Saturday, April 14, 2018

How to find a buyer for your aging HDB flats

I posted a comment from Jim Lion concerning the prospect that HDB flats will have no value at the end of the lease. This would destroy the savings of the HDB owner.

This post attracted 20,000 views in 24 hours. 100 people liked it and 30 people added their comment. Most of them expressed their dismay that they were misled by the PAP leaders.

One of the commenter asked for my views - what can be done to address this shocking state of affairs. I agreed to give my reply and I do it here.

First, allow me to share my personal story. In 1983, I bought a leasehold townhouse for $650,000. I could have spent 20% more and buy a freehold semi-detached house. The townhouse in the condo with facilities looked more suitable.

After a year, I started to worry about the 99 year lease. What would happen at the end of the lease? I asked my uncle for his view.

He said - at the end of 99 years, the government will take back your property. They will pay you $0 for the townhouse. You will be damned lucky that they do not ask you to demolish the townhouse, which would be very costly.

At that time, i had thought that a building would last for 200 years and will still be liveable after 99 years. I thought that it would be unfair for the government to take the building without paying any compensation to the owner.

Nevertheless, I accepted the fate that my big investment would be worth $0 at the end of the lease.

I lived in the townhouse for 12 years and rented it out for the next 20 years. The remaining lease is now less than 60 years. I could still sell it for $2.5 million on the market or twice of this sum, if the enbloc sale is successful.

What the PAP leaders, including Mr Lee KY said, was true. A property was a good investment. There is a caveat - provided you bought it earlier at a low price!

I emphatize with the dismay of seniors who now find it difficult to sell their aging HDB flats to realize cash and to downgrade to a smaller property.

it is mainly due to the cycle of the property market now. There are more sellers than buyers. Many foreigners have left Singapore due to the economic slowdown during the past two years. Business had been bad.

Many private properties are vacant. Rental rates have fallen sharply.

There is another reason. The current government policy made it difficult for aging HDB flats to be sold. There are restriction on who can buy the HDB flats and on the use of CPF savings to pay the mortgage for the flats. These restrictions have to be revised.

I will give views on a separate post.

To these seniors, I will give a few words of comfort. Be patient. There will be a solution. Your HDB flat is still a good investment, but it may not be as good as you had thought it to be. If you had bought it many years ago, you would still be able to sell it at a profit.

Wait for my next post, OK? But I need 100 likes before I write the next post, OK?

Tan Kin Lian

Friday, April 13, 2018

How to solve the magic cube puzzle

You can watch my grand daughers Vera and Nadya solve the magic cube (aka snake) puzzle. If they can do it, you can also, right?



And this is how it is done. They learn from me.

Views about Bogor, Indonesia

Here are a few videos taken from Bogor, Indonesia.

Who pays the property tax?

Some people complain that they should not be required to pay property tax on leasehold properties. They argue that the land owner should pay the property tax, and not the leashold owners.

I do not accept this argument.

Under the law in Singapore and in most countries, the property tax is paid by the owner who tenanted their properties for short term leases, say three years or shorter.

When the lease is for a longer term, the lease agrement will specify who pays the property tax. Usually, it is the lease holder.

It does not really matter. If the owner pays the property tax, they will add it to the rental of the property. If the tenant pays the property tax, they will pay a lower rental.

So, it is more practical for the owner to pay the property tax for short term leases, as the tenant may change every few years.

However, for long leases, say 30 years to 99 years, it is more practical for the lease holders to pay the property tax.

Tan Kin Lian

Maintenance of MRT tracks

Why is it necessary for SMRT to close some stations for track maintenance during the weekends? Is this a regular feature in some other countries?

We are dealing with routine track maintenance. How long does it take to "maintain" the track? What is involved?

We are not talking about faults in trains. These faults can be attended in the maintenance depot. We are not talking about signal issues.

For track maintenance, I suspect that there are some parts of the tracks that need to be replaced. These parts are still working but does give problem to some trains some of the time.

The first step is to identify the sections of the tracks that give problems. This can be done by looking at the data that is collected when the trains pass through. I shall describe it as "smart maintenance", i.e. using data to locate faults. Is this being done?

If all the tracks that need to be "maintained" are identified, how long does it take to repair or replace these sections? I don't think it will take hours. It should be possible to carry out the work during the five hours in the early mornings, when the system is shut down.

For the maintenance work to be done effectively, we need property trained maintenance technicians who are given the right tools and are properly supervised by competent supervisors. Is this happening?

In some countries, the quality of the workforce is poor. The workers are slack. The supervisors are not competent and not on the site supervising the work. Are we facing the same syndromes in Singapore?

I repeat. I suspect that there is no need to close the tracks for regular maintenance. The work can be done using smart data analysis, competent technicians and supervisors.

This is another sign of the bad state of affairs in Singapore under the current government.

Tan Kin Lian

Tan Kin Lian

Use of CPF for lease of at least 30 years

CPF allows its savings to be used to pay a mortage of at least 30 years. But it is extremely complicated.

I tried it and got a negative response. I am not able to see the actual rules. I can only try with the calculator.

Yes, this type of convoluted arrangement is the hallmark of Lee HL. No wonder few people knew about this rule (including me). It was supposed to have been around for 5 year!

Why I cancelled 3 Grab bookings

Some people wondered why I cancelled three Grab bookings and had to pay a penalty of $5. Was I acting unreasonably? Was I acting unfairly to the Grab drivers?

This is what happened.

I asked for a Grab driver to take me from the Grassroots Club to my rented townhouse for an urgent appointment. The fare was $9. It was high, but acceptable to me.

I got a response. The driver would arrive in 9 minutes as he had to drop off the current passenger. I cancelled the booking immediately. Please note that the driver still had his current passenger.

I tried again and got a similar response. The driver would arrive in 9 minutes as he had to drop off the current passenger. I cancelled the call immediately.

I tried the third time. I got the same outcome. There was a mention of a penalty of $5, but I did not notice it. I cancelled the call immediately.

In all three cancellations, the driver was dropping off the current passenger. He was not on the way to pick me. I did not cause the driver any inconvenience.

Why was I not willing to wait for 9 minutes?

I had this bad experience on a few past occasions. On one occasion, the waiting time was supposed to be 5 minutes because the driver had to drop off the current passenger. It turned out to be 15 minutes. What happened? he said that he had to drive up and down a multi story car park.

For the other occasions, the waiting time was usually a few more minutes compared to what was reported.

Why should I pay a higher price and still have to wait for a long time? I went to the road side, hailed a taxi in 2 minutes and paid a lower fare.

Grab refused to refund the penalty of $5. I don't think they gave it to their driver. They did offer me a promotion code for $5 for my next ride. I rejected it.

The bubble in HDB flats

Jim Lion said:
I remember having debates with colleagues in the 1980s whether the HDB flats will worth zero when the 99 lease is up.
Most have unquestioned faith that the PAP government will take care of them in their old age n will never let this happen.
If you dig out videos on LKY, he did sell us at many different times that the prices of HDB flats will continue to rise forever.
This fed their faith n the cycle went on. It was only recently that the Minister bursted this bubble in Parliament.

Suddenly Sinkies woke up to the realities which they should have known all along:
1. The PAP government is deadset against welfare n has always been hard headed when money is concerned.
2. It should common knowledge on the law of how leases work.
3. Sinkies must be able to think for themselves n not be too reliant on the government to make financial decisions for them as SG has never been n will never be a welfare state.
4. Knowing that so many Sinkies rely on the government, the PAP should not have made those rosy promises about HDB flats.
5. The day of reckoning is approaching when the 99 year lease is up n the land will return to HDB n flat is worth zero. All their monies poured into the flat is gone, which is the worst investment in their lives.
6. Unless there is a drastic change, on the present course I see disaster n crisis ahead for millions of flat owners n their progeny as I have foreseen more than 30 years ago.

I am afraid that the outcome will be even worse than painted by Jim.
I agree with him that HDB flats will have $0 at the end of the 99 year lease.
Here is a worse situation - the current prices are inflated, and higher than their true value. The owners have paid too much for an asset that will have no value in a definite time in the future.
This is what happens when people rush to invest in a financial bubble. It is rather sad that the HDB flats, the bedrock of Singapore's success, turns out to be a bubble.

Tan Kin Lian

Want to be a smart nation?

I finally managed to pay the stamp duty on the tenancy. It was a really big hassle.

I had to go through so much trouble to make the payment. I must have spent at least one hour to stamp the tenancy agreement.

Someone said that the IRAS website has this kind of issues for years or decades. They did not improve, in spite of many feedbacks over the years.

I wish to make this suggestion to IRAS.

They should provide an option to pay by credit card. Many people are paying by credit card, and they do not have any issue.

I have made hundreds of payments by credit card for online purchases. It is completed easily, with no hassle. Why should I be required to spend one hour to pay the stamp fee of $110 using NETS?

I am not the only person facing this issue. I asked my tenant to pay the fee online, as I was travelling. He tried and gave up.

Here is my message to our prime minister who wants his two ministers, VB and JP, to head the smart nation. Be smart. Just introduce credit card payment as an option to NETS for IRAS. It is a low lying fruit.

You do not need to spend tens or hundreds of millions on grand projects that take years to realize.

Tan Kin Lian

Allow CPF members to invest and earn a higher return

Mr. Tan
Will CPF's low interest still provide adequate retirement needs for the middle-class after the value of one's BTO plunges after 35 years?

The low interest of 2.5% paid by CPF is inadequate to take core of the retirement needs of the members. The higher interest rate of 4% paid on the savings account is just barely adequate.

The benchmark for an adequate interest rate is a return of 2% higher than inflation.

If the inflation rate is expected to be 2% over the long term, we need a CPF return of 4% per annum. If the inflation rate experiened by the middle and lower class is actually higher than 2%, they need a higher interest rate on their CPF savings.

We know that the inflation of medical fees is much higher than 2%. For the elderly, the medical expenses form a significant part of their expenditure.

In the past, most people rely on the appreciation of their HDB flats to compensate for the low rate of interest paid by CPF. They were able to sell their flats at the appreciated value to get some cash to downgrade to a smaller flat and to spend on their retirement needs.

This method is no longer possible for most seniors. They are not able to find buyers for their aging flats, which now have a remaining lease of less than 60 years.

There is a big supply of these aging flats and a small demand. The supply and demand situation had reversed and now worked against the owners.

The method that worked in the past is not working now. Many of the seniors are strugglying with inadequate cash flow from the CPF savings and an overpriced HDB flat that they are not able to liquidate.

What is the solution?

For the immediate future, the government must change the regulation to allow CPF to be used to buy a property with a shorter lease.

The current regulation actually allows CPF to be used for a remaining lease of 30 years, but the rules are quite complex. It should be simplified.

Over the longer term, the government must allow members to opt for their CPF savings to be invested in equities to earn a higher return. Although equities may fluctuate in value from time to time, this does not concern people who are investing for the long term and can ride out the fluctuations.

CPF members can be educated to understand how to manage this risk through diversification and investing for the long term.

In Australia, many people are investing their superannuation funds to earn a yield of more than 10% a year. This is much better than the "safe" yield of 4% paid by CPF.

CPF members need a better return to earn enough for their retirement needs. The current CPF regulations should be changed. We need a new approach.

Tan Kin Lian

Thursday, April 12, 2018

Get rid of the "stupid" GRC system

Mr. Tan
Do you agree with the decision of the judge in this matter?…/high-court-dismisses-bid-for-…

I empathise with the judge. He was given a very difficult matter to decide.
The root of the problem is the "stupid" GRC system. It is better to get rid of the GRC system and revert to single seats.
There are better ways to ensure minority representation. They can be appointed as non-constituency MPs, if the minorites are not adequately represented in Parliament.

It is difficult to pay stamp duty to the government

I wish to share episode #2 of the e-stamping of tenancy agreement.

I went to the IRAS website to do the e-stamping. I had to go through a lot of trouble. It asked for a lot of detailed information. I suspect that some of the information are not necessary.

The website was also buggy. On a few pages, I had to wait for several minutes to get a response. It is not the poor internet connection in my office, as I am using fibre optics. Furthermore, I do not have the problem surfing other websites. It is the buggy IRAS website.

Finally, I managed to complete the transaction and have to make payment.

It uses NETS. I have to read their detailed instruction on the type of browser to use, etc. Wow, do we really need all this kind of hassle?

I finally got through to DBS Bank. I provided by user id and password. Then the bank asked for my token. I did not have it.

As I was travelling for two days, I asked my tenant to make the payment. It is really his responsibility to pay for the e-stamping.

On my return from overseas, I asked my tenant if he had made the payment. He told me that he tried many times and could not get through. There was issue with the version of the browser that he used. He is IT savvy and much younger than me. He also faced this trouble. It is clearly the bad website that is designed.

Now, I have to pay payment using the DBS token in my home.

Why does it have to be so complicated to pay stamp duty to the government? Why can't the government allow payment by credit card?

Perhaps the government finds the credit card charges to be too high and want to avoid it? Why can't the government set reasonable limits on the credit card charges imposed by the banks?

I am convinced that Singapore is doomed under the government of Lee HL. Each new episode reinforces this pessimistic view.

Tan Kin Lian

Tan Kin Lian

A bad business practice

I had a disagreement with Grab over their penalty for cancelling my booking. I wanted to delete the app. I checked the app and found that I had a balance of $35 (or thereabouts) in the Grabpay account. There was no way for me to transfer the balance back to my credit card.

I wrote to ask Grab Support on how this is to be done.

I received a reply that I had to forfeit all my points and incentives when I delete my app. I was asked to confirm that I wish to close my account.

I do not care about their points and incentives. I find them difficult to understand and to use. I don't know how much they are worth. I don't want to waste my time over these small things.

I had to ask them about the money in my Grabpay account. They replied that it would be forfeited when I close my account. They sent to me the "terms and conditions".

I asked Grab if they are trying to "cheat" me of this balance? Was the staff trying to help Grab to earn some revenue by forfeiting my balance? This is money that I put into the account, and not the points and incentives that Grab gave to me.

I told them that they are not authorised to close my account. I will use the balance and close the account myself.

I find this business practice to be bad.

Tan Kin Lian

A more efficient form of local transport?

Bogor is referred to as the city with "satu juta angkot", i.e. one million public transport vehicles. Angkot is short for angkutan kota or "transport for town".

It is an exaggeration. There are many angkots, but not one million. The population of Bogor is just one million.

Many of the towns in Indonesia rely on the angkot. It can take 10 people. It is a vehicle that is bigger than a taxi but smaller than a bus.

I believe that the angkot ply a fixed route. It picks up passengers from designated places but can drop them off anywhere along the route.

It is a cheap and convenient form of transport. As there are many angkots, the waiting time is short.

It helps to reduce the cost of living for the residents of the town. It also creates jobs for many drivers. I think the angkot is an efficient form of local transport.

The "light bus" system used in Hong Kong operates in a manner similar to the angkot. Most visitors and locals find the light bus to be efficient.

The big buses and the taxis in Singapore are more expensive and not convenient or efficient.

Maybe, we should rethink our mode of transport?

Tan Kin Lian

Poor customer service

I booked Grab for my trip from airport to home last night. I had a cash balance in Grabpay that I have to use, before I delete the app.

I was able to get a Grab driver within 5 minutes. As it took me 5 minutes to clear customs and walk to the pickup point, the driver had arrived. The fare was $19.

Uber showed a fare of $18, so the difference was small.

I should be able to clear off my Grabpay balance within the next two trips, so I would be saying goodbye to Grab.

My recent experience showed that the customer service of Grab is quite bad. They followed SOP blindly and turn me off. If they had exercised initiative and common sense, they would not lose me as a customer.

I hope that Grab will wake up.

This is the "mentality" of many large organizations in Singapore. Their employees apply SOP blindly and cause a lot of harm in customer relations.

I hope that our large organizations realize this weakness and address it.

Allow CPF to be used to pay mortgages for short leases

Several people have expressed concern over the difficulty faced by seniors in selling their aging HDB flats to realize cash to down grade to a smaller flat and to use their cash for retirement.

Their aging HDB flats have a lease less than 50 years, compared to the original 99 years.

The problem is an outdated policy that needs to be revised.

Currently, the bank will not finance a mortgage on a lease less than 60 years old. The CPF will now allow the savings to be used to pay for the mortgage to purchase on old flat.

The first step is to allow CPF savings to be used to purchase flats with a lease longer than 20 years. In other words, the threshold should be reduced from 60 to 20 years.

Some people may argue against this change on the grounds that a short term lease is consumption and a long term lease is "investment".

The reality is that all property is partly investment and largely consumption. It is a matter of degree.

A short lease property is cheaper. Although a larger portion of the mortgage payment is consumption, the absolute amount used for consumption is probably the same as for a longer lease property, even though the consumption proportion may appear to be smaller.

If people can get financing to buy short leases at lower prices, there will be a market for the aging HDB flats. The seniors will be able to sell their flats into this market and realise cash for their living needs.

Some younger people may opt to buy a short lease as it is cheaper. By that time, they will also realize that a property is largely consumption. It is similar to renting the property but they are locking up the rental rates over the term of the lease.

If CPF changes its rules, the banks are likely to follow the cue and offer financing for short leases. After all, the banks are financing cars on short lease of up to 7 years. What is the difference between cars and property?

The key is therefore a change in CPF rules. Will our elites who run the government, including the highly paid ministers and civil servants, wake up and deal with this looming issue?

Tan Kin Lian

Income gap

I prepared this chart to give a talk about Singapore to a group from Europe.
It tells an interesting story.

Singapore and USA have a high per capita income. But they also have a high income gap.
Switzerland has a higher per capital income than Singapore and USA and have a smaller income gap.
Germany and Austria have a lower income gap than Switzerland but their per capita income is also lower. 

Does this chart suggests that the most efficient income gap should be that figure shown for Switzerland?

Although the per capita income of Germany and Austria are lower than Singapore, the majority of their people are better off than the people of Singapore. We need to take one third of the per capita income for Singapore for the comparison, because the gap is three times of these two countries.

Monday, April 09, 2018

Shuttle bus to Singapore General Hospital

I have visited Singapore General Hospital many times during the past years. I always walk to the Eye Center from the MRT station. I did not take the shuttle bus.

Why? I was not aware that there was a shuttle bus service. The sign was not prominent.

On a few occasions where I wanted to take a shuttle bus, I was not able to find the shuttle bus stop.

I wish that there was a more prominent sign in the MRT station to show the location of the shuttle bus stop. Maybe there should put it in the location map.

Security checks at condos

I visited a condo with a big backpack. The security guard was not interested to check the content of my backback (i.e. it could easily contain some explosives). He was busy recording the particulars of a car that is visiting the condo. He is not interested to check if the car contain explosives.

I wonder what the security check was for?

Recording visitors to office buildings

I visited UOB Plaza this morning. The security guard wanted me to pass them my NRIC for safekeeping. They also asked for my mobile number, but I decline to give it to them.

I wonder what is the purpose of recording visitors to an office building?

Somebody said earlier - in case there is a fire, they will know who are in the building. Really? How often does this occur? Once in a lifetime?

What about shopping malls or cinemas? Do they need to record customers, to know who are in these places, in case there is a fire?

Why is there a need to record visitors to office buildings, which are public places?

I guess that many decades ago, some minister decided that this was necessary and the practice continue since. What a waste of manpower. No wonder we had to employ security guards from other countries, to keep the cost low.

It is better to stop the unproductive and unnecessary activities.

If there is a security risk, I prefer the security guards to check backpacks and keep an eye for terrorists carrying explosives, rather than record the particulars of visitors.

Sunday, April 08, 2018

What is your opinion of Law Minister Shanmugam

I asked this question in the Wisdom of the Crowd - What is your opinion of Law Minister Shanmugam?

50% of those who voted said that he is a bully.
39% said that he is not honest.
11% said he is capable and focused.

A total of 89% has a negative view of him.

See the breakdown of the votes in

Han HH's removal from the Select Committee hearing

I asked this question in the Wisdom of the Crowd - Do you agree with Han HH's removal from the Select Committee hearing.

36% of those who voted said that the was unfairly targeted by the panel.
24% said that she acted in a provocative manner
20% said that she was causing a disturbance.
20% said that she was minding her own business.

A total of 56% felt he removal was not justified. 44% thought otherwise.

See the breakdown of the votes in

Lengthy grilling of the historian Thum Ping Tjin

I asked this question in the Wisdom of the Crowd - Do you agree with the lengthy grilling of the historian Thum Pin Ping Tjin?

48% of those who voted said the grilling was out of focus to the main issue.
37% said the law minister was a bully.
7% said the grlling was too long.
7% said that it was necessary to question his objectivity.

A total of 93% were against the lengthy grilling.

See the breakdown of the votes in

HDB flat is no longer an investment for old age

This letter was publised in the Straits Times Forum a few days ago.

The notion that owning a Housing Board flat is an investment for old age is no longer valid today.

This is made worse by the announcement by National Development Minister Lawrence Wong that not all old HDB flats will be eligible for the Selective En bloc Redevelopment Scheme (Sers) and that once flats reach 99 years, they will have zero value and owners will have to vacate (Don't assume all old HDB flats will become eligible for Sers, cautions Lawrence Wong, March 24, 2017; and Understanding what happens at the end of a 99-year lease, Dec 28, 2017).

Presently, many seniors who want to downgrade to Built-To-Order studio apartments for the elderly are in a fix as they are unable to sell their old flats.

They stand to lose their deposits on their new flat if they cannot sell their old flat.

Most of them were hoping to downgrade and live on the profits from selling their flats but have become disillusioned.

The Government needs to step in to manage this problem and not just leave things to market forces.

Ronnie Lim Ah Bee

Seniors are not able to sell their old HDB flats

Hi, Mr. Tan,

As seen from news as reported that most of the elderly citizens/residents who staying in the old HDB apartments, which are having slightly more than half of the 99-year leasehold balance, thus now find themselves cannot really enjoy better value of the premises(assents) as retirement benefits.

Due to depreciation, and value declinding because of lease-property, thus it could be detrimental to the expection of most elderly citizens/residents as what had been earlier told in the different sceanario.

As most of the elderly citizens/residents have lesser or even no retirement fund under CPF, it would be an hardship to all of them, and would HDB offer them better amount in the "Lease Sales Back" Scheme.....???

Thanks for your comment.

HDB flat owners should understand that their HDB asset is a leasehold and a depreciating asset.

It is not different from buying a COE that last for 10 years only (and people are buying $50,000 or more for the COE) or a car that have a limited life span and will have no value at the end of its life.

They should not look at the HDB flat as an investment that will always appreciate in value. Instead, it should be just an advanced payment for the use of the flat for the remainder of the lease.

The seniors face a double whammy. They have a HDB flat that has depreciated in value due to a shorter remaining lease and to age. They also faced the additional short of a lack of demand for their flat.

The government can help to ease their burden in the following ways:

a) Encourage banks to provide a loan for short leasehold and allow the CPF to be used to pay off these loans
b) Provide financing for these old flats through the HDB.

Will the government step forward and do its part to reduce the burden for the seniors? Or will they neglect their duty?

Tan Kin Lian

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