Prices of resale flats may increase by another 10 per cent
October 14th, 2009 | 
Author: From our Correspondent
In an interview with Lianhe Wanbao, Financial Consultant Mr Leong Sze Hian predicted that prices of resale HDB flats may increased by another 10 per cent with the government’s announcement that Singapore is out of recession.
ERA Deputy CEO Mr Lin Dong Rong also lend support to Mr Leong’s views that prices will continue to rise, though at a slower rate.
The price index of resale flats had hit a record high of 144.7 recently, surpassing the peak of 136.9 in the fourth quarter of 1996.
There are three main reasons for the continued rise in the prices of HDB flats despite the gloomy and uncertain economy:
1. Limited supply of flats: Though the government has promised to speed up the construction of new flats, they can only cater to those who are willing to wait for three years or more. Buyers who need a place to stay urgently will have to buy a resale flat.
2. Influx of foreigners: According to recent data released by ERA, 40 per cent of buyers of resale flats are PRS with substantial buying power which helps to keep the prices up.
3. The tenure of housing loans given by banks is now 35 years compared to 30 years in the past. This enables more buyers to acquire a loan to purchase the flats which are getting more and more expensive.
Though the prices of HDB has skyrocketed over the last few months, the government is adamant that they remain “affordable” to ordinary Singaporeans.
National Development Minister Mah Bow Tan chided Singaporeans for being too “fussy” and urge buyers to “plan ahead” when purchasing a flat.
In a desperate attempt to placate angry Singaporeans who find themselves increasingly priced out of the reach of the public housing market, HDB released more than two thousand “balanced” flats left from previous sales to the market.
In less than a week, there were more than 12,000 applications for the flats, an indication of how severe the housing problem is.
An online petition started by concerned Singaporeans to lobby HDB to intervene to cool the housing market has fallen on deaf ears.
Replies by HDB officials through the state media seem to suggest that they are grossly out of touch with the ground sentiment.
Being a government housing agency, HDB should prioritize enabling first time buyers to own a home rather than to make a profit from the sale of flats.
The government had consistently argued that rising prices of HDB flats help to generate wealth for Singaporeans. However, unless one emigrate or downgrade to a smaller place, it will be impossible for one to unlock the value of their flats in such an inflationary market.
The primary reason for the escalation of prices lies in the increase in population via immigration. HDB should have foreseen this scenario years back and build more flats to meet the rising demand.
It is obvious that there is a lapse of judgement somewhere in the administration. Without a strong opposition in parliament to hold the ruling party accountable for its actions, there is nothing Singaporeans can do other than to indulge in their favorite past-time of complaining, whining and lamenting to one another.
Posted in Editorial
35 yrs tenure? that is crazy…
In order to keep the monthly loan affordable… tenure becomes longer and longer… that is not the correct way to “fine tune”… sooner or later, we will have ah mah and ah peks who are in their 70s and are still financing their housing loans… What a shitty life here is turning out to be…
Absolutely crazy!
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Good article / Good points, as usual from TR.
Everyone can see what the problem is with PUBLIC Housing in Singapore except Minister MBT who seems to be blind to it when he should be the most alert, as the Minister in charge of PUBLIC Housing.
Any fool can tell you that there must be a shortage of PUBLIC Housing when prices of PUBLIC Housing keep on rising in a recession.
The biggest fool of all cannot see it because he is too busy counting his S$ million salary.
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Yeah! Malboro got the words right out of my mouth!
35 years?!?
30 years is already the entire career. add 5 more years to that to make the flat look affordable is ridiculous!
So much for electing the civil servant to help the people!
Sigh… dread to think what the future will be like when come the time for me to retire. Or will I? Retire that is…
Sad…
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Having an open resale market is doing more harm than good. HDB constantly worry about people who abuse the system to make money (before introduction of MOP) now with MOP they decide to push the price up so that profit margins are lowered. Then what happens? The price rises even more with COVs.
Can we close the open market down? around 30,000 property agents a large number of whom specialize in doing HDB flat sales will lose their rice bowl. A good 30k worth of votes not going to the MIWs.
What other options do we have left?
Increase MOP. This might have an adverse effect in mature estates which are generally more attractive. The flats that meet the MOP will have their resale value pumped up further due to lack of supply.
Build more flats? Waiting time involved.
Change the pricing scheme. This is one of the driving factors making resale price inflation next to uncontrollable. Coupled with the increased demand from the population increase, it has become a monster.
Raise the income ceiling. Couples who meet the new ceiling will be entitled to a smaller grant.
Change the HDB interest rates. Adding in conditions that lock the home owner to the flat and making it harsher to sell of the flat the moment MOP is met. I do not know the numbers but I would assume quite a fair bit of flats are sold once MOP is up.
Reward “end-usership”. Interest kickbacks on HDB loans on owners who do not sell their flats on MOP. Subsequent 5 year blocks will also net a return of some interest on the loan. Heck, even additional tax cuts can be awarded.
Increase the pace of revitalisations of mature and semi-mature estates. Spread out the building of new flats a bit more to cater to new-home seekers.
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One more thing to add… the additional 5 more years of loan will result in substaintial additional income for our dear banks. Lucrative business!
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One of the many mission of HDB is to provide affordable homes of quality and value. If 35 yrs or more tenure for an affordable home, I sympathised for those who will continue to pay and pay even after retiring or turning to dust ( which ever comes first).
“The government had consistently argued that rising prices of HDB flats help to generate wealth for Singaporeans” can somebody out tell me what does this statement means ?
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The local property market is now a paranoia of diabolical contradiction. The top end stagnates, the lowest suburban end in frenzy spiral now in struggling of breath to sustain but the HDB’s resale market hot as a fiery cauldron and the ECONOMY BARELY SURVIVING ON STIMULUS DRIP-FED IN INTENSIVE CARE TO DELAY MASSIVE RETRENCHMENT. Forward outlook in 2010 is confidently judged by LHL is uncertain of better than dismal 2009. So why such bewildering contradiction of economic logic to macro-economic environment and considerations?
My take is RESTRICTION OF SUPPLY and ESCALATION in demand pumped up by massive influx of migration intake. It is with POLITICAL ADVANTAGE. More than 85% in public housing feels good, feels rich translate to voting support by way of asset inflation – never mind the recession glooms pervading. The other side of the equation is economic bubbling. The banks needs it badly. Why??
About 41% of all bank loans is for property purchase.
http://www.businesstimes.com.sg/sub/news/story/0,4574,354108,00.html?
If manufacturing is weak and vulnerable needing SPURs, JOb Credit etc etc, the banks need it too. PUMP UP THE REAL ESTATE BUBBLE BUT NOT BY TOO MUCH. The banks need the support of 85% of Singaporeans to be strongly profitable as a pillar of the economy. It is killing two birds with one stone – asset inflation for votes and banking sector survival and prop-up to sustain GDP AND VOTES AS WELL.
If HDB market collapse, suburban fringe condo’s also collapse, and mortgage defaults comes in like an avalanche as unemployment will rise next year (as lHL predicted too) what happen to stability of the bank’s balance sheet? If threatened, are the President be asked to use national reserve to prop up the private banks like Obama’s TARP support for US sub-prime induced banking sector???
Add migration to the equation, is HDB resale prices falling soon as the Government restricts supply…..suddenly increasing 7000 units from nowhere??
We are all fools and played like a game of run-around and politicians must be laughing at this circus.
Is it not time for change?
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There is no need to read too much into these things. The up and down of real estate is nothing unusual to Singapore. The future generation is the only one to suffer. Those who already own property have not worry.
Singapore is a country with limited land area, naturally the price of real estate will rise and rise and rise as the country progress. No one can do a thing about it. The one that will pay the highest price is our children. Their entry level to own a home is far much higher than their predecessor. Maybe someday it will come to a point where they will be price out of reach. How about a housing loan tenure of 70 years for size?
What can opposition do about it if ever they take over the government? Halt all progress and create chaos within the country and make everybody run away out of the country is perhaps a way to bring down the cost of housing.
Another way is to merge with Malaysia and transfer part of our wealth to them. Whatever it may be, we have to choose between the devil and the deep blue sea.
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Ideally housing prices should appreciate accordingly to rate of inflation and then get affected by real demand and supply. I say real demand as a significant amount of transactions are done by speculators wanting to make a quick buck.
I have no sympathy for the speculators when market bubbles break as they were playing a dangerous game to start with. The people who buy property with the intent of utilizing it as a residence suffer a lost in value which can affect their mortgages but those can be negotiated with the banks.
As for golden’s theory, look at Hong Kong. They got a public housing option which are have higher density than what we got here. The private housing sector is rife with speculators and the prices were rather inflated. The public houses are non-tradeable (IF only HDB flats are not tradeable). Figures collected in 2006 state that 48.8% (3.3 million) of the population live in them. Source:wikipedia
There has to be a policy shift that combines reducing the demand and increasing the supply. If the HDB is willing to handle having more flats than needed on their books thing should improve. Thing is MBT’s predecessor had created such a situation in the first place.
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japan real estate super-bubble in the 80s led to 20 plus years of stagnation. is singapore going to repeat japan’s route?
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The surge in property price is due to immigration policy that is too aggressive for Singapore to cope!!! Our third generation leader is not up to the task!!!
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The surge in property price is due to immigration policy that is too aggressive for Singapore to cope!!! Our third generation leader is not up to the task!!!
Oops…forgot to say great post! Looking forward to your next one.
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Singapore government is creating a new crisis time bomb with I call Boosted Prime.
In the United States they lend money to those who could not afford housing. It was called Sub Prime and we all know its destructive effect. The might of USA was brought down with a few years and the US debt is in Trillions.
In Singapore, due to the heave international investment losses, and coupled with the disaster, the national savings is basically depleted. No longer can the deficit be filled by more car park fines, ERP, COE, GST, etc. There is a big BLACK HOLE to fill. The only way is thru Property Speculation.
Unfortunately, the property bubble is appearing from Singapore to Hong Kong. China is seeing a greedy government which is driving the mass of the population to graves too.
All these so called buying power are psychological which involves no real cash. The reason is clear because bank loans has escalated.
Bank loans of 35 years are not only putting the individuals at high risk, the bank is also trying to kill themselves. I do not believe there are a lot of cash flowing around in the market. Check carefully, the banks, the HDB, the system, it could be selling the HDB at inflated prices and government controlled banks are in co-operation. Whoever has taken the loan in the past 1 to 2 years, will surely die. Die means living a life that will come to a very abrupt and ride waking in 2010 or 2011.
Never believe the predictions of 10% increment in HDB prices when the economy is declared “OK”. Everywhere, salesmen releases false news to make you commit so that they can make money. If you look at the past, everything there is a downturn the prices will shoot up. Everything there is a recovery the price will TUMBLE big time.
HDB open market sales figures have dropped and slowed down already. History is repeating itself. Those who has committed property, better get ready for a big shock. Especially those who rushed for Duxton. Good luck.
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