HDB: Prices may continue to go up?
By Leong Sze Hian
What do the latest property numbers mean for ordinary Singaporeans?
Recent media reports say that the property market is cooling – that the seventh round of property cooling measures may finally be working.
What does this mean for the average Singaporean? In my view, there may be dark clouds in the horizon.
This is because with the reported 73 per cent plunge in the sale of new private homes to a 43-month low, this may mean that the demand for HDB flats may increase, and consequently the price as well.
(Note: HDB BTO and resale prices are still at record highs.)
Why? Because when people can’t buy private property because of the new loan curbs, they may have no choice but to turn to HDB flats. The new loan curbs do not apply to HDB Concessaionary loans for new HDB Build-to-Order (BTO) flats.If my view is correct, then why is it that there seems to be no media reports sounding any alarm bells?– Instead, we are told that HDB flat prices have stabilised and the demand is being adequately addressed.
“We have cleared the queue for HDB flats,” the prime minister said in his National Day message,” “stabilised BTO prices and tightened up on property speculation and excessive borrowing.”
Much of the HDB’s pronouncements on demand for HDB flats have been in my view flawed in logical reasoning.
For example, it said recently that 100 couples applied for 2-room flats and only about 530 of such couples (Singaporean with a foreign spouse) have been buying in the open market every year since 2008, after the change in policy to allow them to buy new HDB BTO 2-room flats provided the Singaporean spouse is above 35 and the household income is not more than $5,000 a month.
Over the years, the HDB has also said repeatedly that the low subscription rate of BTO 2-room flats means that nobody wants such flats because most Singaporeans want and can afford larger flats.
One wonders as to whether this was the rationale for not building 2-room flats for more than a decade until recent years.
The problem with the HDB’s thinking and planning for the supply and demand of flats are:
Number of applications being true reflection of demand
It is not the number who apply that is a true reflection of demand. You need to include those who can’t apply because of various reasons – for example: because they can’t afford to; or don’t have the cash to pay the resale levy; or the rules make them ineligible forever such as those who have previously bought two subsidised flats.
Average flat applicants’ income to determine affordability
It is not just the flawed assumptions in demand and supply – it may extend to the affordability issue as well. The HDB has always used the average percentage of income of flat applicants or owners to say that it shows that flats are affordable. But it ignores the obvious – that only people who can afford will apply, and those who bought who can no longer afford to pay their mortgages would have sold their flats – hence, the HDB data will always show that flats are “affordable”!
Also, counting just BTO demand may be ignoring the 25,000 new citizens and 30,000 new permanent residents in the population white paper. (Page 4 of Population White Paper: A Sustainable Population for a Dynamic Singapore)
As well as the fact that about half of Singaporeans now marry non-citizens and the majority of these, particularly the male Singaporeans may be lower-income workers. Can they afford to buy a flat bigger than a two-room flat?
Not to mention that many may be below 35 and thus also do not qualify to buy BTO 2-room flats.
Finally, per BTO subscription data may be quite meaningless, because what we need to know is how many people in total are still in the queue for BTO flats – first-timers and second-timers.