Wednesday, February 22, 2012

Silver Housing Needs

One of the innovative introductions in this year's budget is the "Silver Housing Bonus". As Tharman Shanmugaratnam presents it, there's $20,000 worth of free money for the taking if one chooses to downgrade from a 3-room flat to a studio apartment. The "net proceeds" of $250,000 from the disposal of the flat can go into a CPF Life account, which pays out about $1,200 a month. So why are the senior citizens not excited about the new deal?

For starters, there's no $250,000 bonanza. The downgraders will still need a roof over their heads, and a studio apartment will cost up to $119,000 at current HDB "subsidised" prices - which include the hidden "reserves" component alluded to by Mah Bow Tan. Once again, HDB stand to benefit from the transaction, at undisclosed profit margins. The reduced sum means that the associated CPF Life payout will be nearly halved. Living space will also shrink to 45 sq meters. And there's a waiting list. Last month 's launch in Tampines saw 322 applicants for 180 units, making a subscription rate of 1.7 times.

Mrs Chua is one of those less enthusiatic about the scheme, "I like the space that I have (4-room); if I can afford to keep the flat, I would rather do it." Sociologist Tan understands the premium on living space, "Perhaps the flat is where their children will meet them on weekends and where their grandchildren are sent on weekdays, so they would still prefer to live in a larger flat." No one is looking forward to a lower standard of living, not after a life-time of toil. Others may have to hang on to their older, more spacious units for other pragmatic reasons. Their children have just started work and savings, and economic propects, are just not enough to commit to a 30 year mortgage. If every cloud has a silver lining, this ain't it.

Another reason for the lukewarm response is that the Silver Housing scheme is targetted at those with $10,000 in their CPF balance. Or less. With those kind of financial resources available, you will be hard put to find a nursing home willing to take you in for the long haul. Who says there are no poor people in a developed country?
Plan "B" would have to be the group home for the elderly, such as the one-room rental units at Pipit Road. The flats are partitioned so that each resident has his "own little corner" in the communal quarters. For all we know, Mas Selamat may have better accommodation arrangements.
Here's something to look forward to.....


  1. When you are young they tell you Upgrade Upgrade Upgrade....when you are old its downgrade downgrade downgrade.

    Will they Downgrade when their time is up????

  2. Those who choose to believe
    in nincompoops deserve to be
    their preys.

  3. 2 big problems with studio flats, apart from the 45sqm size. First, they are only for 30-years lease --- the price is the same or even more expensive than a new 2-rm flat, but the lease of the studio is only 30% of the 2-rm. The price of studio flats should be $30K-$40K at the most, instead of the $100K-$120K currently.

    What happens when the 30 years is up, and you're still alive? PAP says they will take a compassionate approach and will cross the bridge when they come to it. No black & white legislation on this to protect the lessees of studio flats. Doesn't sound reassuring at all.

    Second, studio flats cannot be resold (not that there will be any buyers for something with less than 30 years lease anyway), and you cannot re-assign or pass it down to your descendants or beneficiaries. When you die, the studio flat must be returned back to HDB. HDB will pay back the pro-rated value of the studio flat to your next-of-kin. Of course don't expect any COV.

  4. From a Financial point of view, this is a bad investment. You cannot sell the flat or give it to your children. It is a 100% loss the moment you buy one and die a year later. I think silver citizen better buy with their eyes open. I agree with the previous writer that $100k is definately too much to pay for something with such silly requirements.

    In terms of per square foot and years remnaining, there is absolutely no joy to shout about!

  5. Have a heart. The proposed procedure only benefit HDB. There is nothing cheap about the studio flat if you calculate based on per square foot and years remaining.

    The only fair way is for HDB to demand a deposit of say $100k so that there is no way the tenant could default. Deduct the money say $300 per month retal from the tenant ($300 x 12month x 30years = $108,000).

    If the tenant dies before the 30 years, return the remaining amount to the next of kin. HDB may continue to appy other clauses e.g. no resale, cannot handover to next of kin etc.

    This is really the way to help the old people after they downgrade to studio.

  6. There's no silver lining. Just another hook, line and sinker to get squeeze the last drop of blood & pounds from them. This is a silver bullet any sane elderly should dodge it.

  7. Another scheme to hookwink the clueless folks.

  8. Regarding studio flats, HDB will pay back the pro-rated price if you die or give up the flat before the 30-year lease.

    E.g. you die after 10 years staying in studio flat. HDB pays your surviving children $100,000 X 20 / 30 = $66,666.67

    But still lose because of inflation, and in the first place the studio flat is overpriced and full of ridiculous rules. The rules make studio flats just like HDB flats in the 1950s and 1960s.

    For old folks thinking of downgrade, better to apply for BTO 2-rm flats or 3-rm flats. There will be income ceiling but for old folks who are retired or low-income then should be OK. New 3-rm flats are also more expensive than studio flats, but at least you get bigger space, extra bedroom, and new 99-years lease (same also for new 2-rm flat). You can also pass on your 2-rm or 3-rm flat to your kids, or re-sell if you want.

    Con is that to downgrade to new 2-rm or 3-rm flat, you need to pay HDB sales levy from your current HDB flat. About $40K to $50K depending on the size of your current HDB flat.

  9. Wait a minute, didn't the PAP minister said just a couple of days ago that the MAJORITY of the feedback to the new budget has been POSITIVE? I guess those POSITIVE THINKERS have read the above post, huh?

  10. Agreed with all who commented. & Tattler that this initiative is no non starter and a joke ! Just like the other part in the Budget about giving S$1.1Billion to the Public Listed very profitable bus operators.

  11. If we look at those current HDB contracts awarded, S$120K is roughly the ballpark average cost of a typical 4-room HDB flat.

    So for the studio apartment to be priced around S$120K for something that is half in area with a shorter 1/3 lease, what do you think is HDB's profit margin made at the expense of senior citizens ?

    To think that they are so generous in giving a S$20K bonus, again the devil is in the details, isn't it ? Which begs the question : Why is HDB still so secretive about actual construction costs & true subsidies ?

  12. Khuen Way, the $1.1B give-away is still a mystery. Can someone let us know exactly how it works? Little details are known as at this moment. SMRT and SBS are making profits year after year, we are still unable to understand why government needs to help them. For free?

  13. Eh sorry ah, i think u got the meaning of "net" wrongly already leh.. It means that even after selling yr 3 Room Flat you still have $250k left over (3-rm sells for abt $350k).

    A bit hard to understand lah, your post. U say pp "not excited about the scheme" but you also say got long waiting list for Studio Apts.. confusing lei..Why CPF Life will halve and HDB benefit?

  14. One of the most complex and significant financial events in peoples' lives is the purchase or sale of a home or investment property.

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