Government will not rule out possibility of private developers having role in VERS: Lawrence Wong
Read more at https://www.channelnewsasia.com/news/singapore/vers-government-will-not-rule-out-role-of-private-developers-10701518

By Lianne Chia @LianneChiaCNA

10 Sep 2018 01:49PM (Updated: 10 Sep 2018 01:52PM)

Ricky Lim

Posted on :- 20 Aug 2018 12:27PM (Updated: 20 Aug 2018 12:52PM)

Ricky Lim
Solving the housing problem - when HDB lease of 99 years is up :-

99-year-leasehold HDB flats will become zero value when the 99 year lease is up.
One way to ensure that its value will not turn to zero - is to enbloc them by allowing private developers to bid for it - but cap its price to be around the BTO prices.

In this way, owners of such flat can reap enbloc price per unit and private developers can redevelop the HDB flat that is reaching 99 years and resell it at the prevailing BTO prices.

By doing so, owners can retain HDB as an asset with values without becoming zero, and also the flat can be redeveoped into new flat and sell at a prevailing price with profit to developers --- and Government coffer will not be hurt.

This will also promote growth of the construction sector - with this enbloc scheme - and further contribute to the GDP of Singapore.
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Ricky Lim
Some people may say, if we allow HDB flat to be enbloc, the younger generation will not be able to afford future HDB flats.
Can we solve this problem in this manner :-
(1) Developers who enbloc HDB flat of 13 floor will pay market price to HDB owners when 99 years lease is up.
(2) When the developers build new BTO flat - they must build a 26 floor flat. The first 13 floor can be sold at market price, but another 13 floor to be sold at subsdised HDB price to younger generation.
In this way, government will have sufficient flats for young generation at affordable prices, but at the same time, current HDB owners will not have their HDB value become zero.

(3) the owners benefitted from the market price cannot buy flats at subsidised price but need to buy at resale prices.

(4) In future, when the 99 year lease is up, young owners (at the new 13 floor of flat) who bought at subsidised price can again enbloc at market prices.
Old owners (who occupy the other 13 floor of flat) will no longer be around.

Thus when enbloc again after another 99 year lease is up, the developers again build another 26 floor of flat - with 13 floor reserve for new batch of young owners at subsdised prices and another 13 floors to sell at market price.

In this way, there are 2 benefits :-
(1) Asset Enhancement of the HDB flat can be fulfilled,
(2) at the same time, young owners can afford to buy new HDB flats at a subsidised prices.

This scheme can continue to "recycle perpetually" --- hopefully the Government can considere this scheme for the just announced "VERs" programme by the PM.
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Ricky Lim
Some people say - VERs pay owners market price don't make sense.

To resolve this problem:-
Pay market price make sense - if instead of building 26 floor - build up to 50 floor. 13 floor reserved for young buyers at subsidised prices. The rest of 37 floor sell at market price. Then developers still earn, and land price can return to Government.

1 floor can have at least 10 units - build up to 50 floors will have 500 units versus 13 floor of 10 units = 130 units. Thus VERs pay a market price to existing owners, return land prices to Government and Developer can make profit make sense. Triple Wins.
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Ricky Lim
Some people say, building 26 floors of HDB flat may not be enough because the plot ratio may not be profitable to developers and thus cannot pay market prices to enbloc owners.

Pay market price make sense - if instead of building 26 floor - build up to 50 floor. 13 floor reserved for young buyers at subsidised prices. The rest of 37 floor sell at market price. Then developers still earn, and land price can return to Government.

1 floor can have at least 10 units - build up to 50 floors will have 500 units versus 13 floor of 10 units = 130 units. Thus VERs pay a market price to existing owners, return land prices to Government, Developer can make profit make sense and also young owners can afford to buy flats at subsidised price. 4 Wins.

However some people say :-
"I dont think it's as simple and straight forward as adding more floors. I am not a architect, but I believe a building needs to be twice as strong to support more floors, also issues like needing more lifts to support more occupants. The economy of scale might not be that substantial to give original owners a free unit."

My answer is: Thought some new HDB flats already built very high. Condo also build very high. Thought just need strong foundation. If they can, why old HDB flats cannot?
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Ricky Lim

Ricky Lim
It is all about solving problems with practical and pragmatic solutions.

I believe anyone with some insights or with some solutions that can solve problems - why not offer?

If the solutions are adopted - it benefits everyone including the Government that uses it.
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Ricky Lim
In addition, with more flat to one plot ratio, more lands will be free up and release to the Government into the landbank -- because more people and household can be compacted and stay in the same plot of land.

Government with less HDB flat to build - as it is building higher to accomodate more people - also benefit with more land bank as when more flat is VERs - lesser plot of lands will be needed to build flat as flat go higher to accomodate more people.

The plot of land with higher rise flat - will also bring about higher values - and thus, enbloc can bring higher market price to the owners that enbloc it via VERs --- fufilling the Government commitment of Asset Enhancement or Capital Preservation --- where majority of Singaporeans are asset rich.

Also paya lebar airport has been moved out to Changi and Seletar - and free up airspace - to allow flats to build higher.
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Ricky Lim
Some people say :-
- "Cannot understand the logic. Building higher flats will be more expensive as stronger foundation and structure is required and more high speed elevators that are more expensive and also more elaborate fire safety equipment is required."

My answer: how much can be sell per unit? it will definitely cover land cost, construction cost. the more unit in one plot of land, the higher the economies of scale.

Eg. 1 plot of land - build 13 floor flats x 10 units = 130 units.
Need 3.8 plot of land - to build = 500 units.

If 1 plot of land - can build 50 floor x 10 units = 500 units --- the Government save 2.8 plot of lands.
No matter how costly the construction cost of 50 floor ---- it will not beat the saving of 2.8 plot of lands isn't it?

Also assume the Government need to incur higher cost on building foundation, lift --- but it is spread out to 500 units.
How can they be more expensive if --- 130 units are spread across 3.8 plot of land cost.?
It defy mathematics.
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Ricky Lim
That is, there is a need to build a lower cost building foundation, lifts, fire safety - 3.8 times vs a higher cost building foundation, lifts, fire safety in 1 plot of land.

No matter what 3.8 times will beat 1 (no matter how expensive).

A side note :- the tallest building in the World in Dubai is about 800 meters to 1 km --- and can go up to 200 floor.
The foundation in the desert, the lift system and the fire safety measures are even more challenging.
But surprisingly the unit cost is quite affordable --- because it is spread out by many housing units.
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Wilson Wong

Obviously VERS is not the solution. It is just something to hide the fact that it is a 99 year lease that will depreciate. The solution is not to pay through the nose.

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Ricky Lim

Wilson Wong - Extending beyond 99 years lease doesn't make sense as the flat will become rundown, maintenance cost will go up and it become a ghetto.
In addition, young people will not like to live in such a rundown estate.

Redevelopment is necessary.

VERs is also viable as describe above - because once the flats are sold, the Government and the private developers can recoup the money.

Providing HDB flats and nice estate to residents and providing a stake for all citizens - has always been the foundation policy of this incumbent Government since starting from 1960s and 1970s onwards.

Now the lease is expiring, and this incumbent Government is "starting from scratch again" rebuilding Singapore.

If they can do it in 1960s and 1970s - they can do it again 20 years down the road.

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William Smith

Who will pay for VERS? Conservatively 6% appreciation means 1970s flat bought at 15k will sell in 2040 at 886k; GST 20-30% enough boh? https://www.edgeprop.sg/prop.../hdb-home-prices-then-and-now

Allow me to remind our dear leaders how well privatisation helped HDB: https://www.99.co/blog/singapore/dbss-flats-issues/

Affordablilty or profitablilty is the mission? Please decide: https://www.hdb.gov.sg/.../vision.../vision-and-mission

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Chua Lee Kheng

The gap between HDB estate and private condo is super wide.

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Whyboon Yeo

Walau what is on their mind? First SEHC now VERS meaning what not when the HDB supposely to be providing low cost subsidised public housing are partisan. Be prepared to pay and pay like the party pulling the strings. I am a resident in sengkang yet i had to park my vehicle in anchorvale crescent, the HDB itself is already creating social divide with the planning, do they expect everyone to be driving sedan and mpv only? So what does it tell when most carparks only cater for sedan and mpv what about those in the driving trade?

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Kris Tan

Those in their 50s now (2018), will be in their retirement age in 20 years, and no longer eligible to any loan (even HDB loan, since it requires the mortgagor to be employed). Given the short remaining lease, and voluntary nature of VERS, will compensation to subsidise payment of the replacement unit, if any, be minimal or will it be comparable to private housing market enbloc compensation?

How can loans be restructured to enable this group who want to age in a nearby replacement site with familiar neighbours?

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Tommy Tan

cost to people will increase

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Foong Mun Loh

velly smart ah..........pass any possible losses and public discontent to private sector........

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Norah Arc

From homeowners to homele$$ne$$. What are they sowing in nation building? The excitation of high class proposition?

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Ricky Lim

Very interesting comments on the board that through private developers, cost to people will increase.

Now let us do some rough estimation.

Assume 1 million HDB flat household is to be VERs - and regardless of flat type assume Government need to pay $200,000 to VERs owners.

In total, how much money the Government need to fork out?

1,000,000 unit x $200,000 = $200 billion - a whopping sum that the Government need to fork out!

Where does the Government get so much money?
(1) Income Tax
(2) GST
(3) Corporate Tax
(4) Plus other types of taxes etc etc

羊毛出在羊身上。

If the Government don't get private developers involved - the only way is for people to pay more taxes to fund the VERs.

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Ricky Lim

How does the involvement of private developers help to cushion the impact of taxes, able to fund the VERs and how can Government keep the flat affordable?

(1) Just like the current BTO, flats are also developed by private developers - to allow some private sectors to involved in HDB flat development - and yet the BTO prices are kept in check by the Government through some policies.

(2) When private developers take over the enbloc through VERs - private developers can:-
(a) pay owners say $200,000 per flat
(b) pay Government the land prices (note :- Government need not pay a single cents and no need to levy taxes on Singaporeans to fund the VERs).
(c) keep some units at subsidised prices to young new HDB flat owners and make it affordable.
(d) sell new flat to VERs owners at market price (as VERs owners already benefit from the VERs payout.

Of course, i am not suggesting that all VERs should be done by private developers.
It can be a hybrid whereby VERs are partly done by Government and partly done by private developers -- but price must be equalised.

Using the hybrid model, then VERs is affordable and sustainable.

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