Wednesday, September 15, 2010

New HDB rule on overseas home ownership raises questions

by Conrad Raj

The recent measures by the Government to prevent a property bubble in Singapore are generally welcome.

However, like all such measures, they sometimes appear to have unintended effects. In some cases, they may appear to affect people who probably were never meant to be the target of those measures.

Take the case of those who own private property not in Singapore but abroad. According to the new rules, a person who buys a non-subsidised public housing flat after the end of last month can only purchase a private property after living in the HDB apartment for a minimum of five years.

Those now own private properties and want to buy a HDB flat will have to sell their private property within six months of their HDB purchase. It does not matter if the private property is here or abroad.

Those who fail to declare their ownership of private properties or make a false declaration face fines of up to $5,000 or a prison term of up to six months, or both. The HDB can also compulsorily acquire its property if it discovers a false declaration has been made after the buyer takes possession of the flat. But many will get away with it for it is impossible or impractical to verify property ownership abroad.

Still, why penalise those having private properties abroad in the first place? How do these people compete for properties here? How are you going to attract foreign talent if they have to give up homes they may have to go back to one of these days - unless you intend to more or less imprison them here?

Not all foreign talent attract the kind of remuneration or pay packages that will allow them to buy or rent private property here. It may make more sense for these people to buy their own HDB flats. And as already reported, permanent residents who inherit properties overseas can also be placed in a quandary. Do you dispose of your inheritance, no matter what the sentimental value attached?

I know foreigners have been accused of driving property prices here sky high. But if you want to attract talent, you have to provide the infrastructure to accommodate them. The solution lies in building more flats, not in depriving them of what they own overseas.

While property prices here, both private and public, are generally expensive, a property in Malaysia or elsewhere abroad, including Australia may be relatively cheap - sometimes one third or less the cost of a four-room HDB flat here.

In fact I know of many friends who have properties in Perth or Malaysia which they use for vacations abroad. Now the new rules will not allow for such luxuries. Why?

One lady wrote in to the papers to say she had a small property in Malaysia which now houses her parents. And she had paid the option for a HDB flat here. Now she has to give up the option or leave her parents homeless. Were the rules meant for such cases?

What about retirement properties overseas? Do you have to live five years in an HDB flat before deciding to invest in them? By then, those properties may be beyond your reach. Prices do not go up only in Singapore.

At one time, the Government itself was promoting property ownership as one of the best forms of investment. That was why it relaxed the rules on private property ownership for HDB flat owners. Now it has made a dramatic U-turn, even where there is no competition in the property market here.

How is owning overseas private property going to impact on local property prices? Perhaps the Government hopes to lower prices by keeping out a section of the population with private flats abroad. There must be quite a large number of people owning private property abroad for them to have an impact on property prices here and for the authorities to want to enforce the prohibitions.

For sure the HDB has said that it is prepared to exercise flexibility on a case by case basis, depending on the merits of each transaction. But you cannot make a property purchase in the hope that the case will have merit in the eyes of an official with subjective views. The rules on the exceptions must be clearly spelt out for all to know and act accordingly. If there is a rejection the reason must be given.

All too often here, things are rejected without any explanation although you may be allowed to apply again, not knowing why you were rejected in the first place. There must be greater transparency and people must be aware of the clear line of thought instead of thinking that the decision depended on the whims and fancies of the person in authority.


The writer is a Editor-At-Large at Today.


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