Saturday, April 21, 2018

Upgrade to cover 40 dread disease

Dear Mr Tan,
I am a owner of the NTUC Living Policy ( LV85) since 1996 . Its contract covers 36 dreaded diseases and permanent diability (PD) provison for up to age 60 years. Today, NTUC has equivalent policy but covers 40 dreaded diseases and PD for age 70 years.

I opine that for my policy to remain relevant as a solution, NTUC should rationalize my contract that I have coverage of 40 dreaded disease and PD for age 70 year. Not withstanding NTUC as a cooperative, it is also a fair act of social responsibility. In fact I expected them to be proactive and to initiate necessary action .


Invest $500,000 in one bank

Dear Mr.Tan,
Do you think is save to put all my savings abt $500,000 in fixed deposit with Hong Leong Bank. It is a foreign bank wf limited liability.What does limited liability means?

Answer here:…

Bank misled customer into buying a 8 year saving plan

This housewife will lose $10,000 because she was misled by the bank officer to buy a 8 year saving plan when she intended to place a fixed deposit.

The bank officer did not tell her that it was an insurance policy and she would lose all of her savings if she cannot continue the policy for the second year. She had no income and could not pay the second year premium.

This type of mis-selling is quite common. Why is MAS still allowing the banks to carry on this activity?

Read my details and find out how to avoid this grievous mistake here.

Hub and spoke system for public transport

I visited my brother in Central Coast, Australia a month ago.

The main town in Central Coast is Gosford. I took a train from Sydney to Gosford. The journey was 2 hours.

From Gosford, I saw the bus routes. There were local buses that serve the nearby towns. It operated like a hub and spoke system, similar to that adopted by airlines.

For airlines, you take a plane from a small airport to a hub. From there, you take an international flight to go to other cities.

I am in favor of a hub and spoke system for our bus services in Singapore. Many cities adopt this system because it is more efficient for the operators and for the passengers.

In Singapore, the hub can be the MRT stations and the bus interchanges. The spokes are the local buses to take passengers from the nearby areas.

If you live near a hub, you can walk there. If not, you can take a local bus to the hub. From there, you can take the MRT or express bus to a stop near my destination.

Under this concept, the express bus stops every 2 km (roughly five bus stops now). The travel time will be reduced considerably.

From the stop, you can walk to my final destination or take a local bus.

I like to see the bus system in Singapore changed as follows:

a) express buses and MRT will connect the hubs.
b) local buses will take pasengers from the nearby areas to the hubs.

Do you like this system?

Worst decision of the PAP

I asked this question in the Wisdom of the Crowd - What is the worst decision of the PAP in the past two decades?
32% of those who voted said - appoint generals to run the country.

18% said - fix the opposition.

18% said - introduce GST resulting in high cost of living

16% said - introduce the GRC system.

16% said - allow property prices to go sky high.

See the breakdown of the votes in

Poor attendance of MPs in Parliament

I asked this question in the Wisdom of the Crowd - What is your reaction when you see poor attendance of MPs in Parliament?

62% of those who voted said - it is shameful to receive a high allowance and neglect their duty.

24% said - MPs should be full time.

9% said - they should be sacked.

See the breakdown of the votes in

Friday, April 20, 2018

The expiring HDB lease

How can we deal with the problem caused by the expiring lease on HDB flats?

We have to recognize that there are many parts to this problem. Let me list two of them:

a) First, some owners who need to sell their old HDB flat with a lease of less than 60 years has found it difficult to find a buyer. The buyer, who is likely to be a young person, is not able to get bank financing to buy the old flat.

b) Second, owners now fear that they have to vacate the flat on expiry of the lease and will not get any compensation. Their total investment in the flat will vanish into thin air.

The first problem is more urgent. Some owners need to sell their flats now to realize cash to downgrade to a smaller flat or to cover their living expenses.

This problem can be solved by allowing the buyer to use CPF to pay the mortgage for leases of between 30 to 60 years. 30 years is a long time for the new owner.

We need to overcome a mental block. Some people, including the government leaders, think that it is all right for people to buy a 60 year lease because it is long enough to quality as an "investment".

A shorter lease will expire during the lifetime and is "consumption".

This distinction is not valid. All properties have a large component for consumption. It is a matter of degree.

The buyer has to pay a much higher price for a long lease property. Let's say, $300,000. If the same property has a shorter lease, it comes at a lower price, say $200,000.

In both cases, the consumption is $200,000 over the term of the short lease. For the long lease, the consumption is also $200,000 and the investment is $100,000.

The $100,000 that is invested in the property will appreciate over the years. But the same $100,000 invested in equities (or stock market shares) will also get the same return.

My point is that there is no difference in the consumption component between the long and short lease.

I also want to give a warning to all property owners. The property bubble in Singapore has grown too big. It cannot continue to inflate because the earnings of working people cannot sustain a bigger bubble.

The government will be able, hopefully, to stop the bubble from bursting, but you should not count on it growing further. The days of easy money are over!

I will now deal with the second problem - the owner has to give up the HDB flat on expiry of the lease.

This problem is not so urgent. It will come in another 40 years time when many leases will expire. Some of the short leases will expiry earlier, but the number is small and the problem is manageable.

When the time comes and large numbers of leases are expiring, the government of the day can offer an extension of the lease by 5 or 10 years at a time.

This can be done, if the flats are still in habitable condition and there are no redevelopment plans.

A premium has to be paid for the extension of the lease. This will not be cheap, but it wil be less costly than buying a new flat - because you do not have to pay for the building.

Furthermore, it can be justified that the premium for lease extension can be kept at a "moderate" price. After all, these are people who bought and paid for the original property.

This is similar to buy a Certificate of Entitlement (COE) for the use of a car for 10 years or to extend it buy 5 or 10 years by paying a premium.

The HDB scheme has been successful for the past five decades. It has allowed many owners to make a good capital gain on the sale of their flats which they used to buy a bigger flat or a private property.

This huge appreciation was also made possible on the back of a rising property market, which has become a bubble.

We are now at the watershed. With the leases reaching the magical 60 year mark, many owners find it difficult to sell their flats. There is small demand for the old flats with less than 60 years due to lack of financing.

The problem affects large number of people. The fear that the property bubble may burst adds to the panic. It can be quite catatrophic.

It is urgent for the government to act and address this problem. As a first step, they should reduce qualifying period for use of CPF savings. Currently, the requirement is that the remaining lease should be 60 years. The government needs to revise it to 30 years.

Tan Kin Lian

Why GST should be abolished in Singapore

I read several reports in the social media about the general election in Malaysia.

One key news that keeps being reported is the complaint from voters about the high cost of living in recent years.

Why was there an increase in the cost of living that affects the lives of the ordinary people?

I am sure that the main culprit is the introduction of the GST in Malaysia on 1 April 2015.

Although GST was exempted for essential items, such as food and medicine, it still have a major impact in increasing the cost of living.

The example in Malaysia show clearly that GST is harmful to the economy and to the lives of the ordinary people, even if it is waived for essential items.

GST is a costly and inefficient tax. As many people have pointed out, it is also a regressive tax, as it hits the lower income people the hardest.

It is not the GST itself. We must also add the cost of administration that businesses have to incur. They have to eploy more staff to take care of the GST calculations and accounting to the government. The additional staff cost will be passed on to the ultimate consumers.

We must also not forget the additional profiteering. The businesses will not only add GST and the higher staff cost, but will also take the opportunity to increase their profit margin amidst the confusion.

Now, I come back to Singapore.

For more than a decade, I have written on many occasions that GST is bad for the economy. I now call for GST to be totally abolished in Singapore.

Can Singapore afford to lose the revenue from GST?

Yes. Singapore collects a lot of revenue from land sale. The amount is not reported, but is estimated to be $20 billion a year. This is revenue that most other governments do not have, apart from Hong Kong.

The revenue from GST is $11 billion a year.

The Hong Kong government does not collect GST because they also collect a large revenue from land sale. There is no justification for Singapore to have GST when it also has a lot of revenue from land sale.

If we abolish GST in Singapore, we can bring down the cost of living by about 10%.

Do you agree that GST should be abolished?

Tan Kin Lian

Thursday, April 19, 2018

No need to call a by-election for Marsiling Yew Tee?

I asked this question in the Wisdom of the Crowd - Do you agree with the High Court decision that there is no need to call a by-election for Marsiling Yew Tee?

62% of those who voted said that the vacancy should be filled as soon as possible.

32% said that a by-election is needed to fill the vacancy vacated by the MP from the minority race.

This makes a total of 94%. The remaining 6% agree with the decision of the High Court.

See the breakdown of the votes in

Wednesday, April 18, 2018

Open letter to Mr. Neo Kian Hong, incoming CEO of SMRT

Dear Mr. Neo,
I congratulate you on your appointment as the next CEO of SMRT.

I wish you success in managing this challenging job. It is difficult but it can be done.

Do not worry too much about the comments of netizens who have already written you off. They said that you did not have any experience in driving a train all your life - how can you manage a train company?

It may be some comfort to you that the same comment could be levied against me when I took up the job as the top person in NTUC Income exactly 40 years ago. I did not have any experience in running a life insurance company or in managing an agency force, which was the lifeblood of the company.

Fortunately for me, there was no social media at that time to write me off.

As it turned out, I did a fairly good job (if I may say so myself). I was able to build NTUC Income into a large and successful insurance company.

If I may, let me give you three tips that you may find useful for you to face your daunting challenge. The first and second tips are based on my 30 years of experience in facing similar challenges.

First, you have to build a good feedback system. In the old days, I had an intranet where the employees and agents were able to give their feedback on what was happening. Often they provided the feedback from the customers. I paid attention to the feedback and made sure that they were attended to.

It was the best way of identifying the real problems that faced my business. What's more, many of the people who provided the feedback were able to offer the solutions.

My task was to use their contribution and make the judgment on what could be done. In many cases, I had to try out the suggestions to see if they could work.

Today, we have the internet. It would be an excellent channel to handle the feedback system.

I know that you may be wary about having to handle several thousand feedback every day. Don't worry. It can be managed. You only need empowered people at two levels to sort out the feedback.

But you have to personally pay attention to some of the feedbacks that are escalated to your level for your personal attention. This is what makes the feedback system works.

In case this sounds "easy to say, hard to do", let me offer the following services to SMRT for free.

I will build the internet website, which I can get ready in two weeks, and manage the feedback process for SMRT.

I only need you to identify the SMRT people who will assist me in handling the feedbacks. Some are customer relations people, but the others are the operational people who can implement some of the suggestions.

I repeat. I am offering the internet system FREE and what's more, my personal time to manage the process. I will do it for at least three months. I will also train a SMRT manager to take over from me.

The feedback can be provided by the public and the staff of SMRT. It will be an open channel for the feedback.

I can stake my personal reputation that this approach will work. If you do not know or trust me, talk to your chairman, Mr. Seah Moon Meng. He knows me personally.

Second, we need a culture of senior people getting their "feet on the ground".

It will do wonders to have the CEO and top managers of SMRT visit the maintenance teams and see how they work in the early morning.

You and your managers do not have to do it all the time. But you can do it some of the time. Have a coffee with them. They will know that the managers care. More importantly, they will also know that they cannot "skive" and get away with it.

Where do you visit? The feedback system will give you the clues on where your managers and you should be visiting.

Do not prepare these visits in advance. Just drop it. It will build a new "work culture".

Third, I have some common sense suggestions on how to deal with the issues that SMRT face daily, i.e. the delays and breakdowns. I believe that they are largely caused by the complicated Thales signal system.

Actually, you do not need a complicated signal system. It is not difficult to operate a MRT system. Each line is dedicated to the trains running on that line. You do not get trains on several lines merging into one line.

The trains on each line are about 2 km apart, based on an average speed of 60 kph and an average interval of 2 minutes between the trains.

This system can be run entirely using people, i.e. train drivers. The driver can stop the train at each station, open the train and platform doors and, after a minute, start the train to proceed towards the next station. It is easier than driving a bus on a congested road.

There is really no need to rely on a complicated signal that gives signal faults now and then.

If you want to be safe and avoid a train collision, you can install a collision avoidance device at both ends of the train. This will detect a train or obstacle ahead and stop the train to avoid a collision.

This type of device is already installed on many cars. They should be effective and inexpensive.

I am aware that SMRT or the Land Transport Authority have already spent $195 million installing the Thales signal system on two NS and EW lines. As this money has already been spent, we should continue to use the Thales system. However, when there is a signal problem, we can switch immediately to manual operations. It should be all right.

I am aware that I might be over-simplying the problems. Engineering may be different from finance. I agree.

However, my 30 years of experience tell me that the key elements of problem solving is the same.

You have to identify the problem; you have to understand what the problem really is. After that, you have get the technical experts to provide the options. As the manager in charge, you can take the decision.

Furthermore, many of the decisions will not work as you had expected. Often, you need to fail in order to get information that were not available before. You may have to try a few times before you finally succeed. Right?

I am suggesting a new work culture, one that is more entrepreneurial, more risk taking.

I am not talking about big risks involving people's lives or large sums of money. I am talking about the smaller risks that need to be taken every day. We will learn to use our common sense to distinguish between big and small risks.

Okay. Here is a test of the new culture that you, Mr. Neo, can bring to SMRT.

Will you send an e-mail to me at or call me at my mobile: 81685845? Will you offer me a cup of coffee and talk to me?

Tan Kin Lian

Will there be "culture issues" in SAF in event of hostility?

Mr. Tan
The outgoing CEO of SMRT spent over 5 years in this position. He employed his kakis, also from SAF, to the key positions. The operations of SMRT got worse during this time. The CEO blamed it on the "work culture".

He did not explain what the problems of "work culture" were.
I have this worry. We spent tens of billions every year on our SAF. In the event of hostilities, can we rely on our soldiers? Will we also face the "work culture" issues?

What has happened in SMRT is a sign that the "work culture" is a big issue. We cannot brush it off as affecting SMRT only. More likely, it affects a big segment of our society.

What are your views?


I share your concern. Singapore now faces big challenges and big problems. We need to go to the root of the issues. We have to change the PAP government.

Excessive bank charges

DBS Bank charged me $18 for processing a MEPS payment. The DBS staff explained that this is an electronic payment. She also said that the charge for a FAST payment is $5. If payment is made by GIRO, the fee is $0.20 for each transfer.

These are charges imposed on corporate accounts. Most people with personal accounts pay lower charges.

I asked the DBS staff - why was the customer not notified about the charges when they use the service? She said that these are posted in their website.

I also told the DBS staff that there are many modes of payments in their online website. I do not understand these different modes. I did not expect the charges to differ a lot. In my case, I made a payment of $44 to a supplier using the MEPS service and was charged an exorbitant a fee of $18.

I told her to give this feedback to the management - as the fees are so large, they should notify the customer at the time of using the service. They should not expect the customer to know the details and small print that were posted in their website.

She promised to do so. But I expect that nothing will happen.

My friend told me that if this happened in Austalia, a commission of inquiry will be set up to look into this matter. The commission will probably imposed a big fine on the bank. That is why the bank charges in Australia are at a more reasonable level.

Welcome to Singapore, friends. It is a place where ordinary people are "screwed up" daily by the government and big companies.

Tan Kin Lian

Inefficiency of the postal service

A condo sent out notice calling for an AGM. To comply with the regulation, the notice has to be sent out at least 14 days before the AGM. The managing agent sent out the notice on 4 April under "certificate of posting". This means that Sing Post certified that they received the mail on that day.

By 17 April, many of the owners have not received the AGM booklet yet. It seemed that Sing Post did not deliver the mail within the expected time. It is possible that the mail was delivered to the wrong address. However, as a large number of owners were involved, it is more likely that the mail was not delivered.

I read from other posts that Sing Post had relied on part time workers to deliver the mail. Maybe, they outsourced the work to contractors who engaged these part time workers. It is difficult to rely on contractors and part time workers. The control and supervision is not effective.

I read a story that an outsourced worker destroyed all the mails that were assigned to him for delivery. He found it easier to destroy the mail rather than deliver them.

To add to the problem, many flats and apartments have installed measures to deter the insertion of mailers and flyers into the letter boxes. This might have made it more difficult for the postal workers to deliver the mail.

You can ask the questionj - why are we still relying on postal mail, when we have the option of e-mail and other electronic form of communication?

The answer is - the government does noT trust e-mail, due to the posibility of hacking. This has caused the volume of postal mail to increase to an unmanageable level.

The quality and reliability of our postal service has deteriorated significantly over the past years. The privatision of the postal service to a listed company, that operates on a profit driven model, is a bad idea.

The inefficiency of the postal service and the high reliance of postal mail adds to the cost of doing business in Singapore. We are an expensive place to do business. It contributes to our sluggish economic performance.

Singapore is facing a lot of challenges. The government under Lee HL is not aware of these huge problems. We are doomed.

Tan Kin Lian

Tuesday, April 17, 2018

May Day Talk - Jobs for Singaporeans

I have accepted an invitation by Gilbert Goh to give a talk on May Day. I will share more details of this event when it is available.

Here is the outline of my talk.

In a recent survey, I asked participants to indicate the item of greatest concern to them - cost of living, jobs and health care.

They chose jobs.

It makes sense. If you have a job that pays a good wage, you can afford the high cost of living and health care. If you do not have a job, you will face financial distress.

In recent years, many people are worried about their jobs. The older workers are worried about being retrenched. The younger graduates are worried that they may not get a job that pays well.

This problem is compounded by the influx of foreigners. Worse, many people have complained that employers prefer foreigners, rather than locals, due to cost and other factors.

What policies and strategies can the government adopt to ensure that locals are able to get a jobs?

I identified three strategies. I will talk about them at the May Day talk.

You can get a preview of the key points of my talk from this video. But I may modify and update my thinking when I present my talk on May Day.

Happy viewing. It just takes 20 minutes.

Please share your views or raise some questions for me to address.

Tan Kin Lian

Should there be a cap on the charges for legal services?

I asked this question in the Wisdom of the Crowd - Should there be a cap on the charges for legal services?

Of those who voted, 53% said the government should set guidelines on legal fees for standard contracts.

16% said the government should set guidelines on hourly charges for litigation.

16% said let the free market decide on the charges.

16% said the maximum charges should be decided by law.

See the breakdown of the votes in

Should visitors be required to give up their NRIC when they visit an office building?

I asked this question in the wisdom of the crowd - Should visitors be required to give up their NRIC when they visit an office building?

Of those who voted - 67% said that it is unnecessary and wasteful and should be stopped.

13% said it is needed for secruity.

13% said we should continue and create jobs for security guards.

7% said that it is needed in case of a fire, to know who are in the building.

See the breakdown of the votes in

Will Dr. Mahathir win over the Malay votes for the opposition alliance?

I asked this question in the Wisdom of the Crowd - Will Dr. Mahathir win over the Malay votes for the opposition alliance?

Of those who voted, 33% said that his appeal to the Malay voted as reduced somewhat as he is no longer the prime minister.

27% said he is well respect among the Malay voters and can attract their votes.

27% said the Malays will continue to support Umno.

13% said he was not well liked by the Malays previously.

A total of 73% said that he would not make a significant impact.

See the breakdown of the votes in

Recognize the consumption component in property ownership

The government has the perception that a short term lease is consumption and a longer term lease is investment. They set a minimum of 60 years lease for the unrestricted use of CPF.

This perception is wrong. All properties have a part for consumption and another part for investment.

For example, if someone buys a property with a lease of 30 years, the purchase price will be consumed within 30 years.

If this person buys a 60 year lease property, he will have to pay a higher price. At the end of 30 years, the value of his property would have dropped, due to the consumption of the property for 30 years.

Suppose the price for a 30 year lease is $180,000 and a 60 year lease is $240,000. The difference is $60,000.

At the end of 30 years, the value of a 30 year lease would have dropped to $0 and for the 30 year lease, it would have dropped to $180,000 for the remaining lease of 30 years would be $180,000. We ignore appreciation in the property values in this calculation.

If he had invested his $60,000 to earn 4% per annum, it accumulate to $194,000.
Hence, in both cases, the property is being consumed at the same rate.

The same argument would apply for a 99 year lease and for a freehold property.

The property with a longer lease or a freehold property cost more than a short lease property.The difference in the purchase price represents the "investment". The underlying amount is the "consumption".

If we assume an average appreciation in property of 2% p.a. he need to earn 6% p.a in alternative investment to be as good as property. This is possible by investing in equities.

If the government recognises this point, there is no need to restrict the use of CPF savings for property with a remaining lease of 60 years or to apply a complicated formula for shorter leases.

They can allow the unrestricted use of CPF with a lease of at least 30 years or even shorter.

Alternatively, the government can reduce the compulsory contribution to CPF and allow the people to use the money in any way that they wish, for example, to rent a property or to buy a short lease.

This is the standard practice in most or all cuontries around the world. There are few countries that have a CPF system that forces the savings to be used to buy properties.

Tan Kin Lian

Note: the figures of $180,000 and $240,000 are quite realistic. They are taken from this table.

When the lease on the HDB flat runs out

What happens when the HDB flats runs out of its lease of 99 years? Many of the owners will have to return the flat to the HDB which will return the land to the government. They would have lost the entire investment in the flat, including the use of CPF.

Someone suggested that the government should increase the lease to 150 years. He did not indicate if a premium should be paid to extend the lease by another 50 years.

I wish to suggest that the government consider the following measures:

a) Allow the existing owner to continue to rent the flats at a subsidised rate, provided that the flat is still in habitable condition and there are no immediate plans for redevelopment.

b) Allow the existing owner to renew the lease for another 5 or 10 years at the time. A premium have to be paid but this can be fixed at an affordable sum. This would be similar to buy a COE on a car.

As there is a lot of uncertainty now, it would be useful for the government to announce a policy to allow these options.

Tan Kin Lian

Monday, April 16, 2018

What will happen to the MPs when they are charged for mis-managing the Aljunied Town Council?

I asked this question in The Wisdom of the Crowd - What will happen to the MPs when they are charged for mis-managing the Aljunied Town Council?

47% of those who voted said they will be imposed with a big fine and be disqualified as MP.

26% said they will not receive any serious penalty.

27% said they will be made bankrupt or go to jail.

See the breakdown of the votes in

Would Chen Show Mao be a better leader for the Workers' Party?

I asked this question in the Wisdom of the Crowd - Would Chen Show Mao be a better leader for the Workers' Party?

42% of those who voted said that his performance as a MP in Parliament has been disappointing.

26% said that he does not get much support from the cadres in the Workers Party.

32% are in favor of him for two reasons.

See the breakdown of the of the votes in

Will the Worker Party forge ahead under Pritam Singh?

I asked this question in The Wisdom of the Crowd - Will the Worker Party forge ahead under Pritam Singh?

48% of those who voted said that he will get the support of the older and young members and cadres.

32% said that he will have to rely on the background support of Low Thia Khiang.

19% said that he does not have the charisma and track record of Low Thia Khiang.

See the breakdown of the votes in

Make the HDB Lease Buyback Scheme more popular

I wish to comment on the difficulty faced by seniors in selling their old HDB flat.

The government has a scheme to meet their needs. It is called the Lease Buyback Scheme. Details of this scheme are set out here.

I suspect that this scheme is not popular and that few people have taken it up.

Let me make a guess why it is not so well received. This is just a guess. I shall be happy if someone is able to give more substantive information.

Suppose the remaining lease of the HDB flat is 50 years and the owner has to sell off the tail end of the lease of 25 years. The owner would expect to get 50% of the current market price.

However, it does not work this way. We have to take into account the time value of money. The next 25 years that the owner stays in the flat is certainly more valuable than the last 25 years.

The owner should get only 27% of the current market value. This is based on the discounted value of the 25 and 50 year lease.

If the owner expects 50%, and that is an unrealistic expectation, he will consider the offer of 27% to be unattractive. Perhaps this is why the scheme has not been successful.

I obtain the 27% by looking at the figures shown in this table, i.e. 54.6/74.7 = 73%. Deduct from 100% to get 27%.

One possible approach is for the HDB to appoint a financial adviser to give independent and impartial advice to the owner. Maybe, the financial adviser can convince the owner that the offer of 27% (or whatever is the actual percentage) to be fair.

The financial adviser can be paid a fee by HDB to give this work. Maybe, it can be $250 or whatever is a fair amount to compensate for the time needed for them to explain the calculation to the owner.

The HDB can make it more attractive by offering a bonus of 20% higher than the calculated value, and this bonus can be funded by the government. This is how the bonus can work.

If the market value of the flat is $200,000, and the sale of the last 25 years of the lease is 27%, it will work out to $54,000. If the bonus of 20% is given, this will add another $10,800 to make $64,800. The owner may find it attractive as they get a bonus that is funded by the government.

Do you like this idea? If so, give me a Like and Share it.

Tan Kin Lian

Sunday, April 15, 2018

Tell the difference between ordinary and bad people

Young children in Singapore are taught by their parents to be wary of strangers. Do not talk to strangers. They may take you away.

They grow up to be fearful of strangers. Should they be suspicious of every stranger? Should they avoid talking to strangers?

Is there a better approach? Can we teach the kids on how to tell the difference between ordinary people and bad people? Can we allow the young to learn through experience?

I recall an incident. i was on a bus to Johor Bahru. The bus was caught in a congestion. I asked a girl in the bus if she came from Johor and is familiar with where I should get off.

She replied to me. We continued with a conversation. She came from Perak and has worked in Singapore for the past year. She is going to Johor to buy groceries.

I told her that it was nice for her to talk to me. She said, "I was taught to show respect for older people".

She was not suspicious of strangers. She knew who can be trusted. She also knew how to handle people.

Avoid investing with borrowed money

You can invest in a property without owning it. This is explained in this article. You can invest in a REIT (real estate investment trust).

However, many people found that they make a bigger gain by investing in a property.

Why is this the case?

When they buy a property, they are taking a loan, say 80% of the purchase price of the property. They only put in a down payment of 20%. This is called "leverage", i.e. investing with borrowed money.

Leverge is good, if the invested asset appreciate. If it goes up 10%, a leverage of 5 times give you a profit of 50%. This is what happened when the property market goes up and up.

But the property market can also go down. When it goes down 10%, your leverage of 5 times means that you lose 50%. Are you able to top up this 50%? If you can't, the bank will sell off your property at a depressed price. You will lose all of the money that you invested. The bank may sue you for the excess, and make you bankrupt.

Over the past decades, many investors have been burnt during the down cycles of the property market. They have lost all of their properties and gone bankrupt. You do not hear about these cases, because they are not publicised.

You only hear about the millions that many people make on their property investments, right?

If you invest in REIT, it is all right. You are not investing with leverage. If the price fall 20%, you still have 80% in your investment. You can wait for the price to recover. It always does. Maybe, you have to wait one, two or there years. Be patient.

Remember this. The property market is extremely high. The risk of a falling market is high. It can cause you to be bankrupt if you invest with borrowed money, including a loan on your property. Be careful.

Is President Trump performing well as President of USA?

I asked this question in the Wisdom of the Crowd - Is President Trump performing well as President of USA?

47% of those who voted said that he is carrying out his promise to make America great.

32% said that he is creating chaos for America and the world.

21% said that he is acting in an irrational and whimsical manner.

A slight majority of 53% has a negative opinion of him.

See the breakdown of the votes in

How well in Xi Jing Ping performing as President of China?

I asked this question in the Wisdom of the Crowd - How well in Xi Jing Ping performing as President of China?

59% said that he is raising the stature of China in the world.

24% said that he is creating prosperity and a better life for the people of China.

17% has a negative view of him for two reasons.

See the breakdown of the votes in

Do you expect the trade war between US and China to get worse?

I asked this question in the Wisdom of the Crowd - Do you expect the trade war between US and China to get worse?

60% said that this is just posturing; the two countries will find an amicable solution to the dispute.

30% said that the trade dispute will worsen as both sides do not want to back off.

10% said China will give concessions to reduce the trade imbalance.

A total of 70% are optimistic that the trade dispute will be solved.

See the breakdown of the votes in

Free up the market for old HDB flats

Many seniors now find it difficult to sell their aging HDB flats (with remaining lease less than 60 years). They faced a dilemma - they have inadequate CPF savings and need to sell the flats to realise cash for their living expenses.

They are disappointed that the promise made by PAP leaders in past years that HDB flats are a good investment had turned out to be untrue.

Let me first address the issue on why it is difficult to sell the old HDB flats.

The property market is now weak. There are more sellers than buyers. Many units are vacant. Rentals have fallen. This applies to the whole property market, namely the private properties and the HDB flats.

The economy has been weak for the past few years. Business has been bad. There are less foreigners who need to rent a place to live in.

The seniors would probably be happy to rent out a room to tenants, but they probably have difficulty in finding tenants in this weak market.

Apart from the poor market conditions, the HDB owners face two obstacles. These obstacles applies to HDB flats and not private properties.

They can only sell their HDB flats to eligible buyers, who must be citizens and permanent residents. They can only sell after the "minimum occupation period".

These two obstacles may not be too serious.

There is another obstacle that cause the problem. The buyer of the old HDB flats find it difficult to get financing for the purchase. The banks are reluctant to finance the purchase of HDB flats with a remaining lease less than 60 years.

Many people (including me) are not aware that the government now allows CPF to be used for leases of at least 30 years, subject to conditions.

I am not able to find out exactly what the conditions are. I used the calculator provided in the CPF website some inputs. I obtained an answer "Not eligible".

I have two suggestions to overcome the problem faced by the seniors in selling their old HDB flats.

First, we need to change the current regulation on the use of CPF savings.

At present, CPF can be used quite freely for the purchase of a property with a remaining lease of at least 60 years. We need to change the 60 years to 30 years.

In other words, a person should be allowed to use his CPF savings to buy a property of 30 year lease as freely as he is now allowed to buy a property with at least 60 year of remaining lease.

There might be some concern that the property will have no value at the end of the lease of 30 years. This means that the CPF savings is used for consumption over 30 years.

This argument is flawed. The buyer of a 60 year lease has to pay a higher price. One part of this higher price is consumption; the other part is for "investment". The consumption element for a 30 year lease and a 60 year lease is the same.

If we can get rid of this mental confusion between consumption and investment, we can free up the market that is now affected by this artificial obstacle. We will open up the market for the aging HDB flats with a remaining lease of less than 60 years.

Some young families may opt to buy the old flats because they are cheaper or located closer to their parents. The seniors will be able to sell these flats to realize cash.

With a more active market, the prices of the old flats will reflect the market price, rather than a depressed price.

If CPF can be used freely for properties with a remaining lease of at least 30 years, the banks will be happy to provide the loan. After all, they have been lending for purchase of cars that have a lifespan of 10 years. They should be happy to lend for purchase of a property tht have a lifespan of 30 years.
I have a second suggestion; the HDB can buy back some of the old flats and rent out the flats to eligible occupiers. This will increase the supply of rental flats for young families.
Some newly married couples may opt to rent the flats for a few years while saving to pay the deposit for the flats that they will eventually buy.

If the HDB does not want to be involved in this renting operation, it can formed a subsidiary to perform this function.

My two suggestions are aimed at freely up the market for the old HDB flats, so that the seniors can realize their investment in the HDB flats and get a fair market value.

It will also provide more housing options for the newly formed families and make it possible for more people to start a famly earlier.

I am not saying that all young familes should buy the old HDB flats. Many may be happy with the current arrangement, and may opt to wait longer to buy a new flat. This option will continue to be available.

However, we should also provide the option for the young families to buy an old HDB flats at a lower price or even to rent these flats for a few years.

If you like this suggestion, please click on "Like" and "Share" it widely.

Tan Kin Lian

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