There has been much discussions over the last few weeks on low cost HDB alternatives. It is probably a hot topic at this moment.
What alternatives were mooted and could it have an adverse impact on current HDB owners?
Luckily, National Development Minister Khaw Boon Wan 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.
He proposed 3 ways to differentiate the low cost alternatives from the current HDB;
1) Longer Minimum Occupation Period
In theory, this is quite easy to implement but it would really impact those that eventually come under this scheme. I don't know how much longer it can be extended by; 7 years? 10 years? What if some owners that need to sell their flats before the MOP for various reasons? It may be unrealistic in reality.
2) Shortening the Lease tenure
In theory, if the lease period comes down, the cost should reduce proportionately. But we know that in land scarce Singapore, this may be a temporary effect and costs will go up over time. The purpose of creating maybe a special group of affordable flats may be rendered useless. Morever, due to a shorter lease, it may even be difficult to resell it in future.
3) Separating It From Resale Market
1) Longer Minimum Occupation Period
In theory, this is quite easy to implement but it would really impact those that eventually come under this scheme. I don't know how much longer it can be extended by; 7 years? 10 years? What if some owners that need to sell their flats before the MOP for various reasons? It may be unrealistic in reality.
2) Shortening the Lease tenure
In theory, if the lease period comes down, the cost should reduce proportionately. But we know that in land scarce Singapore, this may be a temporary effect and costs will go up over time. The purpose of creating maybe a special group of affordable flats may be rendered useless. Morever, due to a shorter lease, it may even be difficult to resell it in future.
3) Separating It From Resale Market
This may be the one to be implemented but currently, it is still very vague and we will need to see the proposed terms and conditions that will govern this special 'class' of HDB flats. Perhaps, it would be made mandatory to resell it back to only the HDB at cost plus an embedded profit over x years of holding and thus recycled to others who fall in this category? The problem with this is that it will be difficult for aspiring owners in this category to upgrade as they will not enjoy the appreciation like others outside this category.
At this point in time, I believe there are lot more considerations to take into account before such a plan gets implemented.
Only time will tell if it takes off.
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