home ownership to the world, Singaporeans are in fact merely lessees of their HDB flats.
In an interview with Bloomberg, Nicholas Mak, executive director and head of research at real estate firm ZACD Group Ltd said:
“The government has to walk a tightrope on this. Officials can neither extend the leases “for free” nor let prices decline too much, because wealth loss among public-housing dwellers could be politically costly.”
The value of the homes has been falling even as prices of private dwellings rebounded over the past five quarters, leading to a 13.8 percent price gap, the widest in more than a decade while private home prices rose 0.5 percent in the third quarter, after climbing 3.4 percent in the previous three months.
A recent report by Swiss bank Credit Suisse predicts that resale HDB flats are likely to see a steady decline in value over time as buyers are less willing to pay for an aging flat.
Song Seng Wun, an economist at CIMB Private Banking in Singapore added:
“Housing is a very emotive issue. That may be understating it, in a country where marriage proposals can come in the hape of: “Let’s get an HDB apartment together.”
In a recent interview with the state media, Prime Minister Lee Hsien Loong said it is a “fair arrangement” for HDB flat lessees to return their flats to the government when the lease ends:
“It means the government sells you the flat for 99 years and after 99 years you return the flat to the government. This is the same as selling a 20 year old leasehold hawker stall to a hawker. The hawker can do his business at the stall or rent it out to another person, but once the tenancy ends, the stall will return to the government’s possession.”