Demand vs Supply: So many applicants, so few flats
November 6th, 2009 | 
Author: By Khalil Adis, Social Correspondent
[Khalil Adis a former editor of Property Report. He now writes for Property Report, Property Guru and Temasek Review]
Flats sold under the Sales of Balance Flat (SBF) scheme were more than ten times oversubscribed further confirming that demand has exceeded supply.
Analysts say the number of applications for the 2, 132 HDB flats put up for sale under the Sales of Balance Flat (SBF) scheme were actually much higher than what was earlier reported in the local media, putting the figures at 20, 691 applicants instead of 12, 700.
“Actually, there were 20, 691 applications for the 2, 132 HDB flats. There is definitely a greater demand for these flats due to various reasons, besides the perennial reason that there is a longer waiting time of three to four years for a Build To Order (BTO) or Design Build & Sell Scheme (DBSS flat) and the fact that HDB has run out of readily available flats in their stock,” says PropNex chief executive officer Mohamed Ismail.
In comparison, figures from HDB show that the number of applications received as at midnight on 14 October 2009 stood at 21, 452 – – more than ten times oversubscribed.
Whatever the final figures are, they have provided further confirmation that demand has indeed exceeded supply which is sure to raise public fury following the increasing cash-over-valuations (COVs) and a record rise in the Resale Price Index (RPI).
The latest RPI data shows that the index has continued to climb even higher, posting a record 145.2 for the third quarter of 2009 – a growth of 3.6 percent over the previous quarter.
“This is evidently the result of the greater demand for resale flats in recent months,” says Mohamed Ismail, referring also to the 11, 649 resale transactions posted for third quarter of 2009, up 14.9 percent from the second quarter.
HDB had in the past, constantly maintained that its flats are affordable and there is adequate supply of flats to meet demand.
However, in October this year, HDB made an about U-turn. It hastily announced that it was ramping up supply of its BTO flats from 8, 000 to 9, 000 units this year following public criticism that HDB resale flats have become less affordable due to increased demand from both Singaporeans and permanent residents and the lack of supply which has pushed property prices upwards.
HDB had also announced that it was releasing more supply in the market via the SBF scheme.
The 2, 132 flats sold under the SBF scheme are flats that remained unsold from the previous balloting or were taken back by HDB.
They are located in various parts of Singapore such as Ang Mo Kio, Central and Clementi – just to name a few.
As such, some of them could have been built more than ten years ago with a price that are almost comparable to flats in the resale market.
For instance, three-room HDB flats in Bukit Merah range from $262, 000 to $488, 000.
The closest price comparison ten years ago was two resale transactions that took place in 2002 where two three-room units were sold for $371, 000 and $390, 000 respectively.
Data mined from HDB’s website on the resale price for three-room flats between January to October this year shows that it was transacted between $185, 000 to $452, 000.
Still, analysts say the prices of flats under the SBF scheme are much cheaper than market prices.
“The prices offered are actually about 20 percent cheaper than similar resale flats in the vicinity,” says Mohamed Ismail.
Citing examples of four-room flats in Bukit Merah and Punggol, Ismail said in the last one month, both areas have seen their resale prices exceeding $550, 000 and $360, 000 respectively.
“The price range of the offered flats for these flat types in these areas was up to $488, 000 and $311, 000 respectively. These prices are between 10 to 15 percent cheaper, while the median prices could be up to 20 percent cheaper for the flats offered under the SBF exercise,” says Mohamed Ismail.
Mohamed Ismail further notes that buying flats under the SBF scheme also mean buyers are not subjected to paying COVs, as they would if they had bought a resale flat.
Analysts also say pegging the flats with the current market values are fair.
“In our opinion, it is fair to sell such flats based on current market values, with a discount, and not on previous prices when the flats were built. This is because doing so would create a greater imbalance to HDB’s value and asset appreciation,” says Mohamed Ismail.
PropNex is unable to provide figures on how many of these applicants are first-time Singaporean and permanent residents buyers.
Attempts have been made to contact HDB via email to provide a breakdown on the applicants under the SBF scheme but HDB did not respond – the second time that it did not respond to our query.
About the Author:
Khalil Adis was a former editor for Property Report magazine covering Singapore, Malaysia and Indonesia. During his course of work he has travelled to all three countries to cover their property markets extensively. He has also interviewed politicians like Singapore’s Minister for National Development Mah Bow Tan, Kuala Lumpur’s Mayor Dato’ Ahmad Fuad Ismail and Malaysia’s Energy, Green Technology and Water Minister Datuk Peter Chin. He now writes for Property Report, Property Guru and Temasek Review.
You can read more of Khalil’s articles on:
www.property-report.com and www.propertyguru.com.sg
Other articles by Khalil Adis:
>> Home affordability: HDB versus the public
Related articles:
>> Number of applicants exceed number of flats
>> HDB to increase supply of flats
>> Mah: don’t compare with prices in the past
>> ERA: 40 per cent of HDB flat buyers are PRs
Posted in 
singapore flats expensive like crazy
who caused it?
Are permanent residents allowed to buy under SBF scheme.
I was under the impression that PRs are not allowed to buy direct from HDB, which the SBF is basically about.
Please correct me if I’m wrong
*sigh*, I am one of the 20,000 applicants. Having not able to secure a new flat for almost 5 years, my hope is not high.
HDB knows there is a lot of demand in mature estates but refused to build more and rather build new flats in fringe estates that many do not like to stay in, due to their lack of access to amenities and work places.
Who caused it? That’s a very interesting question, and one only has to understand the dynamics of supply and demand to get to the bottom of the matter. To put in in very, perhaps overly simplistic terms when demand is high, and supplies are low, prices rise. If demand is low and supplies are high, prices fall. In free market conditions, when the private sector is constantly self adjusting their prices to the demands of the market, prices typically self adjust based on the capacity of the market (buyers) to afford housing and their willingness to pay a premium. In this scenario, market prices are typically more in line with the actual valuation of the property. The capacity of buyers to buy depends on the state of the economy and earning power. Why do I go through the trouble of explaining this? Singapore’s situation is unique in that we have a class of housing that is government controlled that controls supply of housing to the majority of the population. The private housing market, which offers an alternative but much pricier housing option for the populace, is priced above the ‘base’ pricing of HDB flats. By limiting supplies of HDB housing, the government is able to create an artificial boost to the prices and valuation of private housing, by creating an artificially high Base price for properties that are really not worth what we are paying for it.
This is significant for two reasons – reason 1 – Imagine this – a 99 year leasehold flat requires an entire lifetime of savings to pay for – this, in a sense represents an accumulation of wealth in a Single generation. When you’re done paying for the HDB home, the effective lifespan of the home has two generations left (even if you sell, prices will keep rising due to this level of control). What this means is every three generations, the government is able to RESET the wealth generated by it’s citizens, and pump that hard earned value from the pockets of our parents who worked hard to pay for their property, back into the pockets of the government. SO while our tax rates are low by international standards, we are able to consistently milk generation after generation of our citizens for this value, creating a greater and greater divide between the rich and the poor.
Reason 2, with the prices of private housing built on top of this artificial base pricing of HDB flats, the government is now understanding that any upward adjustments in the supply of HDB flats would certainly exert a downward pricing pressure on the private sector and the valuation of the housing of the wealthier among us. So they’re stuck between the devil and the deep blue sea….increase supply and watch the valuation of private housing fall (but making homes much more affordable for MOST of us), or control supply and keep prices high (leaving many of us poorer than ever, but the rich get to maintain the valuations of their property built on the HDB house of cards)
Was this by design? Or was it by folly?
Have our toying with the market landed us in this current state? where our middle class can only remain in the middle class, and our lower class have no other choice than to rent? Have we created a system where the fundamental measures of progress in our nation is measured by the size of the government’s coffers and not the decreasing ranks of our poor?
The housing market and the state that it is in today, is the result of the policies forged by the PAP government. They are fumbling right now, because they’ve got on their hands an artificial lever that they’ve pulled all too readily and all to often to artificially stimulate prices to present a facade of progress? Singapore, this is but one of the systemic failures of the PAP government, and it is fast unraveling out of control. No amount of propaganda is going to be able to prevent what’s coming..the singapore housing market is a house of cards….
Singapore, we have to vote with our ballots and not with our coffeeshop and taxi ride conversations. At the next elections, we have to say no to our pro-elite government and say yes to a new government that will be focused not on sweeping our problems under the carpet, but on being honest and transparent with us, and a government that will face our problems head on. This nonsense cannot go on, we’ve worked too hard to allow myopia to keep us from becoming what we could be.
In our opinion, it is fair to sell such flats based on current market values, with a discount, and not on previous prices when the flats were built. This is because doing so would create a greater imbalance to HDB’s value and asset appreciation,”
says Mohamed Ismail = PropNex chief executive officer.
<– in short, this would be subprime in SG and i'd lose my job.
the issue here is why this problem came about, not just what the problem is.Gerald Giam has previously made some suggestions. An artificially supported bubble by the govt is what we have at current.
He always speaks for his own rice bowl, its not the first time, throughout this whole period when prices increased relentlessly, he's been backing what MBT says.
How would his comments be non-partisan when his interest is definitely similar to HDB, to PROFIT from increasing prices.He's not a CEO of a commission based career for nothing.
I have always found it ridiculous that he gets to comment, why not hedge fund asset managers to comment?or Academics?
Those who profit, well done, but do remember and think of the next generation who would suffer because of this
Benedict Lim:
I agree totally with your excellent analysis. I won’t be surprised if our beloved govt start reducing HDB to 66-year leases in future to make them “more affordable”.
However, I am more cynical about what our opposition members will achieve. Will our opposition members prioritize and focus on pushing through fundamental reforms in CPF and HDB once they get into parliament? So far, they seem more interested in making noise about jobs and wet markets, as these are the topics that sway votes.
But no matter what, I agree we need more opposition inside parliament asap. The current nonsense must not go on.
Just reported in the news… the govenment releases new location for priviate estates… I am wondering why are the location in the mature areas?
Why poor locals or people that get subsidies have to live so far away from the city yet rich foreigners can live in the matured estate?
Can someone answer me?
Correct me if I am wrong in this news…
To tiredman:
Very simple, because they can sell land at higher prices to private developers compared to HDB.
“Will our opposition members prioritize and focus on pushing through fundamental reforms in CPF and HDB once they get into parliament? So far, they seem more interested in making noise about jobs and wet markets, as these are the topics that sway votes.”
It is simple to see that why the opp party is focusing on area they are more likely to get first-hand information and support. The opp party can at least get to the ground and understand the matter with real stakeholder like job-seekers, low-wage workers and stall in wet markets. They actually go hand-on on the ground. However they are unable to obtain detail information on CPF and HDB since they lack useful information, transparency and accountability with officer not even willing to give detail, and only reguritate the standard model answer. So will you even as opp party talk about CPF and HDB when they don’t have enough information ? The opp party will only be mocked in parliament as we have seen in parliament when MP Low is mocked by those arrogant pappies and MIW as ignorant of industry. Beside, they might even get sue by gov over inaccurate info of CPF and HDB. So isn’t it wise that opp party only take matter that they can control and look into ?
If you vote for opp party, at least there is reform and we can vote them out if they did not perform. How about PAP ? Even now, they already have absolute power and see how much nonsense and suffering they give to lesser mortals to stay in power and greed ? Can you even vote out PAP ? If not next election, when ?
“Just reported in the news… the govenment releases new location for priviate estates… I am wondering why are the location in the mature areas?”
Simple because the government can sell those land at premium price to private developers, and sell gov flat at higher premium. Much higher price because the infrastructure there like MRT, bus-route, mall, town are already in place for convenience.
“Why poor locals or people that get subsidies have to live so far away from the city yet rich foreigners can live in the matured estate?”
Because the place not popular, the gov want the people to make the place popular and then increase those land and flat in price once infrastructure is been built and demand is built up, and then cycle will continue again.
As for those
When the sun rises from the East, it usually gets warmer.
This is a general fact.
When more opposition gets into parliament, PAP ministers will work a lot harder to keep their million dollar salaries.
Just look at Lim Boon Heng. When he knows he is going to kicked out, he had to go all the way out to suck LHL’s ass during the last election.
those who think that there will be too many opposition to kick PAP out for the next election is dreaming.
This is not going to happen.
But we cannot be in the same situation as last election.
We need more a lot more opposition in parliament to get PAP to work for us, the ordinary folks.
Else , you got to pack your bags and leave soon this country.
//tiredman
That is why the so called subsidy is not a subsidy.
Living far away from the city center is a cost by itself and needs to be compensated anyway.
They managed to cheat the older generation earlier and they think they can get away with the current generation.
PAP people are wrong.
//tiredman
There is another reason why they are releasing these land only to the private developer.
to support the hdb prices of those people who bought say bishan flats at 700K.
Whatever they are doing now is to solve 2 things:
1. the mess they have created with the failed investments in TH and GIC.
2. the mess they created with the propery bubble in the mid 90s.
Re: Comment by Exposer on Sat, 7th Nov 2009 12:50 am
I agree with what you have said about limited access to information by the opposition parties. As the opposition party members in Parliament are not Ministers, they do not have access to non-public information that are held by the ministries and statutory boards. With such a disadvantage, I do empathise with them, as it is an uphill task trying to build a case based on incomplete information. That said, whether the opposition parties can perform if they are voted into Parliament and given access to information, still remains a question. But I say, give them a shot.
The high price of HDB flats does not destabilize the government.
HDB flats prices may be a bane for the next generation of people but it will not affect those who already own flat.
The government will easily turn the situation to their advantage when election comes by offering pork barrel politics to entice the younger voters.
There is nothing for the opposition to exploit in asking for lower HDB prices.
//citizenofSG
High prices of hdb not a problem?
Try continueing with the current policy and see how many people will end up on the streets.
Already a large percentage of the owners are not locals.
As if the govt can keep issuing goodies without paying the price.
Then why is it doing just that?
This is nothing more than economics at work. Real estate near downtown locations have more demand. There is limited new supply. So the price rises.
It is correct to price these at market valuations. Those who want to pay less can buy in the new towns. This happens everywhere – in Singapore and outside.