‘Modest’ payouts but low-income flat owners will benefit
Experts: Scheme a big help to elderly with little or no retirement income
By Tan Hui Yee, Housing Correspondent
VARIOUS OPTIONS: The buyback plan is the latest in recent years to help retirees use their home to fund their living expenses. Currently, they can sublet their flat, buy an elderly-friendly short-lease apartment or take up a reverse mortgage. — ST FILE PHOTO
PAYOUTS from a new plan to help Housing Board owners fund their retirement are likely to be modest but could still make a big difference to lower-income groups.
That was the initial assessment of financial experts of the Government’s plan announced on Sunday to buy back partial leases from some elderly HDB flat owners.
The big advantage is that they get to stay in their memory-filled homes rather than having to move somewhere new.
Financial experts say one reason the payouts are set to be modest is that only owners of smaller homes - two or three-room flats - qualify for the scheme.
And most of these 200,000 or so flats across Singapore were built 20 to 30 years ago so they have a relatively low value, they say.
The plan involves the HDB shortening a flat’s lease to a remaining 30 years, once a flat owner is 62 or older.
Then the HDB pays a lump sum followed by monthly instalments for the rest of the owner’s life.
Further details on how the scheme will work will be released later.
A typical HDB flat lease is 99 years. If a flat owner bought his home at the age of say 33, such a flat would have 70 years of lease left by the time he turned 62.
That means that by shortening the remaining lease to 30 years, the Government would look at buying the other 40 years in this example.
The details are far from clear yet but the former chief of NTUC Income, Mr Tan Kin Lian, estimated that a three-room flat with 70 years lease remaining, and worth $160,000 on the resale market, would probably net its owner about one-third of that resale value - or about $50,000 - under the scheme.
The plan, announced by Prime Minister Lee Hsien Loong, is the latest in recent years to help retirees use their home to fund their living expenses. Currently, they can sublet their flat, buy an elderly-friendly short-lease apartment or take up a reverse mortgage on their HDB flat.
The last option, which involves pledging their property for a regular stream of income, was introduced by insurer NTUC Income last year but was not well received.
By last September, only 10 HDB flat owners had taken it up. The insurer could not provide current take-up figures at presstime.
The HDB buyback plan is somewhat similar to a reverse mortgage but appears to be aimed at lower-income groups. Home owners must be at least 62, with a two- or three-room unit and have had only one housing subsidy, in order to qualify.
The head of the mortgage division at financial advisory firm New Independent, Mr Geoffrey Ying, said a typical three-room flat owner could be looking at payouts of under $400 a month under the buyback scheme, if reverse mortgage payments are any indication.
But he added: ‘If you are talking about people whose retirement income is low or non-existent, it makes a big difference to them. Every little bit helps.’
Like him, the president of the Society of Financial Service Professionals, Mr Leong Sze Hian, felt the plan should be seen as more of a fall-back option for those without sufficient retirement savings.
For retired nurse Maisie Tan, 90, who lives alone in a one-room flat, every extra option is a good thing. She said: ‘Although I am not struggling financially, I know people who are much more worried about their situation. They could probably benefit from this.’
Source : Straits Times - 21 Aug 2007
Singapore Property - Buy , Sell , Rent , Invest
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