Offer cheaper flats with a condition - sell them back to HDB

The Straits Times; Published on Oct 24, 2011
Offer cheaper flats with a condition - sell them back to HDB
IN HER letter, Ms Chen Xinyi argued that restricting resale of three-room flats to only low-income earners, and pegging resale prices to the original sales price plus the annual inflation rate will disadvantage current as well as future three-room home owners, as they will be unable to leverage on capital gains from the asset to upgrade to a larger flat ('Restricting sale and price of resale 3-room flats won't work'; last Thursday).

There is a legitimate need to supply flats to citizens who simply want a place to live, and are not concerned about capital gains.
Yet if the Government continues to build more flats to keep prices at low levels, existing owners like Ms Chen, who hope for capital appreciation, will be out of luck. There is clearly a need to balance the interests of the two groups.
I suggest that a new restricted sale scheme be implemented for new HDB flats. Then those who buy flats directly from the HDB can choose to buy either under the restricted sale scheme or the current (open market) scheme.
Under the restricted sale scheme, buyers will pay a substantially lower price to the Housing Board. But they must sell the unit back to HDB at the original purchase price, depreciated for the length of stay and adjusted for inflation.
Additional rules like no subletting (regardless of how long the owner has lived in the flat) can also be imposed. In effect, it is a long-term prepaid rental scheme, but with looser income restrictions than existing rental schemes.
The intent of this scheme is to supply flats at a steep discount to citizens who want the flats to simply live in, while isolating their effects on citizens who wish to see the value of their flats appreciate.
The crux of the problem is that HDB flats' resale prices are directly affected by the direct sale prices. One cannot have the best of both worlds, but one should be allowed to choose the scheme that best suits one's needs.
Wah June Hwang
http://www.straitstimes.com/STForum/Story/STIStory_726515.html
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