Lease Buyback Scheme sees low take-up rate

The phrase “asset rich, cash poor” is a common refrain in Singapore.

But property watchers said schemes aimed at helping elderly Singaporeans unlock the value of their homes, are slow to find favour.

That’s because the schemes are either too restrictive, or not well understood.

The Lease Buyback Scheme was introduced in March 2009 to help low-income elderly living in 3-room and smaller flats unlock the value of their properties.

Owners sell a portion of their flat’s lease back to the Housing Board, and are left with a 30-year lease.

The money gained from this transaction is put into an annuity, to provide a lifelong payout for the owners.

They’ll also get S$10,000 (S$5,000 cash upfront, S$5,000 put towards buying an annuity) as an added incentive.

But take-up rate for the scheme has been low.

HDB said 446 households have taken up the Lease Buyback Scheme in the past three years.

This is less than two per cent of total eligible households.

HDB said that 95 of the households took up the scheme last year.

Nicholas Mak, executive director of Research and Consultancy at SLP International, said: “Some of the existing flat owners may be unfamiliar with the details of the Lease Buyback Scheme, or they may be uncertain about what will happen after the expiry of the remaining 30 years of the lease. And they still wish to continue to live in their flats.”

HDB said past surveys show that the majority of elderly respondents do not need to monetise their flat, as they have adequate financial support.

A Silver Housing Bonus was introduced in this year’s Budget.

Senior citizens who downgrade to a 3-room or smaller flat will get a S$20,000 bonus – with S$15,000 in cash and S$5,000 to the CPF accounts.

But property watchers said some may resist such a move due to sentimental reasons.

Mohd Ismail, CEO of PropNex, said: “People are generally cautious when it comes to having to sell their existing property, or to downgrade, because assets are very personal to them, and it is generally an Asian culture.”

Communication also remains a challenge, as some elderly households said they are still confused over what the various schemes entail.

During a Mandarin Budget Forum organised by MediaCorp, Health Minister Gan Kim Yong said the government is always concerned about how to explain new schemes to the elderly.

He added that the government will work with grassroots organisations to help spread the word.

Source : Channel NewsAsia – 27 Feb 2012

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