Monday, February 28, 2005

HDB Handcuffs II.

Just got back from a short weekend getaway with the SO. We had a good time and talked of many things. Including the approach to handling the quandary of the SO not being able to get an Australia PR visa. I will probably blog about this after I have had some time to mull it over.

We also went for a wedding dinner. Normally I prefer to avoid wedding dinners because the need for polite small talk bores me to distraction. This one was not too bad. The SO and I were in our mischievous moods and delighted in shocking our fellow dinner guests with our unorthodox views and directly challenging many of the cherished traditional Singapore life-scripts. Aside from the dropped jaws and hurried atttempts to change the conversation, I hope we also gave out fellow dinner guests some food for thought to take away as well.

A comment by a dinner guest stuck in my head. He mentioned that the choice (and timing) of getting married had been determined for him by the government. His wife did not disagree. He summed up the marriage-proposal-by-HDB-flat as: "it is expected once you apply for a HDB flat" since a marriage certificate is required three months from taking the keys to a lease on a new HDB flat direct from HDB.

Later in the same evening with a bit more beer going around, someone else (a five-year married man) mused "Have you ever considered the purpose of marriage?"

It would seem that the following answers are socially unacceptable for polite dinner conversation:

  • "Because the government gives incentives for people to get married."
  • "There are serious disincentives to get married. Why did you get married?"
  • "So that the woman can get 50% of the assets." (reference to Singapore's implementation of the Woman's Charter)
  • "So that you have security that your partner is legally required to be there in the morning (after spending the night)."
  • "Love? What has love got to do with marriage? Marriage is an economic merger."
Methinks that five years after getting married is a wee bit too late to be asking about the purpose of marriage.

..."it is expected once you apply for a HDB flat"...

So why is it a faux pas to imply that marriage in Singapore is primarily driven by economic and housing reasons? If not for the need of a HDB flat, would Singaporeans be getting married in such a hurry?


From a economic standpoint, I would argue that the HDB lease is effectively a lifetime sentence locking an individual's (or couple's) economic fate to that of Singapore Inc.

I was planning to do a piece arguing how HDB leases were a hinderance rather than a help to living a financially secure life in Singapore. And about how the HDB / CPF policy is an excellent piece of engineering to tie down the lease-holder's personal economic futures to that of Singapore Inc. And on how a HDB lease pretty much wipes out any chance of an decent (let alone, early) retirement - even for the high-income group.

Then I stopped and surveyed the the whole pointlessness of it all. The folks that have followed the majority-endorsed Singapore life-script are only going to get offended. See example above of conversation at wedding dinner for illustration. And the folks who are savvy enough to be data mining the HDB and CPF information, and who have a basic understanding of compounding will be more than capable of building the same argument and arriving at similar conclusions anyway. And besides, the most compelling arguments to sign a 99-year lease have absolutely nothing to do with economics.

So instead I am going to take a more constructive approach.

How can a Singapore emigrant take advantage of the HDB and CPF policy for individual economic benefit?

This is an option that older emigrants with significant funds in CPF may wish to consider. For younger emigrants with minimal CPF funds, it may make more sense to just focus on withdrawing the funds as soon as possible.

The theory is as follows:
  • select choice of HDB lease location for attractiveness as a rental unit.
  • take full advantage of Housing Grant, subsidised loan and take the maximum loan possible, to minimise monthly payments.
  • ensure MOP has been fulfilled before applying for whole unit to be sublet.
  • lease out unit for hard cash (rental has to be more than the lease payments).
  • pay off lease mortgage with rental, pocketing the difference.
The rental cashflow will come in useful to subsidise - or even support - the cost of living, depending on where you are staying. For certain places in Malaysia, China and Thailand, the cashflow from the rental of a fully-paid HDB lease may even be sufficient to handle the entire cost of basic living. Hence instantly accelerating early financial retirement by "early withdrawal" CPF funds in a steady cashstream.

This strategy allows the emigrant to benefit from Singapore's growth in rising housing costs, and leverage on the government's blueprint to increase the resident population to 8 million. Without having to endure the stresses of coping with 8 million people on a tiny land-constrained island. However in this strategy, the emigrant would have to postpone the surrender of Singapore citizenship and total withdrawal of CPF funds.

Another much simpler way to optimise the benefits from the CPF system is to move all excess funds to the Special Account designed for retirement. The Special Account has a interest rate 1.5% higher than the Ordinary Account. Normally, it would not make sense to do this non-reversible transfer as there are a lot more restrictions with respect to usage of the Special Acccount. However in the case of emigrants, all CPF funds can be withdrawn upon surrender of Singapore citizenship, so might as well take advantage of the higher interest rates.

It is my personal opinion that the risks involved are not worth the potential benefits:

  • HDB may change sublet policy suddenly without warning.
  • HDB may change MOP policy suddenly withou warning.
  • CPF may change withdrawal policy concerning surrender of citizenship.
  • The availability of ready tenants willing to pay the target rental price.
  • Market risk that the lease cannot be offloaded without a loss in value.
  • Opportunity cost of CPF funds that can be otherwise used.
  • Risk of Singapore dollar weakening, leading to drop of purchasing power in the country you are living in.
  • Alternative investments may offer more attractive return of investments than the CPF-guaranteed 4%.
This approach is not without significant risks but promises to provide a boost to retirement funds if executed correctly. With some luck for those who can accept such a risk, this strategy may effectively shave off more than a few years to retirement in a low-cost overseas location.

Personally, my risk appetite is insufficient to pursue this strategy. A dollar in a private account without restrictions to allocation is worth more (emotionally) than a dollar tied up in investments which are severely constrained by a myriad of regulations. However this strategy may be of use those with a higher risk appetite, or those who are already locked into a HDB lease.

As a serf, I do not make the rules. I just try to work within them.

And always remember the Hokkien adage: Kiang hor liao. Mai kay-kiang.


Blogger Calamity Man said...

2 questions: what is "SO" and "serf"?

you have what it takes to be a consultant or something, man. your willingness to do research can be put to good use to back up your points well.

February 28, 2005 11:59 PM  
Blogger KnightofPentacles said...

SO = Significant Other.

Entry: serf
Pronunciation: 's&rf
Function: noun
Etymology: French, from Old French, from Latin servus (slave)
Definition: a member of a servile feudal class bound to the soil and subject to the will of his lord

Actually, the more accurate term would be villein. Villeins in medieval England were not slaves - they have legal rights, had recourse to the law, could enter into contracts, sub-let the land holdings, etc. Except in dealings with their ruler (lord).

March 01, 2005 12:34 AM  
Blogger Jeff! Lim said...

hey, nice explanation of the terms!!! and yes, i do agree with mr loobz as well...

March 01, 2005 12:53 AM  
Blogger aberwyn said...

Frankly, lotsa sg folks get married cos: a good reason to stay out(away from parents, time to get a flat, been dating too damn long and need to 'move to the next stage')

As individuals, we DO have a choice not to follow the norm. The point is, does one dare to?

March 01, 2005 11:35 AM  
Blogger Calamity Man said...

not me.

March 01, 2005 11:58 AM  
Blogger True Flight said...

Oh dear. Such scepticism. What would your SO say?

Most people do not get married because they want to buy a flat. Instead they buy a flat because they want to get married.

The HDB rules have an effect of dictating your schedule of events somewhat. Then again these are logistics. The cause and effect should not be mistaken for each other.

For example, you go to Changi airport because you want to fly to Thailand. You do not fly to Thailand because you want to go to Changi Airport.

You do have to be at the airport on a fixed date and a fixed time and with your air ticket and passport in hand. But this does not alter the cause and effect.

Similarly you do have to be at the HDB office on a fixed date and a fixed time and be able to produce your marriage certificiate. But this does not alter the cause and effect.

You are still buying a flat because you are married and you want a place to live in.

You are not marrying because you want to buy a flat.

March 02, 2005 6:25 AM  
Blogger True Flight said...

As for your emigrant-&-HDB-owner issue -

I'm a bit surprised that you did not mention a more obvious possible alternative.

Planning to emigrate? Sell the flat. Take the proceeds, repay the loan. Take the excess, and leave the country.

If you are right to say that housing costs in Singapore are always rising, then it follows that your flat would have appreciated in value since you first bought it.

If you are emigrating for good, it is also a nuisance to be renting out your HDB flat over the long term. Tenants come, tenants go, every one or two years - are you going to be flying back every time then, to handle the paperwork, inspect the apartment and collect the keys?

Note also that HDB flats do not generally offer great rental income. Expats, professionals and such prefer to rent condos with recreational facilities, while the lower-end tenants bring the lower-end type of problems. The last thing you need while enjoying your new life in Australia is a call from the Singapore police saying that they just raided your place, and they found that your tenant sub-rented your apartment to 10 Chinese prostitutes and 7 illegal Bangladeshi workers, would you please return to Singapore immediately to assist in further investigations?

Another point - in your post above, you've largely regarded the HDB flat from a financial point of view.

But you've ignored the fact that a HDB flat also serves a much more basic and essential purpose. It is a shelter over your head.

And you have to pay for a shelter over your head - whether you rent or buy, and whether the place is a flat or a bungalow or a terrace house, and whether you are in Singapore, Australia, Canada or anywhere else.

What this means is that you cannot regard your home in purely economic terms.

It is not a question of "Shall I invest my money in stocks and bonds, or shall I buy a HDB flat?"

If you invest in stocks and bonds, you still need a place to stay. You cannot sleep or bathe or shit in your stocks and bonds, and they will not keep you dry when the rain comes down.

March 02, 2005 6:42 AM  
Blogger True Flight said...

"Alternative investments may offer more attractive return of investments than the CPF-guaranteed 4%."

Several points to consider.

Firstly, in the current investment climate, CPF-SA 4% is truly an excellent rate and even CPF-OA 2.5% is very good.

These are as risk-free as you can get - they are essentially triple-A Singapore government bonds.

If you compare to other similar, practically risk-free investments (eg a 12-month deposit with DBS), well, the CPF rates of 2.5% and 4% are about twice or four times as much as what DBS would pay you.

From a personal financial planning point of view, you can treat your CPF monies as the bond portion of your portfolio. You need to diversify, right, across asset classes;

you put some in riskier assets with potentially higher returns,

and you put some in low-risk assets with lower, but more stable returns. Your CPF monies will be these. And I reiterate again that 4% really is not low right now.

March 02, 2005 6:55 AM  
Blogger Singapore Calamari said...


I am not married. If I want to stay out, I stay out. Period. I am single and have stayed out for a good 10 over years, ever since I was 18. No need the excuse of getting married to stay out.

Yes, we have a choice not to follow the norm. Do I dare to ? Do you ? If you (note I used the word IF) need to get married to stay out and have freedom, then I am sure you are not the one to choose to be different from the norm.

Obviously some choices are much more difficult to make. In some scenerios, choices are win-lose. So who, rationally, will chose the losing choice ? And if so, rationally-speaking, is there really a choice in the first place ?

King's Indian,
Most people do not get married because they want to buy a flat. Instead they buy a flat because they want to get married. ---
It is supposed to be so. I guess. But most people I see register for HDB, THEN when the time is near, register for ROM.

I mean, if you wanna get married, go ROM first, or register the flat concurrently. Why the flat first ?

"Oh, flat comes usually much later, so it make sense to register earlier." is one of the responses that I have gotten. So what, give yourself some buffer time ? Easier to terminate HDB application than terminate marriage, I know.

I know of a few, but not many, who are married, live with parents before the flat arrives. Or some still live with their own parents' first (separately), and wait for the flat to arrive. Now, that one I know, confirmed, that they married for love first and foremost.

Most will delay ROM until it is near the HDB arrival date.

But then, if HDB does not impose a marriage cert, how many people are more than happy to "cohabit" and not get married ?

Planning to emigrate? Sell the flat. Take the proceeds, repay the loan. Take the excess, and leave the country.

If you are right to say that housing costs in Singapore are always rising,I am sure KOP did not say that HDB price is always rising, and history indeed has proven that it is not the case.

Also, sell the flat and suffer huge financial losses if certain requirements are not met. So, If I know I have a high chance of emigrating, why risk my money than ?

In the mean time, stay with parent's ! No money needed. Why must I have my own place ? Why do I have to risk losing financially if I rent ?

And until I am sure I cannot or will not migrate, THEN I buy a small HDB. It is still not too late.


The fact is, HDB is a way of emotionally making people sink roots. 30-year loans. How many countries have such long mortages ?

Once you have your flat, decorated nicely to your taste, chances are (statistically AND psychologically speaking) you will comfort yourself and weaken your resolve.

A sociology professor (or was it economics? I can't remember) once commented. Other than communist countries, Singapore is the only one with highest per-capita house/flat ownership in the world. Sounds like dark humour, but isn't it true ?

LKY, when he was PM, said long time ago, that we need people to defend our country. The only way to get people (many were actually immigrants then)to defend it is to make the feel the country belongs to them. And the only way is to give everyone a piece of land.

That point, is very much communist. Opps. I hope the ISD's web crawlers do not black-list this site.. haha

March 02, 2005 3:33 PM  
Blogger darn tootin right said...

>..."it is expected once you apply for a HDB flat"...
So why is it a faux pas to imply that marriage in Singapore is primarily driven by economic and housing reasons? If not for the need of a HDB flat, would Singaporeans be getting married in such a hurry?<

I only have one question. If you had no option but to stay in singapore, would YOU marry purely to get a FLAT?

To date, naive though i may be, i know not a single person who has married just to obtain accomodation unless you're prospecting from a third world country. Or a serial house keeper a la zsa zsa gabor. Or have serious family problems and desperately need to cut loose.

You mentioned that singaporeans are in a hurry to get married. Perhaps you could consider another view? The dreaded reunion dinner question of "so when is your turn" might give an inkling that sometimes cultural conditioning and norms might give an even greater and more urgent pressure as opposed to monetry concerns.


March 02, 2005 11:01 PM  
Blogger Singapore Calamari said...

When are YOU getting married ?
If you already are, then "When are you going to have a kid ?"
If you already have 1, then "When are you going to have the next Kid ?"
If you already have 2, then "When are you going to have the 3rd ? Got free money you know.."

If you already have 3, then I will ask "When you upgrading your flat ?", "Oh, 3 kids and 5-room already ? Get EC lah ? Not nice ah ? Landed lor, I heard a few houses at Holland selling for quite low price leh"," can use CPF mah !"

Next, I will ask, "When are you getting a car ?".. Oh, you have already ? "Which one?".. "Why not get the Merc E200 ? Very cheap nowadays."

Oh, if you answered yes to all my questions above, then congratulations, you have passed all social exam. You can live without fear in Sg.

No one ask "Hey, you saved enough for retirement already ? Aiyoh, nowadays, children cannot depend one.. must depend on yourself."

"Hey, saved enough money in case you kenna retrenced at 45 ? No ? Then what ? Retrain ah ? Oh, you white collar, no use retrain.. too bad lor..."

March 03, 2005 9:51 AM  
Anonymous Anonymous said...


Perhaps we move in different circles, but where i come from, people don't ask quite so many questions in that particular direction.. The marriage issue remains pertinent across all races though.

No one will be blatantly rude enough to ask outright if one has saved enough for old age, but i assure you the question weighs heavily on some people.

I have spent much of my time dealing with an array of elderly /parents who span from the deprived to the influential in my course of work. It is not a rare subject to hear them lament it is not a given nowadays to reply completely on your children.


March 03, 2005 1:00 PM  
Blogger True Flight said...

Several misconceptions again.

First, most single Singaporeans choose to stay with their parents. This is definitely not the cultural norm in all countries. In some other countries, young people move out quite quickly.

I think the reasons are cultural as well as financial. In some countries, you can be perceived as rather geeky if you go on staying with your parents when you are old enough to look after yourself.

In Singapore, you're more likely to be perceived as rather silly to move out. Firstly, because you're wasting money on rent;

secondly, because the concept of filial piety is probably stronger;

thirdly, probably because Singapore is so small - no matter where you move to in this country, you're not likely to be more than 90 minutes away from your parents' home anyway, so why bother.

Why do Singaporeans tend to move out only when married? Firstly, for the physical space - your spouse is an addition; children may come soon; your parents' flat, however, does not grow in size. So you get your flat, for the space.

Secondly, married couples need more privacy. When I first got married, my wife and I stayed with my parents for some time. It is a bit inhibiting for your sex life - you do not feel comfortable about making too much noise in bed, when your parents are in the next bedroom. So you get your own flat.

On Singapore Calamari's timing issues - I think if you ask your married friends more about their personal experiences, you'll see that people have many different reasons for their own schedule of arranging affairs. For example, some people want the ROM to be on their actual wedding day; BUT they do not yet have money to get married; SO they decide to save for a few years; HOWEVER, they do intend to live in their own flat upn getting married; SO they apply for a flat first, as there is a waiting time.

In recent years especially, I doubt if many people consider their application for a new HDB flat to be more important than their marriage. Even if you are very mercenary and money-minded, it does not make much sense. New HDB flats are not that cheap; prices of these new flats do not appreciate so easily; there is in any event a 5-year MOP if you accept the government grants; resale prices have come down, making them a viable alternative with a much shortened waiting time; and furthermore, the new flats are all in such ulu areas nowadays, like Sengkang.

Singapore Calamari also asked: "How many other countries have 30-year mortgage loans?"

Actually mortgages are typically that long in just about any country - the usual is either 25 years or 30 years.

Also, in Singapore, you do NOT have to take a 30-year loan; you can choose to make it shorter; it simply means you have to make bigger monthly instalments, or alternatively make a downpayment of more than 20% at the start.

Note that HDB is actually very kind about prepayments. At any time, you can walk into HDB offices and prepay your loan. For example, say you've been a flat owner for 3 or 4 or 5 years and you find you have extra savings. You can just tell HDB, "Hey I'd like to pay extra money on my loan - here's a lump sum of $20,000." HDB will accept the payment, and correspondingly, the life of your mortgage will be reduced. Note that you do not necessarily have this right if you had borrowed from a bank - there are usually penalty fees involved if you pay up early.

March 03, 2005 1:08 PM  
Blogger True Flight said...

Singapore Calamari has also said this:

"Also, sell the flat and suffer huge financial losses if certain requirements are not met."

If I am not mistaken, the HDB levy on the resale price will not kick in if you merely intend to sell the flat and leave for good.

The HDB levy kicks in only if you sell the flat and choose to upgrade to a new (not resale) flat from HDB.

So you need not be too concerned.

Your concern is only with market risk - that you cannot get a good resale price, when you want to sell. This is the same thing with any kind of asset you buy -

whether it's shares, cars, art, bonds, houses, flats, unit trusts, foreign currencies, X-men comics or Hello Kitty dolls.

"Risk", of course, has a technical meaning - it means the possibility of making money or losing money. By buying a flat, you also enjoy the risk of making money if its value appreciates later. You sell the flat for a profit, you emigrate, and the profit helps you to finance your new life in another country; eg if you start a business or buy a new home in Australia or Canada.

March 03, 2005 1:12 PM  
Blogger True Flight said...

Singapore Calamari said:

"Why must I have my own place ? Why do I have to risk losing financially if I rent ?"

You DON'T have to have your own place. You CAN rent (or you can stay with your parents).

Of course, from a financial planning point of view, renting carries its own risks (which is not to say that buying does not have risks).

The risks of renting are illustrated by a simple example:

1. A rents a home (or homes) for 25 years, paying $1000 a month;

2. B purchases a flat with a 25-year-old mortgage loan, paying a 20% downpayment and then paying $1000 a month for 25 years.

At the end of 25 years, A owns nothing but still needs to find a roof over his head.

B owns an asset which he can sell for $750,000. Or he could rent a room to A, and collect $1,000 a month.

March 03, 2005 1:18 PM  
Blogger True Flight said...

I frankly do not understand how there can be social pressure to get married.

All these examples of relatives talking at CNY;

I would view it just as harmless chitchat. Who would really feel pressured to find a mate and get married just because a certain Auntie Ah Mei or Auntie Ling Ling said you should do so?

I imagine you would have to be an uncommonly weak-willed little worm, if relatives' banter of that sort affected you for more than 15 minutes.

March 03, 2005 1:28 PM  
Blogger JRT said...


"I imagine you would have to be an uncommonly weak-willed little worm, if relatives' banter of that sort affected you for more than 15 minutes."

I imagine your parents would have to be an uncommonly strong-willed person, if your relatives' banter of that sort did not affect them a single bit.

I imagine your parents to be somewhat anti-social, if they do not hear similar chitchat on a regular basis.

I imagine your parents to be somewhat thick-skinned, if they can shrug off these comments without a care.

I imagine you must have a so-so relationship with your parents, because you seems to know so little of how they feel.

I imagine you must be an uncaring person, for their well-being seems to have little or no effect on you.

I imagine you must be somewhat special because you are so different from me.

If I imagined wrongly, please pardon me, for I am too presumptuous for my own good.


March 07, 2005 8:38 PM  
Blogger True Flight said...

Well, you're probably right on two counts -

(1) I think you probably imagined wrongly, and (2) you're probably right to say that you and I are quite different.

I married quite young, and fathered two kids in quick succession,

and my wife and I entertain notions of having a third in a few years' time;

it is my parents who are horrified by the idea - they do not want their grandparenting duties to increase any further;

especially my mum, who wishes to preserve her social life revolving around mahjong, singing classes and qigong;

as for relatives, it is true to say that I am not at all bothered by anything they ever have to say -

like many Singaporeans these days, I hardly ever see most of my relatives more than once a year, during Chinese New Year;

and of course I hear all the usual friendly exhortations and ribbing - almost everyone gets it, right?

the marriageable singles are asked, "Aiyoh when are you going to get married?"

the childless married are asked, "Aiyoh when are you going to have a baby?"

the married with 1 kid are asked: "Aiyoh when is the second one coming?"

the married with 2 kids are asked, "So are you going to have no. 3?"

the teenagers are told, "Wah you have grown so tall ah! Cannot recognise you!"

anyone of any age can be told, "Wah, why you so fat now ah! Better eat less!"

And yes, I think you ARE an uncommonly weak-willed person if you are affected by any of this banter for more than 15 minutes.

And even if you are extremely irritated and annoyed by such banter, I think you would also have to be extremely stoooopid for such banter to have any influence on your personal & major life decisions like those pertaining to marriage.

March 08, 2005 10:08 AM  
Blogger JRT said...


I seems to have failed in my previous post so I shall write plainly.

I shall say that your imagination needs a little work. There are many circumstances that I can show where such harmless chit chat, as you put it, can be very annoying for a person.

I should say that you are blessed with an early marriage and in the eyes of most elderlies, a model to emulate.

Not every one seek the same life choice as yours. For some, these choices involve significant heartache to their parents and family.

How do you explain to a widow of sixty that she is never going to see any grandchildren because of her three sons; one is a gay, one does not believe in marriage and the last wants nothing to do with kids.

How do you tell her, "Ma, I'm sorry. No matter what the relatives say and how many times they say it, we're not changing our minds. You just have to accept it. I'm sorry if what they say bothers you a lot but that's the way it's going to be. I'm sorry I broke your heart."?

In many cases and in many families, such ribbing are far from harmless. They are considered benchmarks and material for gossip. Since you are alien to this world, I suggest a lot more openmindedness, a little more empathy and less with the insults.

And Lastly. Read and Read Well. OF COURSE we are NOT stupid enough to let gossip and banter affect our decisions. It's having to deflect directed barbs and stings time and again that annoy us no end.

I'll try your shoes for size but I would not call you a worm if I do not get the color.


March 08, 2005 1:06 PM  
Blogger True Flight said...

Perhaps you're right again and my imagination fails me.

I *can* imagine an elderly widow saying to her grown-up son/daughter,

"I really hope you'll have children soon. I would love to have a grandchild, babies are so cute."

But I really find it hard to imagine the widow saying,

"I really hope you'll have children soon. I detest it when Auntie Ling visits during Chinese New Year and makes malicious remarks about you being childless. You should get pregnant so that our relatives will shut up."

IMHO, the widow would have to be rather warped to say that, and likely not to be a normal grandmother.

March 10, 2005 5:36 PM  

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