Updated: 09/03/2014 02:17

Housing analysts have their reservations about a lease buyback scheme for private home owners

Housing analysts have their reservations about a lease buyback scheme for private home owners

Industry experts have their reservations about a lease buyback scheme for private home owners. 

The were commenting on the possibility that the government would look at such a scheme to help private home owners unlock cash for retirement. 

During a live radio show on Monday night, Prime Minister Lee Hsien Loong said the Government is prepared to study ways to help elderly private home owners monetise their properties for retirement. 

In theory, he said private houses should also be eligible for a buyback scheme. 

But property analyst, Ku Swee Yong, says such a scheme might be difficult to implement. 

"For private condominiums and apartments, which take up about 70 per cent of Singapore's properties, it's very difficult to implement such a rule. In the case of HDB flat, lease buyback works because you never own a share of the land in HDB, you buy a right of use for 99 years. In private property market, you either own your land or the developer bought the land, not the government, it's a category where foreigners participate in, and we are disrupting the free market in the private property segment, which consists of foreign investors, developers and banks lending. That isn't very fair." 

Another analyst, Chris Koh, says there are other options available. 

"The sale of their private property will allow them to downgrade to another smaller property or even HDB flat." 

Instead of a lease buyback scheme for private property owners, Mr Ku suggests the government loosens some of its cooling measures like the Total Debt Servicing Ratio or TDSR. 

The TDSR limits a borrower's loan repayments to 60 per cent of his monthly income. 

"Before the TDSR rules came out, if your property were worth a million dollars, even if you were retired, and you've fully paid up your property, you go to the bank, you can borrow against your apartment, that would be for your own investment and day to day living. You could also use it to buy a smaller house. So, TDSR should give some weightage to asset value, but under the current rules, only your income counts." 

Political observer, Eugene Tan wondered if the government should be stepping in to help asset rich but cash poor owners of private property. 

"The key concern, we have to question, whether the arrangement is equitable. But it also depends on where one stands, the general perception is that private properties' value has tendency to increase more than public housing, so question is whether the government should step in." 

-By Lee Gim Siong

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