Monday, March 29, 2010

HDB flat sales proceeds and CPF

According to an article from Channelnewsasia.com (reproduced below), at a forum organized by REACH, PM Lee announced that the government “is exploring how it can further tie a person's CPF to the purchase and sale of an HDB flat”. The implication seems to be that sales proceeds from HDB flats will be returned to CPF.

I have two questions.

“It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit.”

So, if they do not ask their MP for help in getting a rental unit then the authorities would not be so concerned?

“Prime Minister Lee said this goes against the aim of these homes as assets for life.”

So are we to now understand that it is more important to preserve the the government’s aim than it is to allow the indebted person to clear his debt and start afresh?

Somewhere along the line I seem to have lost my ability to understand the government’s rationale and priorities.

I think I would be better able to understand it if the rationale had been that there is too much buying and selling from people trying to extract cash out of their houses and getting fresh loans for the next, and thus this measure is to prevent them from increasing their indebtedness. Although I would have preferred less government intervention, but at least it would have been understandable. But to do so to prevent a debtor from selling his home to clear his debt boggles my mind.

Are we down to treating symptoms only? Is this scheme going to be accompanied by some other schemes to help the indebted person sort out his financial predicament?

Am I old-fashioned to think that elected representatives are elected and paid by taxpayers to help the people they represent? Is this the help we can expect when we are down?

How is the HDB flat an asset when it cannot be utilised as we will? Private properties can be sold to repay debts but not HDB flats?

What about foreclosures / mortgage debts? Would banks still have first charge over CPF? Does this mean that sales proceeds from the sale of HDB flats can be used to repay bank loans but not other debts?

It seems I lied when I said I have two questions.

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From : Channelnewsasia.com
Title : Govt to explore ways to increase use of CPF for buying HDB flats
By : Hoe Yeen Nie
Date : 27 Mar 2010 2131 hrs (GMT + 8hrs)

SINGAPORE: The government is exploring how it can further tie a person's CPF to the purchase and sale of an HDB flat.
The aim is to strengthen the message that property is an asset for one's old age.
Prime Minister Lee Hsien Loong said this at a forum organised by REACH, the government's feedback unit.
It is a growing trend that has got authorities concerned: Home-owners selling HDB flats to pay off debts, only then to ask their MP for help in getting a rental unit.
Prime Minister Lee said this goes against the aim of these homes as assets for life.
"When we help people to own a home, it's really for you for life," Mr Lee said. "When you're not so old, and you've bought the house, and now you see that the pot of gold is down there and you ignore the 'please don't break the glass sign' and you break the glass and take the money out straightaway, then what happens to you? Or more importantly, your children and your dependents? Where do they go?"
Hence, the government wants to strengthen the CPF route in the buying and selling of flats.
"Like what we've been doing with the Additional Housing Grant - that grant we give you into your CPF, you can use it to buy a house," explained the Prime Minister.
"If you sell the house, the money goes back into the CPF. So if you're buying another house, you can use that for another house. If you're not buying another house, the money is there for your old age."
On tackling income inequality, the Prime Minister said the point was not to measure the size of the gap, but to look at how the poor can be made better off.
Access to a good education and a high rate of home ownership are two of the best things the government has done.
However, Mr Lee noted there are some people who will be left behind.
"And my advice is, please try to help yourself. And particularly, please help your children to break out of this cycle," he said. "The government will help them, but you must help them too."
Said Dr Vivian Balakrishnan, Minister for Community Development, Youth and Sports: "It's not just about dollars. It's how you deliver the dollars, how you deliver assistance so that people make the right decisions for themselves and their children.
"If you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, where you will have food on the table. Even if you can't afford it, we will have meals delivered to you. You will get healthcare.
"Do not lose sight of the fundamentals. And I am confident that we have done our duty for the people who need our help."
The hour-long dialogue also saw questions on the teaching of the Chinese language, and more help for singles.
In response to a question on casino entry fees, Mr Lee said the aim was not to prevent Singaporeans and permanent residents from gambling. He added that gambling was not harmful if seen as a form of entertainment, but it does become a concern when people get addicted.
The dialogue session is part of a forum on securing Singapore's future.
- CNA/yb

3 comments:

  1. In my view, HDB flat owners who need cash and become bankrupt will still have their HDB flat. In the case of private properties, they have to sell everything including their home if they are bankrupted.

    Since the HDB flat is protected from bankruptcy proceedings, it makes less sense to sell the flat to repay the creditors than to refuse to pay and keep the flat. Especially when most people don't "start afresh" if they sell their flat and use the cash - they'll only end up broke instead.

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  2. Dear Contrarian,
    Although I agree that the HDB flat owner would probably be better off declaring bankruptcy, refuse to pay and keep his flat, but that is an individual decision that each should make for himself. After all, it is only right to repay the money one has borrowed. If a person chooses to honour his obligations vs keeping his flat, it should not be the government's role to prevent him from doing so. And what about the people who lent him money who may be relatives and friends? Do they not deserve to get their money back? I suppose if the creditors are corporate entities, most people would choose the route you have outlined, but that does not require any change to current rules.

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  3. This pap govt wants people to vote for them but come to problems,they want to play tai chi.Don't because of a few cases who have to sell their flats and pay debt, then you as a PM can't handle it and need to change rules to avoid people from getting rental flats.

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