CPF-HDB Scam by Pseudo-Intellectual Roy Ngerng

Papsmearer said:

As you know, the HDB flat is basically a prepaid 99 year rental. You and the HDB enter into a 99 year lease on good faith. But guess what? HDB has abosolutely no intention to honour their 99 year lease. Just look at the construction, design and materials used in their flats, especially those build circa 70s, 80s, 90s, does anyone here really think they will last 99 years? I have yet to see an engineering report where the economic life on one of these buildings is 99 years. Also, as the estates get older and the underlying land becomes more valuable, HDB will do a relocation exercise by terminating the leases of those buildings and moving them to a new flat in a newer estate for a "discounted" price. Than they will build higher density on the land vacated by these tenants.

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Exactly. See my reply to Scroobal above.

(2) no HDB building lasts 99 years! – which means the HDB is not only collecting prepaid rent, it is collecting it for a fictitious tenure, a tenure that HDB has neither the intention nor means to honour. Which means the HDB in addition to collecting prepaid rent is effectively borrowing additional funds at no cost from the tenant beyond the realistic tenure (say 50 years) – a hefty opportunity cost for the tenant. If this is not usury, what is?

mojito said:

In short, if i use 100 from your piggy bank as collateral to gamble and agree to pay you back 103 next year, when you use your piggy bank to buy an iPhone, suddenly my banker say the collateral i use is no good. I have to borrow some money, say 20, and i pay interest between 1- 5 per year. Not fair to expect me to pay you 103 right? So you pony up and pay the 3 yourself so i can make interest payment of 1 - 5 per year. Pretty logical to me though it could be more transparent.

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Wrong. If I used $100 from my piggy bank to buy an iPhone, you'd have to borrow $100 at higher interest cost from somebody else for your collateral. My $100 was no longer used as your collateral. You had found a substitute collateral.

I then sold my iPhone for $150, pocketing the $50 profit, and put my $100 back in piggy bank, which you can now use for your collateral. You're not obliged to pay me the $3 interest for the period I took out my money, neither should I be obliged to pay the $3 because it was my own money – $100 – I used for an alternative investment.

And the $3 is my own money, why should it go to finance your borrowing costs ($5) from another party?

Agree but i think you might have missed my point. I think we all agree affordable housing is important to Singaporeans. We all agree it is important to have enough for retirement so seniors do not experience undue hardship. I am suggesting we should 1) delink public housing from retirement funds, 2) build and sell public housing near cost and 3) establish controls for greater accountability of investments using public funds.

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Cannot agree more. See my reply to Scroobal above. Retirement funds are retirement funds – not for buying property, or worse, paying for long-term leases which are an expense, not investment.

Personally I feel that public housing should be only be long-term rental leases, like in other developed countries. If you want to sell subsidized public housing, then do not allow resale on private market. Public housing should be a segregated sector meant for a social function: providing (subsidized) housing for people who do not have the means for private ownership or rental. Not for capital gain, investment income or speculative trading.

Papsmearer said:

They are related, see my post #32

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What I meant was that the issue of injustice does not arise because when you take funds out from your savings, you already forego interest income, an opportunity cost. The additional cost of borrowing from HDB (or bank), loan interest, is not related to that opportunity cost, but adds to it because it's an expense. You could also use your CPF funds plus cash to buy property without a loan, in which case the question of loan interest quantum doesn't even come in.

In other words, even if HDB or another bank charges 5% for the loan, it's OK. You take a interest hit every time you borrow money – caveat emptor. Why compare it with your CPF or savings or fixed deposit interest rates?

This is true whether HDB borrows from CPF Board or other institutional lenders.

LEGEND said:

HDB wipes out all available monies in OA for down-payment irregardless of how much loan they approved to you. This so call effective interest rate of 0.1% is not applicable most of the time. Regardless whether the person makes a capital lost or gain at the end of the day, 2.6% of the loan amount goes to HDB per annum. Forget about whether one needs to top up CPF when he makes a capital lost or refund any interest to CPF when he makes a capital gain. The interest rate charged by HDB is 2.6% per annum. If you loan $300k for 25yrs, the interest HDB is going to collect from you in total is $108300.

As a matter of fact, interest rates from bank have been floating about 1.x% for the past few years. Getting loan from the bank allows you to make minimum down-payment and keep the rest in CPF to make 2.5% interest.

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You are correct. HDB should actually make interest free loans to people who want to "buy" they flats from them. After all, they already made 300% profit from selling you the flat in the first place. On top of that, they still want to earn your interest? Fuckers..

yellowarse said:

Exactly. See my reply to Scroobal above.

(2) no HDB building lasts 99 years! – which means the HDB is not only collecting prepaid rent, it is collecting it for a fictitious tenure, a tenure that HDB has neither the intention nor means to honour. Which means the HDB in addition to collecting prepaid rent is effectively borrowing additional funds at no cost from the tenant beyond the realistic tenure (say 50 years) – a hefty opportunity cost for the tenant. If this is not usury, what is?

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It is actually worse than that, much worse. The HDB has transferred most cost of ownership to it tenants instead of shouldering it as a landlord. For example, property taxes should be paid by the landlord, and so too for conservancy charges and other maintenance fee. The killer is the upgrading costs which are passed on to a tenant. If you rented a private condo from a its owner, as a tenant, you would not be expected to pay $30,000 ++ for any upgrading that is needed on the building. In exchange for rent, the landlord has a legal obligation to provide a livable premise. Making the tenants pay to make it livable is a legal concept that is rejected in most other countries.

Papsmearer said:

The HDB has transferred most cost of ownership to it tenants instead of shouldering it as a landlord.

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Good point.

yellowarse said:

Wrong. If I used $100 from my piggy bank to buy an iPhone, you'd have to borrow $100 at higher interest cost from somebody else for your collateral. My $100 was no longer used as your collateral. You had found a substitute collateral.

I then sold my iPhone for $150, pocketing the $50 profit, and put my $100 back in piggy bank, which you can now use for your collateral. You're not obliged to pay me the $3 interest for the period I took out my money, neither should I be obliged to pay the $3 because it was my own money – $100 – I used for an alternative investment.

And the $3 is my own money, why should it go to finance your borrowing costs ($5) from another party?

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I suspect some of the money channeled from CPF are used to for investments that are not very easily bought or sold (eg real estate). Conventional market practices do not allow investors to use the money they have committed to be taken in and out at will. Had it been a private entity, it would have charged you a hefty penalty for early withdrawal. CPF Board does not ask you to pay a penalty (since politicians have the final say at the end of the day), so it really looks to me as being extremely benign and accommodating.

Not all money is being invested into such investments though, popular opinions believe they are channeled into stocks and bonds, where investor withdrawals are less draconian. I suppose in my opinion it is fair that the CPF Board takes a middle path approach and I have little complaints about that.

yellowarse said:

Cannot agree more. See my reply to Scroobal above. Retirement funds are retirement funds – not for buying property, or worse, paying for long-term leases which are an expense, not investment.

Personally I feel that public housing should be only be long-term rental leases, like in other developed countries. If you want to sell subsidized public housing, then do not allow resale on private market. Public housing should be a segregated sector meant for a social function: providing (subsidized) housing for people who do not have the means for private ownership or rental. Not for capital gain, investment income or speculative trading.

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I am very cynical about the motives of the politicians and I think that is normal everywhere. I am growing extremely cynical about the motives of bureaucrats in SG, which is not unusual for people living elsewhere in the first world. Ours is very dedicated to increasing revenues, and the rising sale price of HDB flats is a very obvious reflection of that attitude.

Why have market pricing for HDB leases? Because it fills government coffers and pays the astronomical upkeep of our career bureaucrats and justify high land sale prices to their developer cronies. For bureaucrats who purchase investment properties, that's essentially taking two servings of the property boom buffet.

It is said that people are our greatest resource in Singapore. Our bureaucrats are masters at resource extraction. So were our colonial masters. I fear that after 50 years of independence, Singapore has come full circle and returned to the bad old days, only this time under a different sovereign.

mojito said:

I am very cynical about the motives of the politicians and I think that is normal everywhere. I am growing extremely cynical about the motives of bureaucrats in SG, which is not unusual for people living elsewhere in the first world. Ours is very dedicated to increasing revenues, and the rising sale price of HDB flats is a very obvious reflection of that attitude.

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I've gone beyond cynicism. There's no doubt at all that our govt is on a irretrievable neo-liberal path where market forces and non-productive resource extraction (rent extraction) rule to continually generate GDP growth and top up coffers, while exploiting labour by suppressing wages and relying on foreign workers, and maintaining a fascist monopoly on the 'free' market via totalitarian land ownership, GLCs and REITS. Free enterprise suffers, productivity stagnates, real wages fall, purchasing power decreases, inflationary bubbles form.

Propping up the value of assets belonging to the elite and their cronies and maintaining a vast bureaucracy (civil service, defence) also serve a (unspoken) political purpose of preserving party allegiance and ensuring party survival.

The only other example of public housing sale in developed countries I'm aware of is HK's Home Ownership Scheme, which on the surface resembles HDB but in reality is a world apart. The govt sells the property to the tenant at a subsidized (below cost) price. After the alienation period of 5 years, if you want to sell your flat on the open market, you have to pay back the subsidy first to the govt. This discourages the use of public housing for investment gains and effectively segregates public housing from the private sector.

Roy in his article had a para where he says that after paying so much at the end the flat has no value. See below the extract of his comment. That is how leasehold works for any asset. He should have argued about pricing and the actual build cost to the govt which where the PAP screws the public and refused to reveal its cost calculations.

""Can someone please explain to me why we have to pay $600,000 (after 30 years) on a $300,000 for a flat that has absolutely no value at the end of its lease? ""

Papsmearer said:

I believe that Roy did not say that. I think he understands the 99 year HDB is a Lease and not a Leashold. There is a significant difference. A leashold has an underlying ownership element (not the land), but usually the improvements on it, like the physical building itself. A lease has no ownership element, its just a rent, like when u lease a car, u have no ownership in it whatsoever.

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We have endured the stench for too long. Time to take out the trash.

Look at the HDB legal contract when you "buy" a flat. Its titled "Agreement to Lease" See the Url link below.

http://www.hdb.gov.sg/fi10/fi10297p.nsf/ImageView/Specimen%20AFL/$file/Specimen+AFL.pdf

As I said, the PAP is very good at this as the practice is the same worldwide. Legally you cannot touch them. It the ridiculous pricing that has no resemblance to cost.

yellowarse said:

In any country leasehold refers to land lease, where land is sold by the govt to the developer or house-owner on a specified tenure. There is thus land ownership, whether strata or otherwise.

When we talk about lease, whether in S'pore, US or elsewhere, it refers to contractual agreement between lessee (tenant) and lessor (landlord) for use of an asset or property, i.e. it is a rental agreement. The lessee does not own the property nor the land on which it sits. The lessee pays a monthly or annual rent.

That's why in 1st World countries, public housing is almost always a rental lease, because no land or property is sold or bought. The lessee pays a monthly rent to the govt to live in the place. The lease is also under legislated rent control to make rentals affordable for the lower-income folk public housing is meant to serve.

On the other hand, HDB tenancy is a long-term rental agreement, disguised as land lease, with the 99-year rent paid upfront. This is a breach of natural justice because (1) a rental tenancy is one in which rents are paid on a regular basis until the tenant moves out or assigns the lease to someone else – if there's a prepaid component it's a deposit against default but never covering the whole tenure; (2) no HDB building lasts 99 years! – which means the HDB is not only collecting prepaid rent, it is collecting it for a fictitious tenure, a tenure that HDB has neither the intention nor means to honour. Which means the HDB in addition to collecting prepaid rent is effectively borrowing additional funds at no cost from the tenant beyond the realistic tenure (say 50 years) – a hefty opportunity cost for the tenant. If this is not usury, what is?

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Agree. But the Govt is aware that politically they are in a wining position as they know people would want a decent roof over the head than worry about their pension 30 years down the road. And they have the monopoly over land.

yellowarse said:

Absolutely. The govt has opened a can of worms by giving lower than market returns on your retirement funds and allowing you to speculate on property with your retirement money, thus depleting your retirement funds. Then they tell you to repay interest on your own money when you sell your property. Make sense? How does paying 2.5% interest on your own money (a ridiculous concept) help replenish your 'coffin money' when most people are living in the very property they use their CPF money to buy and are technically are unable to release those funds without risking homelessness?

Delink superannuation funds from property 'ownership' or tenancy, and give decent returns, if the govt is serious about building up a nest egg for retirees.

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scroobal said:

It the ridiculous pricing that has no resemblance to cost.

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I am glad we are somewhat on the same page regarding this matter.

It was on everyone mind in the early years and Chiam's favourite hobby horse. Despite the relentless questioning the Govt stonewalled the cost question repeatedly. When the HDB builds a housing estate they make sure the residents pay their share of the bus terminus, entry roads, communal amenities all around the huge estate. Unlike most countries where infrastructure come from the state taxes.

All this while one family has used same huge estate along Orchard Road rent free for 50 years but keep claiming that they still living in their old house.

mojito said:

I am glad we are somewhat on the same page regarding this matter.

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scroobal said:

It was on everyone mind in the early years and Chiam's favourite hobby horse. Despite the relentless questioning the Govt stonewalled the cost question repeatedly. When the HDB builds a housing estate they make sure the residents pay their share of the bus terminus, entry roads, communal amenities all around the huge estate. Unlike most countries where infrastructure come from the state taxes.

All this while one family has used same huge estate along Orchard Road rent free for 50 years but keep claiming that they still living in their old house.

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we need a new govt to take over and investigate whether there was any misuse or abuse of power

TracyTan866 said:

we need a new govt to take over and investigate whether there was any misuse or abuse of power

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You must be some kind of fucking retard. Well, are you? There are 3 pages and over 50 posts on this thread explaining things and you are still wondering whether there was any misuse or abuse of power? hahahhahahhahahahhahahaha

scroobal said:

Roy in his article had a para where he says that after paying so much at the end the flat has no value. See below the extract of his comment. That is how leasehold works for any asset. He should have argued about pricing and the actual build cost to the govt which where the PAP screws the public and refused to reveal its cost calculations.

""Can someone please explain to me why we have to pay $600,000 (after 30 years) on a $300,000 for a flat that has absolutely no value at the end of its lease? ""

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maybe Roy should just come on here and read this thread. In theory, the flat has no value to the "buyer" at the beginning of the lease as he does not own it. Only the lease itself has value.

yellowarse said:

Delink superannuation funds from property 'ownership' or tenancy, and give decent returns, if the govt is serious about building up a nest egg for retirees.

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In theory, it sounds good, but in reality, its probably too late now. And to do it would be political suicide. the PAP has started on this slippery slope without realizing there is no turning back. Lets say for example they delink the CPF from HDB flat "purchases", in other words, CPF money will no longer be allowed to be used to "purchase" flats, but will be used instead for its intended purpose of retirement management. I can safely assure you the prices for HDB flats will drop by 1/3 over night. When "buyers" are not allowed to use the $100K, or $200K, or $300k in their CPF as down payment and they had to actually save that money or get it from other sources, it will kill the market overnight by pricing many buyers out of it. SOmeone who paid $500K for their flats 2 years ago will suddenly see the price of their flats devalue because the resale market is just not there anymore due to the inability of potential buyers to use their CPF funds. How much incentive do they now have to vote PAP at the next election? New buyers might be happy to buy the lower price flats, but really, they are a small minority of flat dwellers. In addition to this, the price of a HDB flat underpins the prices of the rest of real estate in SIngapore. Leasehold and freehold properties take their cue from HDB prices. If HDB prices take a hit due to the inability to use CPF, than private condos will also decline in price. As well, if people cannot use their CPF for their non-HDB flat purchases, the market for private properties will fall too. The Lees and the Kwas are collectively some of the largest property owners in singapore, along with their PAP cronies, they are not interested at all in seeing their private properties decline in value. This is why they cannot delink the CPF from HDB. They neither have the political will, nor the financial incentive to do so.

But I know that I only pay 20% and my employer pays 16%. So on his chart, we are much lower than other countries such as Italy, China, Malaysia, Netherlands, Switzerland, Finland and so on.

He failed to see that 16% from employer is part of the overall pay package. That his money and not extra money given by employer for free. After all doesn't the employee 20% also comes from the employer?

Papsmearer said:

maybe Roy should just come on here and read this thread. In theory, the flat has no value to the "buyer" at the beginning of the lease as he does not own it. Only the lease itself has value.

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It is not fruitful to insist on ascribing the value of a HDB flat to either the physical property or to the lease. The flat serves the utilitarian purpose of providing shelter and security. A 99-year lease is longer than the (remaining) lifespan of anyone who purchases the flat in early adulthood.

You may argue that for such a short lease, the depreciation becomes exponentially rapid after 40 or 45 years, but again, the person is already in old age and has no use for whatever value the lease has. All he needs is the shelter and security of the physical apartment. The flat may be worth $100 for all he cares.

The harm is done at the beginning of the young adult's life when he has to purchase the flat at such an exorbitant price that he has no money left to retire comfortably. So these are the pertinent questions:

(a) Why is something of such essential utility (shelter, security) being sold at such a high price
(b) Why is land cost factored into price when the flat residents does not own the land
(c) Why is the CPF not used for retirement anymore but instead converted to an escrow account
(d) Why does it take 3-5 years for a couple to get a BTO flat. Note that a woman's fertility drops exponentially after a certain age.
(e) Why is HDB not transparent in construction cost and land cost.
(f) Why is money transferred from left to right hand of the govt apparatus at the peoples' expense?