Monday, February 21, 2005

HDB Handcuffs.

Some of the search engine phrases (in italics) that have led to hits on this blog. My comments follow each of them.

"singapore long ago money"
Long ago in Singapore, I had money too.

"sample seafood swot matrix report"
I recommend the sambal BBQ stingray at the Portuguese village in Malacca. Go on a non-holiday weekday evening to avoid the tourist hordes.

"used car dear in singapore"
New cars are also
expensive in Singapore.

"what singaporeans can do to keep singapore clean"
Take pride in your environment. Develop civic consciousness. Oh, nevermind, we will just have another of those "No Littering. Fine S$5000" campaigns.

"solutions on the birth rates in singapore"
mrs budak was right - the childfree are a menace to society.

"overseas singaporeans are disloyal"
Tommy Koh Thong Bee might disagree.

"Singapore PR wants to buy HDB flat"
This Singapore citizen is not sure he does.

"what the contribution of being independent of singapore"
Angell about global knowledge workers. Or read Montaigne. Or Hayek. Or Rand. Or even Locke.


The second last search string in the list above prompted me to do this post. Let us think about HDB. [ Housing Development Board - the "privatised" government department that administers the public housing system in Singapore. ]

There is so much to write about the HDB issue that I do not know where to start. Many thoughts came flooding in after a visit to the HDB office to explore options of an elderly person trying to avoid loosing the hard-earned lease on a HDB flat. And talking on the forums with other emigrants and potential emigrants with regards to HDB pitfalls also brought up a flurry of jumbled thoughts.

I could talk about the general misconception that HDB is an ownership scheme when it is actually a 99-year lease agreement from the government. I could bitch about the HDB inequity to singles and non-traditional couples. Or the lack of significant differences between benefits for local-born citizens versus Singapore PR holders. Or launch into a diatribe about the obscene profits by a supposed non-profit organisation. Or bemoan how a public housing scheme has become yet another perverted means for political ends. Or to give my opinion on the recent crackdown on the cashback schemes. Or talk about the political impact of the HDB implementation on Singaporeans' retirements.

But I will not. As a mere serf who has no say on the ruling policies, it makes more sense to focus on the very specific piece of the issue that is within the control of the individual.

What would be a rational path of action for a potential emigrant with regards to HDB leases?

There are two groups here. The first is are those who already "own" (i.e. have a ongoing lease on) a HDB flat. Having signed the HDB paperwork has certain entailments.

HDB implements a
minimum occupation period (MOP) before the lease on the flat can be transferred (misnomer as "resale"). To summarise:
  • 5 years MOP for a direct purchase from HDB or using CPF Housing Grant.
  • 2.5 years MOP for resale market without using CPF Housing Grant.
  • MOP is still at least 1 year for those who did not buy direct from HDB, and did not take any HDB concession loan, and did not take any housing grant, and with bank market rate loan fully paid off
If you are working overseas and have applied for the whole HDB flat to be sublet out, the time period you are overseas does not contribute to calculating the MOP.

So what happens if you cannot fulfill the MOP conditions when you surrender your citizenship?

"If there are changes to the flat owners' citizenship, their eligibility to continue to own the flat will be reviewed... If the occupation period for the flat has not been completed, HDB will acquire the flat and compensate the owners at a price determined by HDB."

Entailment is "when you get your tail caught in a crack".
- To Kill a Mockingbird, by Harper Lee

I am fortunate to belong to the second group which is unencumbered. There exists certain arguments for potential emigrants to consider leasing a HDB flat. I come across these arguments (in one form or another) ever so often.

  • make a profit to 'fatten' your CPF funds before surrendering citizenship to withdraw the CPF funds
  • as a fallback position in Singapore should the emigration process fail
  • to generate a stream of cashflow to subsidise living expenses abroad
  • as a retirement house, or as housing for elderly parents
Tempting as they are, I however believe these arguments above to be dangerously fallacious. My corresponding counter arguments are:

It restricts options.

See the MOP conditions summarised above. And there is no guarantee of liquidity in the HDB "resale" market to transfer your lease. Unless you can afford to pay in full using your CPF funds, you will need to make monthly payments to the lease (either with CPF or cash). This adds an additional and unnecessary burden to either have a stable overseas job to pay for the HDB in cash, or a job in Singapore for the CPF contributions, or to have sufficient funds already in the CPF to make monthly payments for a temporary period before you can unload the albatross.

No guarantee of profit.

Most people conveniently forget to factor inflation, interest costs, transaction costs and opportunity costs (CPF liquid funds pays interest) when figuring how much money they "profit" by churning a HDB flat. Not to mention that expensive capital lease improvements (i.e. renovations) are seldom recoverable as they have only a muted impact on the official HDB-assigned valuations required on the "resale market".

It can become an emotional crutch.

The emotional impact of having a HDB lease in Singapore can be fatal to the preparations to emigrate permanently. It could be used as a chip for emotional blackmail by those opposing the decision - "what about your house?", "your roots are here", "you have benefited from the Singapore system". It could manifest itself as an exaggerated sense of responsiblity - "I have bills to pay and cannot risk it", "I cannot emigrate because I already have a house here". Or even as a convenient excuse - "if not for my house, I would have already left long ago".

I personally would avoid a HDB lease like the plague. Especially given the potential pitfalls of the HDB system to ensnare the unsuspecting, irrevocably intertwining their personal futures with that of Singapore Inc. But I digress. Further elaboration of the lost theory would have to wait for another day.

In short, as the Hokkien saying goes: Kiang hor liao. Mai kay-kiang.

Literally translated: Smart is good enough. Do not be extra-smart. Implication being that trying to be too smart would backfire on you.


Anonymous mrs budak said...

You asked budak why it was a bad idea to get an HDB flat. Well you've just listed some of the reasons yourself. For us, the full horror of our housing decisions became clear when I started reading up on the "pay back housing grant" clause. We probably will not be affected because we don't intend to move, anyway.

Another friend of ours (loupgarou26, on my "friends list") had a long exchange with CPF on the withdrawal limit, which eventually ended in stalemate. It's a largely unknown CPF condition (which I'm not that familiar with myself) and has something to do with how much you can withdraw from CPF and how you need to use cash to top up after.

Basically, anything that's got to do with the CPF has the potential of screwing up most of your well-laid plans. We learnt too late but on hindsight, we chose the best option we thought we had. Hopefully we won't get screwed up when it's time to sell the flat.

February 22, 2005 9:09 AM  
Blogger KnightofPentacles said...

The "pay back housing grant" clause mentioned is the HDB resale levy.

It effectively taxes 15% to 25% of the "sale price" or market valuation of the unit under certain conditions.


The CPF Board valuation limit rule.

Using a 30-year loan, at different interest rates, the number of years at which valuation limit (VL) of 120% will be reached are as follows:

At 2.5%, 120% VL reached at 24.98 years.
At 3.5%, 120% VL reached at 22.27 years.
At 5.0%, 120% VL reached at 18.63 years.
At 7.5%, 120% VL reached at 14.30 years.

Once the 120% VL is reached, all future lease payments can no longer be paid with CPF.


The CPF board Available Housing Withdrawal Limit rule.

General case:
Once VL 100% is reached, HDB lease payments can only be made from CPF after setting aside Mininum Sum cash compoent (~S$60,000) in the Ordinary Account.

There are other associated terms and conditions to ensure that you have to continue working for the continued stream of CPF contributions, in order to keep your HDB lease.


From a purely administrative systems viewpoint, the CPF / HDB scheme is a beautiful and exquisitely intricate work of social engineering to accomplish certain desirable economic goals for the nation.

February 22, 2005 2:20 PM  
Blogger Jeff! Lim said...

Not exactly the kind of entry i was expecting, actually, but... I like the targetting of the audience!! :) Although i must say, i dont fully understand everything (and will probably not want to waste my time and effort to try to understand all the minute details either...).

February 22, 2005 9:16 PM  
Blogger ldsdtsunami said...

You can pay your monthly payment via that when you sell your money is going back to CPF.

February 23, 2005 12:14 AM  
Anonymous mrs budak said...

That is true, but who wants to use cash to pay the housing loan when you can use CPF?

Not many newly-weds really think about such things, unless they've talked to people who have been there and done that.

In our case, we were mis-advised by our housing agent. They had assured us that we would not need to "pay back" the housing grant. Technically, they're right, if we do not intend to buy a subsidised flat or get more subsidies from the government. Thankfully for us, we're not one of those "upgraders" (avoid the housing trap!) so we should be fairly safe.

Unless the CPF/HDB change their policies again...

February 23, 2005 12:10 PM  
Blogger True Flight said...

Actually, KnightPentacles, I think you kinda exaggerate the problem.

I don't really feel that a minimum occupation period of 5 years poses a big obstacle to emigration.

If you were seriously contemplating emigration, you wouldn't buy a HDB flat (or condo or house in Singapore, for that matter).

And suppose the emigration notion started creeping into your head one or two years after you bought the place.

Why, you'd probably spend the next one or two years doing research; visiting the potential new country; finding out about its tax laws, job opportunities etc.

By the time you've really resolved to leave, you'd be in your fifth year of occupation. You take another half a year or so to wrap up your affairs, and the MOP is up already.

Also, about the valuation limit rule - I think that the implications have been exaggerated. It will only ever affect a very small number of people.

For example, no one in Singapore will be paying 7.5% interest rate on a housing loan!

HDB rate is only 2.6% - pegged at 0.1% above the interest which the government pays you on your CPF OA monies.

Thus the more likely scenario of the valuation limit being reached is after 24 or 25 years.

In practice, this will hardly ever happen. How many people do you know, who have lived in the same HDB flat for 25 years?

Even if they stay that long in the same flat, in many cases they will not have any really difficulty servicing the loan. They will have already paid 25 years worth of the 30-year loan.

Note also that the inflationary effect, and the fact that HDB loans work on a fixed monthly instalment.

Let's say today you pay $800 per month on your loan, and you find that manageable, although somewhat of a strain.

If you don't bother to do anything (eg no prepayments etc), then 25 years later, you will still be paying $800 per month.

But $800 will be a much lesser, and much more affordable sum by then. Taking annual inflation of 4%, $800 in 2030 is just $300 in today's dollars.

On a more philosophical note, does it really matter whether the money comes from your CPF account or whether you pay with cash? Either way, it's your money.

After servicing your loan for 25 years, you're probably around the age when you can withdraw your CPF monies anyway.

February 23, 2005 2:47 PM  
Anonymous mrs budak said...

Ahhh but the point is he doesn't want to remain here until retirement! Buying an HDB flat would make the departure process more complicated.

Remember that whatever principal you take up from the CPF, you need to return it with interest. If the market climate is not good by the time you sell, you may have to fork out precious cash to "pay to yourself".

Of course, the counter-argument is that if payment had been done in cash, the end result would have been similar.

February 23, 2005 4:09 PM  
Blogger True Flight said...

It still does not really matter. If the market falls, the market falls - this is a risk that anyone who buys anything with a resale value has to take.

If your intention is to emigrate, you get to take out all your CPF money early and leave with it anyway. So it does not matter that you have to pay yourself.

February 23, 2005 10:45 PM  
Anonymous mrs budak said...

The problem, of course, is unless you have multiple citizenship, it is going to take a while before you can renounce your Singapore citizenship and withdraw your entire CPF savings (unless you are contented with being stateless and obliterating all chances of getting citizenship with another country). Meanwhile, if you need to fulfil any residency requirements, needing to pay back the sum to CPF would mean having a lower cash balance to tide over that residency period.

February 24, 2005 12:06 AM  
Anonymous sotong_sg said...

of course, all these "obstacles" are not impossible to clear.

The issue is, by the time you reach MOP, will you have been brainwashed to stay with slippery slope arguement ? (Since already stay for half your life, migrate for what ?)

5 years is not short.. I am 32 now. 5 years time, I will be 38. By then, migration window may have been over. How about loss of employment opportunities elsewhere ? I might not get the same offer I have right now.

Reducing financial loss is also part of the objective. If you really want to migrate, ask you to give up all your CPF and cash here, also can, not impossible, but who wants to ?

Future value of the same $800 you pay now maybe lower, but at age 40, people already have difficulty finding job.. still wanna pay $300 FV for the next 20 years ?

February 24, 2005 3:10 PM  
Blogger True Flight said...


There is a lot in your post I disagree with; I think one or two points are simply factually wrong; others are not well-reasoned -

perhaps I'll just point out one, which really tickles me. You said:

"The issue is, by the time you reach MOP, will you have been brainwashed to stay with slippery slope arguement ? (Since already stay for half your life, migrate for what ?)"

I think that emigration is your personal choice - you weigh the pros and cons, and then based on your personal circumstances, you either decide to stay or you decide to go.

But if you do not trust yourself to be able to make good decisions in five years' time, why should you trust yourself to be able to make good decisions now?

If you are 30 years old and you really think, despite your 30 years of brainwashing, that you should leave -

what kind of brainwashing do you think can happen in the next 5 years, that will lead you to an opposite conclusion?

And how do you know that you will be wrong then, and that you are right now?

To me, your approach doesn't seem to a very feasible approach to life. You assume that in future you will be a fool and right now you are clever, therefore today you must go around circumventing your future self.

March 02, 2005 6:01 AM  
Blogger Singapore Calamari said...

Yeah, I agree when I was entering my previous comment here, I wasn't thinking through very much, and just wanted to complete it..

(Excuse being that I was in the office.. so was distracted a little.. haha)

Anyway, yes, you are right in a way. I know that if I get emotionally involved in something, my rationality might lose out.

With regards to : I think that emigration is your personal choice - you weigh the pros and cons, and then based on your personal circumstances, you either decide to stay or you decide to go.

Yes, I am worried that by the time I actually sink roots in, it will hold me back due to my lack of resolve to take "more" energy to unroot myself.

I know myself. I have been know to be lathergic and just live with whatever I have, even though I do not really like it.

I was also referring to the brainwashing of the "majority". And I, for one, do not think that I am much better, nor do I think that I can be so strong-willed to resist elite's complex-scheme-of-things targetted at average ppl like me, with average IQ, and average EQ.

It is not the brainswashing that will happen in 5 yrs time. It is the "emotional effect" of rooting.

Worse will be the case of not living happily.. being "half brainwashed" and "half realizing" and totally "no energy" to do something about it....

March 03, 2005 11:11 PM  
Blogger Singapore Calamari said...

Ops.. just to clarify.
Sotong_sg = Singapore Calamari.
Just some screwups in my previous post.

March 03, 2005 11:24 PM  
Blogger True Flight said...

Wait. Let's examine this "emotional rooting" point a little further.

If you are emotionally rooted to Singapore, that is a factor indicating that you should not leave.

If you are NOT emotionally rooted to Singapore, then that is a factor indicating that you should go.

And in deciding whether to leave or go, you ultimately weigh all factors, including the "emotional roots" factor, and then you either go or leave.

But if you deliberately find ways to emotionally not put roots in Singapore, so that in a few years' time you can justify to yourself that the right decision is to go -

well, that seems a little warped to me.

To show you some analogous lines of thinking:

1. Amy is 25 years old. She has been wondering whether in future, perhaps five or six years from now, she should have children or not. Suddenly Amy decides to have her Fallopian tubes tied up so that in future, she will not decide to have children.

2. Ali is 20 years old. He is considering a future career either as a soccer player; or as a insurance agent. He decides to jump off from the 2nd floor of his apartment building so as to break his ankles. This makes it easier for him to decide, in future, to be an insurance agent.

Perhaps the above examples are a little extreme. But you get the point. When you deliberately engineer your circumstances so as to make Singapore a less desirable place for yourself to live in, and thereby seek to motivate yourself to leave -

well, it sounds like a rather dubious approach to me.

March 04, 2005 11:19 AM  
Blogger Singapore Calamari said...

I think I can use your re-phrase your extreme examples, so that you know how I feel about this issue.

1. Amy is 25 years old. She has been wondering whether in future, perhaps five or six years from now, she should have children or not. Suddenly Amy decides to have her Fallopian tubes tied up so that in future, she will not decide to have children.Tying fallopian tubes is a bit extreme.

Amy knows that she is very anti-abortion. But now, she is not sure whether to have children in 5 or 10 years. But she knows that once whe get pregnant, she will carry it to term and will NEVER do anything to get rid of the child.

Now that she is undecided on whether to have a kid or not, she reasons "Well, I shall not get myself emotionally rooted to the child issue until I decide to have it. In the mean time, I shall abstain from making babies". So she decides not to have sex.

Sure, you tell her, you can still have sex, just use protection. But protection is not 100%, and if she is unlucky, she is then forced by her circumstance to have the child.

So like my case, I haven't decided whether to have the kid (stay in sg) but I wanna abstain from getting pregnant first. So I shall not have sex. Sure, I lose the chance have wonderful orgasm etc..

But once I decide to have the kid, I can get myself pregnant. Same for the HDB. Once I have decided to stay, I can buy the flat IMMEDIATELY. There is nothing to stop me. But I know once I get the HDB, I am sort of putting myself into an emotional issue.

I am not like squandering my money if I don't get HDB. When I am still undecided, I shall live as I am living now (I can't buy HDB anyway, since I am not 35yo yet).. But the current mood is that I don't really LOVE this place. I don't HATE it that much to be sure that that I want to leave.. But if circumstances change, it would be _easier_ for me to choose to go.

Like Amy, her current situation (maybe she is not married, not earning enough to upkeep a kid) is not exactly favourable to have kids, but she still think she likes kids and might want to have children in future, if she earns more.

But she knows she can live without having sex. But once she starts having sex, it increases her chance of putting herself into a pregnant situation.

So likewise, I can live with the fact that I do not NEED to buy HDB. I can rent a room and be satistisfied. If 5 years down the road, I am retrenched, and I can't really find a job, I still have my cash and maybe go elsewhere to live. (May not be Oz, maybe I can work in Malaysia, take lower pay, but lower expenses. And my S$ convert to RM is a lot more in real terms).

Until I decide, I shall not anchor myself here, with financial, and emotional commitments.

2. Ali is 20 years old. He is considering a future career either as a soccer player; or as a insurance agent. He decides to jump off from the 2nd floor of his apartment building so as to break his ankles. This makes it easier for him to decide, in future, to be an insurance agent. Your examples are mostly irreversible. By not buying HDB now, how does that make it irreversible ? I am keeping my options open by not closing another door.

I am not making Sg more undesirable. Pray tell, how does not buy HDB makes it more undesirable ? I am jsut making sure I do not close a door prematurely.

Rather, my situation would be this, if you want me to use the Ali's example.

Ali is not sure to be insurance agent, or to be soccer player. But he still studies hard anyway, cos even if he is a scholar, he still can choose to be a soccer player. But if he plays soccer all the time and neglect his studies, he will not make it to insurance as his qualifications will then not be suitable.

Your analogy closes options. My situation is I am keeping things equally open, by not commiting yet.

You can say, oh well, if you decide to go, you can still sell the HDB.
Then is if other factors makes it that bad in SG that I have to go. Then I dun mind even forfeiting the house and just leave.

By not committing to sink root, so that I keep my options open. So how does buying HDB equals to sinking roots ?

Take for example, I do not really like my job. It is boring now, I and wish to just quit tomorrow and take a break, and slowly look for a job.

But now that I have my car, I need to pay monthly instalments.

If I HATE my job so much, I can opt to give up my car, sell it and "downgrade" to taking public transport.

But the case is, I dont hate it yet. just not very satisfying. and because of the car, I am "pressured" to stay and save a few more months buffer, to ensure I can still pay my instalment when I am jobless for the next 3 months.

What do I lose by buying the car ? Restricting some of my options. Because without the car, I can just quit and take a 3 months break, without being so stressed of looking for another job.

You get what I am trying to say ? By commiting to somethings, certain options become less desirable, and thus ultimately affect my emotions and may affect my decision.

With the car, I need to feel more loathe for my job to quit. Without the car, as long as I am not satisfied, I will quit.

March 04, 2005 3:37 PM  
Blogger Singapore Calamari said...

By buying HDB now, if I decide to emigrate, and the housing prices is not so favourable, it may have caused me to decide "stay a few more years".. and then wait longer for me to break even or take money out of the HDB before I exit SG.

I do not want to actually spend money by making (very likely) losses if I decide to sell and emigrate.

If I keep my money now, and just earmark a bit as expenses for a roof over my head, I am still keeping the money with me. If I decide to go, it is easier and cleaner. Less hassle. If I decide to stay, I can buy HDB straight away..

I am merely postphoning my actions until I am sure of my decision.

March 04, 2005 3:42 PM  
Blogger True Flight said...

Okay. So you choose to keep options open for as long as you can. That's sensible.

Just be aware of the usual problem with keeping too many options open for too long. In the end, you may fail to optimise any option - because you exercised it too late and weren't committed from the start.

There is also the risk that as time passes, new factors arise to affect or eliminate options which are currently available.

For example, let's say that now is a good time to buy a flat in Singapore (prices are low) but you do not buy, because you think you might want to go to Australia in 5 years' time.

In 5 years time, you decide that you do not want to go to Australia, after all. You then decide to buy a flat in Singapore. And you find that the market has changed and prices have risen substantially from what they were 5 years ago.

Second example: suppose right now you qualify to emigrate to Australia, but you are undecided about leaving Singapore. You decide to wait for five years.

In 2010, you decide that you DO want to go to Australia. However in 2009, Australia's immigration policies have changed and someone like you is no longer permitted to be an Aussie.

In life, all of us, from time to time, make the mistake of playing our cards too fine.

Sometimes we fail because we had too many options. The ones who succeed

March 04, 2005 6:29 PM  

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