Debunking the official myths about HDB flats (Part 1): Singaporeans are ‘owners’ of their HDB flats
Posted by temasektimes on June 25, 2013
MYTH #1: Singaporeans owns their HDB flats.
TRUTH: Singaporeans are merely renting these 99-year leasehold properties from HDB at exorbitant prices.
The Housing Development Board was set up in 1960 during a time when large numbers of people are living in squatter settlements and slums around the city centers.
Under the then indefatigable Minister for National Development Mr Lim Kim San, HDB began the task of solving Singapore’s housing crisis and resettling the squatters.
It built 21,000 flats in less than three years. By 1965 it had built 54,000 flats, exceeding the 50,000 target of its First Five-Year Building Programme.
Today, about 84 percent of Singaporeans live in HDB flats compared with only nine percent in 1960 when HDB was first established.
The ruling party has always prided itself for building homes to house the majority of the population. HDB has become its crowning achievement and the mainstream media never fails to attribute Singapore’s high home “ownership” to the PAP during every elections.
While it is true that most Singaporeans have a roof over their heads, whether they actually own the flats they live in is debatable.
There are three categories of properties in Singapore: freehold, 999 year and 99 year leasehold properties.
Technically speaking, only those living in freehold properties can claim to own them since they are permitted to bequeath the estates to their descendents forever.
All HDB flats are 99-year old leasehold properties which means that the government can reclaim them after a period of 99 years. When Singaporeans purchase HDB flats, they sign a Tenancy/Lease Agreement with HDB and the usual Sales and Purchase Agreement for private properties. (thanks to reader Ang Kong Kia)
In a sense, HDB dwellers are only “leasing” their flats from HDB for 99 years, they do not strictly own them though the misconception has been perpetuated for years by the ruling party and the state-controlled media.
Addendum contributed by reader Papsmearer:
[Basically, when you borrow money from the bank to buy your 99 year leasehold HDB flat, you are in effect borrowing money to pre-pay your lease (you can call it rent too) for 99 years.
Normally, when you rent from a landlord, you might be required to sign a 1 year lease agreement which stipulates among other things, the monthly rent. At the end of the 1 year, the landlord may not decide to renew your least. In the case of a HDB flat, by prepaying your lease for 99 years, you avoid the uncertainty of the normal lease.
Secondly, people claim that they own the flat because they make a profit when they sell it. What they are actually selling is their interest in the pre-paid lease, not the actual flat themselves, because they don’t own it. They are selling the right to live in that unit, and basically, assigning their rights as tenants to another individual for a fixed price.]
Furthermore, there are some restrictions placed on the sale of HDB flats: e.g. one must live in it for a period of 5 years before they can be sold; the ethnic quota must be maintained in the process, previous HDB subsidies will have to be returned and a hefty resale levy is slapped on the seller which can be as high as $50,000.
If Singaporeans are really owners of their HDB flats, then they should be allowed to sell them to anybody at any time like in the private property market without being subject to these restrictions imposed by HDB.
Besides, most of them have to take up a bank loan to finance the purchase of the flats. In the event that they are unable to service the loan, the bank will repossess the flats.
The reality is, Singaporeans do not own their HDB flats. They are merely renting it from HDB for a maximum period of 99 years and paying a pretty high monthly “rental” at that.
When old flats are demolished by HDB for redevelopment, its inhabitants are not paid at prevailing en bloc rates. Instead, they are given discounts for new flats built to replace them.
The remarkable success of HDB in transforming the landscape of Singapore lies in the small size of the island and population. Given that almost all land is owned by the government, HDB has no difficulties in acquiring land, much of which is undeveloped to build new towns.
Post-independence Singapore has a small population which makes it easier for the government to relocate them to the newly built HDB flats. The feat will almost be impossible to replicate in an already densely populated city like Hong Kong or in a larger country like Malaysia.
The government deserves credit for ensuring that the majority of the population has a roof over their heads, but to claim that Singapore has one of the highest home ownership in the world when its citizens are merely renting leasehold properties at exorbitant prices from HDB is stretching one’s imagination to the limits.
It is time for Singaporeans now and the future to realize the truth – that they do not own the HDB flats they live in and they belong ultimately to the government which retains the right to acquire and demolish them anytime they wish.
Note: This article was first published in the old Temasek Review in September 2009.