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MND Exploring Low Cost Housing with Restrictions

18 Mar 2013 
SOURCE: Calvin Passive Income
National Development Minister Khaw Boon Wan exploring lower cost HDB alternatives is probably the hottest topic right now. If done right, it can allow for more affordable houses for the young and future generation. If done wrong, it could have a disastrous impact on the current HDB owners.
 
He has made it clear that the low cost HDB will not affect the existing owners, but there would still be an impact no matter how distinctly different it is, just like how HDB prices can affect EC and private condo prices. It affects the demand and supply of resale HDB as well since there is a new “alternative supply.” He proposes three ways to distinguish the new low cost alternatives from the current HDB.
 
Longer Minimum Occupation Period
 
This is a possibility as the new owners will be locked in for a longer period with less flexibility. It should also have the least effect on the current resale market. Five years is already considerably long, how much longer can it go? Eight years? Ten years? The downside is that some people may need to sell their house before then for various reasons and anything more than five years is really difficult for anybody to forecast.
 
Shorter Lease
 
By reducing the lease period, the cost goes down accordingly. However, is the cost necessarily cheaper?
 
Current HDB have 99 years lease, if they introduce say 60 years lease, the value of the HDB will depreciate much faster. It contradicts the vision that HDB should be an appreciating asset for Singaporeans.
 
On the flipside, if we argue that Singapore is becoming like HK, where leases of less than 50 years are the norm, then perhaps it still carries some weight.
 
Separating it from Resale Market
 
This is a very vague proposal as it does not specify a specific method. Should this low cost HDB be considered a new class, just like when they came up with ECs with its own rules? Even if it is called a new name, there will still be a resale market when the units come off MOP eventually. Unless the owners can only sell it back to HDB, market forces will take over after that as well.

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