A Creative Way To Tap Value

Source : The Straits Times, Wed, Aug 22, 2007

AS YOUNG as it is, Singapore already is a remarkable success story.

The economy today is strong, and growing in new directions as Singapore attempts to secure the future too. But it isn't without its challenges.

Perhaps the greatest of these is the widening income gap, itself a consequence of the rapid development that has taken the economy to ever higher levels of sophistication.

So in Prime Minister Lee Hsien Loong's speech on Sunday were to be found fresh initiatives to address this problem. The plan is many faceted and complex.

Among the various measures that captured our attention, one in particular was the attempt to allow more people to bank a retirement nest egg through the Housing Board.

Indeed, if creative planning has been the foundation of Singapore's prosperity,
clearly innovation can equally be employed to help those who have not received as many benefits as others from the country's growth.

Mostly, the plan is straightforward. The Additional CPF Housing Grant for lower-income families will be raised to a maximum of $30,000, a 50 per cent increase.

Also, the monthly-household-income ceiling for eligibility rises a third to $4,000.

There is no better way of building a retirement nest egg than through home ownership.

As Mr Lee noted, a three-room flat in the early 1970s cost around $8,000, but today would be worth $160,000 or more.

The most creative aspect of the HDB plan affects the elderly poor.

It involves shortening the lease on their flats to 30 years, and buying out the foregone lease period with a lump sum payment upfront and monthly payouts.

Since only the elderly in two- or three-room apartments who have had only one HDB flat - that is, those who haven't traded up the HDB ladder - are eligible, the scheme targets those who perhaps need the most help in their retirement age.

By letting people continue to live in their homes and still collect a financial windfall, this is a sympathetic approach to a pressing issue.

We suspect, as well, that because this is a government scheme, the take-up rate might prove better than for reverse mortgages.

Clearly, both HDB initiatives will cost money.

True, it is money Singapore can afford at present.

But if provisions need to be made for the future, one avenue available to the Government might be a modest reduction in the subsidies inherent in a HDB flat for those who trade up, specifically those who can afford a 'second bite' of the cherry.

In this way might a larger portion of society become tangibly invested in helping those who need a little boost.