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THE new Flexi scheme for the sale of two-room flats unveiled by the Housing & Development Board (HDB) on Wednesday was lauded by market watchers for offering flexibility in lease tenure for the elderly.
The scheme is the result of the merging of two previous schemes: one was the Studio Apartment (SA) scheme, under which such flats with 30-year leases were sold to those aged at least 55 who had sold a previous flat to fund their retirement; the other was the two-room flat scheme, which offered these flats on a 99-year lease to families and singles.
The merger of the two schemes now offers elderly buyers short-lease options ranging from 15 to 45 years, instead of a fixed 30-year lease option as before.
Some market watchers noted warily, however, that the bar against selling such two-room flats with short leases on the open market - a condition under the old SA scheme - has been retained under the new scheme.
But others argue that, by keeping this condition, the HDB is ensuring that the basic premise of short-lease flats is retained - that of providing a home, rather than a form of investment, for the elderly.
PropNex CEO Mohamed Ismail said: "The greatest benefit of the scheme is that it allows seniors another option at the entry level, to commit to a purchase of a two-room flat and unlock more cash from the sale of their existing flat.
"However, a critical decision has to be made by the interested buyer, as the Flexi scheme does not give the option of selling the flat in the open market - which effectively means that the buyer will not be able to enjoy the possible capital appreciation in future."
HDB said that the final design of the new scheme incorporated feedback from an extensive public consultation held over the past few months.
Under the old SA and two-room flat schemes, flats were either 36 sq m or 45 sq m in size, but studio apartments were cheaper because of their shorter leases and the fact that selling them on the open market was not allowed.
Merging the two schemes into the Flexi Scheme gives flexibility in three areas - type of buyers, lease tenure and fittings.
First-timer and second-timer families and first-timer singles will continue to be offered 99-year two-room Flexi flats.
Citizens aged 55 and above can now choose to buy a two-room Flexi flat on short lease, regardless of whether they have enjoyed housing subsidies previously or own a private residential property. However, if they buy a two-room Flexi flat, they must dispose of their private property within six months of collecting their keys to their two-room unit.
The purchase of such short-lease flats must be financed through cash or CPF savings, not mortgage loans. Subletting and resale are not allowed.
Those who buy two-room Flexi flats on 99-year leases will continue to have the option of flooring and sanitary fittings under the Optional Component Scheme (OCS); buyers of short-lease flats can opt for a fuller package with more built-in features.
HDB said that more than 70 Build-To-Order (BTO) projects across Singapore to be launched over the next five years will come with two-room Flexi flats, starting from the next BTO flat exercise in Bidadari and Punggol in September.
At least 40 per cent, subject to a minimum of 100 units, of the two-room Flexi flats in each BTO project will be set aside for the elderly, it added.
Pricing of the two-room Flexi flats take into account the lease tenure, whether buyers are first-timers, second-timers, or others, as well as the location and prevailing market conditions.
For illustration purposes, HDB said that the base price (before housing grants and amounts payable) of a two-room flat with a 99-year lease could be around S$110,000.
Flats with a 40-year lease might cost around S$62,800, and those with a 15-year lease, around S$36,700.
Some market watchers asked how HDB will value flats with shorter leases and the residual lease values when these flats are returned to HDB.
ERA Realty key executive officer Eugene Lim suggested that the way the prices of flats on shorter leases are arrived at could be made clearer: "Given that there are many lengths of leases available for the elderly, perhaps some explanation (is needed) as to how the prices of flats with shorter tenures are derived."
SLP International executive director Nicholas Mak said that prohibiting the resale of short-lease two-room flats "goes back to the original principle that this is a home, not an asset".
"This is essentially paying a rent to HDB. Instead of paying monthly, they pay a lump-sum," he said.
However, he asked whether the government needs to set aside more funds to buy back some of these two-room Flexi flats as the senior population in Singapore grows and more of these flats are sold.
"Generally, this should not be a problem if the future government of the day were to budget for such expenses in advance. Otherwise, it could be a burden on the taxpayers in the future," he said.
Century21 Singapore chief executive Ku Swee Yong noted that if the scheme is highly subscribed, buyers collecting their keys four to five years from now will have to release their existing property in the resale market. "This will add pressure to existing HDB resale prices," he said.
Out of the one million HDB flats here, some 300,000 flats are owned by citizens aged 55 years and above, and 80 per cent of these flats are fully paid up, said HDB. But monetisation rate has been low.
Since the SA scheme was introduced in 1998, 8,000 studio apartments have been completed and 4,000 are still being built.
Since 2006, when HDB resumed building two-room flats, it has launched about 12,500 two-room flats under the BTO exercises; of the number, about 8,600 units were under construction as at end-July.
The two-room Flexi scheme was mooted by National Development Minister Khaw Boon Wan in March. In June, he hinted that the income ceiling of S$10,000 for HDB flats and S$12,000 for executive condominiums would be raised.
Expectations are running high in the market that Prime Minister Lee Hsien Loong will visit the subject of the income ceiling in his National Day Rally speech on Sunday.