Tuesday, August 21, 2018

Move away from the fallacy of "investment" in leasehold property

The government should get away from the fallacy that purchasing a HDB flat is an investment.

Why?

The HDB flat will eventually have no value at the end of the lease. It is just advance payment for the remainder of the lease.

If the lease is long, the lessee pays a higher price. If it is shorter, the lessee pays a lower price.

There is no commercial sense in forcing the lessee to buy only long lease flats "for investment". Currently, the lessee has to buy a flat with a remaining lease of at least 60 years or if the remaining age plus the remaining lease exceed 90 years.

The government should just allow the remaining lease to be 30 years or longer for a start. 30 years is long enough. Eventually, the remaining lease requirement could be shortened to 10 years.

Why force the buyer to lock up so much savings in the advance payment for a long tease?

By freeing up the market, the government will allow the existing owner to cash out their old flats. This will be good for both buyer and seller. It will create a more "normal" market.

This will require the use of CPF to be relaxed for paying for leases below 60 years.

Let us get away from the fallacy that a long lease is an investment. All leaseholds will decay to zero value at the end of the lease.

Tan Kin Lian




1 comment:

Anonymous said...

More homeless people.

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