Some Hdb Buyers In Afix Over Cash Proceeds Rule

[Warrior88 0]

Straits Times Singapore, 22 Jul, 2010, Thursday

Some HDB buyers in a fix over cash proceeds rule

Half of gains must go towards next flat but they have spent money

By Teo Wan Gek

A SMALL number of HDB buyers now face a cash shortfall and cannot buy replacement homes of their choice, due to changes to the HDB loan policy in March.

These buyers sold their flats before a new rule stated that buyers must use 50 per cent of their cash proceeds to finance their next flat. They are now stuck because they have spent the cash.

A Straits Times check with 16 MPs found that a small number of such buyers have showed up at their Meet-the-People sessions.

Aljunied GRC MP Cynthia Phua has five constituents caught out by the policy change; Dr Lim Wee Kiak, an MP for Sembawang GRC, has seven; Mr Yeo Guat Kwang, also of Aljunied GRC, has two and Madam Ho Geok Choo of West Coast GRC has 10.

These buyers are divided into two groups: downgraders who sold their flats and used the cash proceeds to settle debts, or genuine upgraders who need a bigger flat for their families.

Among those who sought Madam Phua’s help were a couple who sold their flat in 2006. When they tried to buy a flat this year, they were surprised that the loan amount granted by HDB was reduced by half the cash proceeds from the first sale.

HDB changed its loan policy in March to make second concessionary loans available to downgraders. Such loans were previously given only to upgraders. HDB also laid down a new rule – loan applicants must use the full CPF proceeds and half the cash proceeds from the sale of the previous flat or $25,000, whichever is less, to finance their next home. The change was to encourage financial prudence.

While Madam Phua supports the move to prevent home owners from cashing out on their flats, she does not think it is fair for those who sold their flats before the policy change in March to be subject to the new requirement.

‘HDB will now give a loan only less half of the cash proceeds amount, but that’s not enough money to buy a new home and most of them have already spent their cash proceeds,’ she said.

During Monday’s Parliament sitting, Madam Phua appealed to National Development Minister Mah Bow Tan on behalf of her constituent who sold his flat in 2006.

Mr Mah said in reply that the HDB gave home buyers a second subsidised loan so they could buy something they really needed. ‘If you have already made a lot of money, then I think it is only fair that the HDB takes that into account, irrespective of when you have sold a flat,’ he said.

He also felt that home buyers like the one Madam Phua cited were ‘rare’, as most bought a second flat soon after they sold their first. Still, he promised to review appeals on a case-by-case basis.

The HDB also provided figures to show that the policy change benefited large numbers of downgraders.

Between March and May 31 this year, HDB approved 2,439 applications for a second concessionary loan. Of these, more than half were downsizing or moving to a flat of the same size. These buyers would not have qualified for a second subsidised loan if the policy had not been changed.

On Monday, Mr Mah stressed that the size of the second loan could not be independent of the proceeds from the sale of the previous flat. If it were, that would create a ‘perverse incentive’ for people to upgrade and downgrade ‘to automatically get a larger HDB loan’.

PropNex chief executive Mohamed Ismail said the policy change has helped many flat owners who faced financial hardship and needed to downgrade to a smaller flat. Before the change, they could not apply for a second HDB loan. Many were also unable to secure a bank loan because of their bad credit history, he said.

The new rule has made some more cautious. Mr Jerry Lee, 31, a property agent with HSR Property, has had five clients change their minds about selling since March. ‘Many of them wanted to cash in on their property, but the policy change has made them think twice before selling.’

Wrong timing, now family has no home

MR W. H. Wong, 36, a manager, has been living apart from his wife and two young children for six months and sees no end to their plight in sight.

He sold his four-room flat last August to upgrade to a maisonette but while trying to secure a housing loan, HDB’s loan policy changed and he now faces a cash shortfall for his next purchase.

He still hopes to buy a maisonette, so his parents can move in with him.

For now, his wife and their two children, aged six and four, stay with her parents in Serangoon, while he is with his parents in Chua Chu Kang.

Every evening, he drives to Serangoon to see his family, then heads back to his parents’ four-room flat, which is too small to accommodate his family.

He is frustrated at the situation because, unlike some others, he did not sell his flat for easy cash but to upgrade to a bigger home.

When he sold his flat last August, he received cash proceeds of $57,000. Now, HDB has asked him to fork out half of that sum for his next purchase. HDB has also reduced the size of the loan it will grant him by that amount.

‘The housing loan is now smaller, and the cash-over-valuation for flats is rising. With this new rule, HDB has reduced the amount of cash I have that I could have used to pay for the COV of the new flat,’ he said.

A buoyant market has sent the COV – cash premiums for HDB flats – soaring.

Mr Wong has tried looking for flats with lower COV but to no avail. He also sought the help of his MP Cynthia Phua.

His query: ‘I sold my flat before the policy was implemented. Why does it apply to me?’

In November last year, he applied for an HDB loan to finance the purchase of his second flat.

The board rejected the application as the couple’s combined monthly income exceeded the cap of $8,000.

He re-applied. HDB finally gave him a loan in April. By then, his wife had left her job and the family income was below $8,000.

Now, the problem is that he does not have enough cash to buy a flat of the size he wants.

‘Every maisonette seller is now asking for at least $50,000 in COV. If I give HDB half of my cash proceeds, where do I find the cash to pay for the COV?’ he asked.

‘It’s all wrong timing,’ he lamented.

[gimz63251073 0]

Things to point out:

1. Since he is upgrading, its not that much of a social issue. He can always get back a 5room or 4room. For goodness sake, he owns a car even. Govt should be more concerned with those who REALLY cannot afford a roof, not someone who cannot afford COV for a masionette.

2. Tried to be too smart? Did he get wife to quit, then re-apply for HDB loan? Only he will know the real answer. HDB looks at past year's income, possibility is there to tweak the household income.

3. How can EVERY masionette owner be asking for 50k at least? Another case of wanting to stay at Bishan but willing to pay Jurong prices?

4. Ill-prepared upgrader. Period.

My apologies if i sound mean, but these are just my thoughts.

[ngunadi 2]

My apologies if i sound mean, but these are just my thoughts.

I also agree.

There are more severe cases. I bet many people who think they can downgrade but can't downgrade because the COV is too high. This is the more important case.

[Plastic3 0]

I have a client facing problem with the new rule, she sold her flat 5-years ago due to divorce, been renting rooms since the sale...recently decided to buy a 3-room flat with her daughter but HDB requested them to use quite a substantial amount of the previous sales proceeds in the purchase to get her 2nd loan.

They are not rich folks, I have written an appeal letter to HDB, still waiting for their reply (been 1 week)

Hope HDB can really go through case-by-case and give them some alternative, whether reduction in loan amount or even pay in installments...I feel this new rule hits divorcees really hard...

Edited July 22, 2010 by Plastic3

[therat 18]

we dont know the full story behind.

Why he want to get masionette?

masionette has more room?

They still have 3 bedroom same as 4rm and 5rm

The only had more toilet , has 3 while 4rm and 5rm has 2.

BUT.. those staircase. I believe none of the elder like it.

My grandparent and aunt use to stay @ masionette.

As they grown older, leg start to giving them problem.

masionette basically is a nightmare.

In the end, my aunt downgrade to 4 rm

[therat 18]

Things to point out:

1. Since he is upgrading, its not that much of a social issue. He can always get back a 5room or 4room. For goodness sake, he owns a car even. Govt should be more concerned with those who REALLY cannot afford a roof, not someone who cannot afford COV for a masionette.

2. Tried to be too smart? Did he get wife to quit, then re-apply for HDB loan? Only he will know the real answer. HDB looks at past year's income, possibility is there to tweak the household income.

3. How can EVERY masionette owner be asking for 50k at least? Another case of wanting to stay at Bishan but willing to pay Jurong prices?

4. Ill-prepared upgrader. Period.

My apologies if i sound mean, but these are just my thoughts.

I think he was sabotage by the new HDB rule.

If don't have the new rule, I believe he should not have problem buying the unit.

Wrong timing

[davidbslee 1]

It will only be FAIR if the 50 per cent of their cash proceeds to finance their next flat new rules only applies to those sell & buy after the start of new rules. Just like the new MOP rules applies to those taking bank loan before & after. Hope you get what I mean.

Edited July 22, 2010 by davidbslee

[gimz63251073 0]

I think he was sabotage by the new HDB rule.

If don't have the new rule, I believe he should not have problem buying the unit.

Wrong timing

no doubt he was disadvantaged by the new rules, less cash on hand so less purchasing power.

but the point i wish to highlight is that he failed to make proper planning for upgrading.

1. the 8k income limit, the whole Singapore knows it leh, he should have made proper planning to enable him to get a loan prior to selling. if he exceeded the cap, then let the more needy borrow it. It is highly possible that his wife quit to qualify for hdb loan, a clear loophole actually.

2. not having proper planning in taking hdb loan resulted a long wait in getting a new home. Long wait = facing higher prices everyday in a rising property market. Or was he trying to wait for a property crash? No one really knows.

3. upgrading obviously means he shud have some cash on hand to handle things like agent fees, reno, etc. From what was reported, was he threading on thin buffer? It appears so.

In life, nothing is certain but we must first prepare ourselves. Obviously, failed to plan and given normal circumstances he would have gotten by with no issue. But with the change in rules, he ran into trouble. He could not control the rules, no one could see it coming. But he had not prepared himself properly for the upgrading.

now he may have to incur more $ to get a similar flat as before, i.e. suffer a loss for nothing! As i said, this is less of a concern for the govt, lower priority i would say.

[jeffcraze 0]

no doubt he was disadvantaged by the new rules, less cash on hand so less purchasing power.

but the point i wish to highlight is that he failed to make proper planning for upgrading.

1. the 8k income limit, the whole Singapore knows it leh, he should have made proper planning to enable him to get a loan prior to selling. if he exceeded the cap, then let the more needy borrow it. It is highly possible that his wife quit to qualify for hdb loan, a clear loophole actually.

2. not having proper planning in taking hdb loan resulted a long wait in getting a new home. Long wait = facing higher prices everyday in a rising property market. Or was he trying to wait for a property crash? No one really knows.

3. upgrading obviously means he shud have some cash on hand to handle things like agent fees, reno, etc. From what was reported, was he threading on thin buffer? It appears so.

In life, nothing is certain but we must first prepare ourselves. Obviously, failed to plan and given normal circumstances he would have gotten by with no issue. But with the change in rules, he ran into trouble. He could not control the rules, no one could see it coming. But he had not prepared himself properly for the upgrading.

now he may have to incur more $ to get a similar flat as before, i.e. suffer a loss for nothing! As i said, this is less of a concern for the govt, lower priority i would say.

Well said!

[therat 18]

no doubt he was disadvantaged by the new rules, less cash on hand so less purchasing power.

but the point i wish to highlight is that he failed to make proper planning for upgrading.

1. the 8k income limit, the whole Singapore knows it leh, he should have made proper planning to enable him to get a loan prior to selling. if he exceeded the cap, then let the more needy borrow it. It is highly possible that his wife quit to qualify for hdb loan, a clear loophole actually.

2. not having proper planning in taking hdb loan resulted a long wait in getting a new home. Long wait = facing higher prices everyday in a rising property market. Or was he trying to wait for a property crash? No one really knows.

3. upgrading obviously means he shud have some cash on hand to handle things like agent fees, reno, etc. From what was reported, was he threading on thin buffer? It appears so.

In life, nothing is certain but we must first prepare ourselves. Obviously, failed to plan and given normal circumstances he would have gotten by with no issue. But with the change in rules, he ran into trouble. He could not control the rules, no one could see it coming. But he had not prepared himself properly for the upgrading.

now he may have to incur more $ to get a similar flat as before, i.e. suffer a loss for nothing! As i said, this is less of a concern for the govt, lower priority i would say.

agree with you.

Especially he is a manager.

Don't know is not an excuse.

Very poor planning

[bepgof 20]

Is it really fair to those who sold away their flats way before march 2010, and thereafter getting a flat but found themselves subjected to return 50% of cash proceed to cpf account?

I think our dear minister's body is itchy, need some scratching. He siad those words very cheem which I, ah pek, don't understand abt "fairness" and "making a lot of money". What exactly he was trying to signal?

Why don't put this rule subject to only those who sold after Mar 2010, his body is really itchy? isn't it?

Wonderful part is got ppls want to scratch for him untill he bleed.

If he dares to change the rules to those taking bankloan, sure die flat flat immediately, need not to wait till GE.

Edited July 23, 2010 by bepgof

[therat 18]

hahaha

his horse backside long long time already itchy

bepgof, if he is @ our town council. He sure get big big from you.

[salavanun 0]

I sold my house with a good profit . i was waiting for property to crash badly so i can buy EM at the same price of the 4 room i sold. Never did i expect 50% rule coz i was upgrading. I earn around 8k but i solely depend on the cash profit to pay for COV reno etc etc. pls buy my story

[bepgof 20]

hahaha

his horse backside long long time already itchy

bepgof, if he is @ our town council. He sure get big big from you.

These "make a lot of money" ppls with their backside itchy, die die want to get 2nd HDB "concessionary" loan, never mind, they don't use their hands to scratch, instead , ask MPs' itchy hands to scratch the itchy body. They all need sweet potato powder badly & some more, to cure effectively, must hide behind a door. Why? See my posting in FS thread.

Now is itchness vs fairness, who will win. Sayong, Paul the otopus not around....

Edited July 23, 2010 by bepgof

[gimz63251073 0]

Is it really fair to those who sold away their flats way before march 2010, and thereafter getting a flat but found themselves subjected to return 50% of cash proceed to cpf account?

I think our dear minister's body is itchy, need some scratching. He siad those words very cheem which I, ah pek, don't understand abt "fairness" and "making a lot of money". What exactly he was trying to signal?

hmm, no idea what he intends to do with that rule anyway. My view is that they have set too many complicated rules already!

This 50% thingy will make people think twice about changing flats... not sure if it aids in controlling every increasing prices?

Or maybe his colleagues at HDB already overworked, so he try to lessen their burden? haha...

ministers always talk until very cheem, but they always evade the point.

only MM is direct to point. Accept floods.