Need to clarify if HDB leases are investment assets or not

The recent discussions on the 99-year leases of Housing Board flats have only generated more heat and obscured the main concerns of those living in such flats.

First, this is not a question of the length of a person's lease, but about the rights an individual has over the property, and if these rights may be traded.

Hence, the debate on whether a person "owns" an HDB flat is not a fruitful discussion.

Second, the debate on the applicable labels obscures the main concern of the public: whether the value of leases would depreciate to zero over time.

This turns on how such HDB leases are perceived - whether they are an investment asset or merely a consumption good.

The older generation have an interest in not having the value depreciate, as they generally view their HDB leases to be a store of value, representing their entire life's work.

Phrases such as "retirement assets" and "nest eggs" used by the Government come to mind.

The perception of an HDB lease as an investment asset furthers the Government's narrative that citizens have a stake in Singapore.

However, such an approach will mean that the future generations will pay the price - directly through high resale prices and indirectly through the Government buying back such leases at a high price.

It is unlikely that this approach will be sustainable in the long run.

The younger generation, if they view leases as merely a consumption good, would want to have the flat value depreciate.

This, in turn, would allow them to have access to cheaper resale flats, and may aid them to live closer to their parents.

The Voluntary Early Redevelopment Scheme does not contain sufficient details as to whether such leases might depreciate or appreciate.

Are HDB leases still investment assets or should they now be viewed as a consumption good?

Allen Sng Kiat Peng

A version of this article appeared in the print edition of The Straits Times on August 30, 2018, with the headline 'Need to clarify if HDB leases are investment assets or not'. Print Edition | Subscribe