MND vs NMP: Round 3

by Leong Sze Hian

I refer to the report "Property measures have taken effect: Mah Bow Tan" (Channel News Asia, Nov 27).

It states that "National Development Minister Mah Bow Tan said there are signs that measures to cool the property market have taken effect.

There has been at least a 20 per cent drop in HDB resale transactions this quarter while Cash-over-Valuation (COV) is down some 10 per cent from the third quarter.

I find it rather strange that whilst the minister is able to cite the COV data for the last month to justify his statement that COV has declined, he does not cite last month's HDB resale price data to justify his statement that resale prices have eased.

So, perhaps the obvious question to ask, is why say prices have eased without any data to support it?

Well, I believe the answer may be that the October HDB resale price data may actually have continued to rise.

Just to set the record straight, the Resale Price Index in the third quarter of this year, rose 4 per cent, which is just over a month ago.

Also, since the previous quarter's increase was 4.1 per cent, how can a mere 0.1 per cent drop in the last quarter, be described as prices have eased?

For the first three quarters of the year, it rose by 11.3 per cent, and by 66 per cent over the last five years.

According to the article "Cooling measures working" (ST, Nov 27), Mah Bow Tan claimed that signs "are emerging in both the public and private housing markets that the Government's three-month-old price stabilisation measures are working,".

But, similar to the minister's remarks on HDB prices which were somewhat demolished above, private property prices are still rising at 2.9 per cent in the third quarter.

So, the minister's rhetoric may not seem to match the reality of the data.

Mr Mah was further quoted as saying that COV figures have also dropped "by more than 10 per cent from around S$30,000 in the third quarter to about S$25,000 last month". A clue as to why this may not really be a drop in COV, may be in Mdm Peh Poh Hua's letter "Check why they're breaking HDB flat rules" (ST, Nov 21) in response to the article "HDB flat sellers left in tight spot by new rules" (ST, Oct 24).

Mdm Peh related how to her dismay, in her hunt to buy a resale flat, the majority of sellers wanted an illegal lease-back for another two months.

This is due to what was reported in the latter article, that more than half of resale transactions now have this problem, because of the new HDB rules that a 80 per cent loan can only be confirmed when the HDB issues the official letter to the seller approving the sale, which is typically about six weeks before legal completion.

This six weeks time frame is too short for the seller to find another home. Thus, the request for a lease-back which is illegal under HDB rules.

Hence, the lower COV, may simply be an adjustment to reflect the two months illegal lease-back.

As to the drop in HDB resale transactions, why is it that the CNA report said "Mr Mah said HDB resale transactions have gone down by at least 20 per cent so far this quarter", and the Straits Times report said "Transactions in the HDB market have also fallen by 30 per cent in the fourth quarter thus far, compared to the same period in the previous quarter"?

So, is the drop 20 or 30 per cent?

Normally, if transactions fall a lot, prices should also fall.

But, we now have large falling transactions with prices continuing to rise.

Therefore, arguably, the cooling measures may not be working very well.

Finally, if the minister is really serious about bringing HDB resale prices down, why is it that the Build-to-order (BTO) launches after the announcement of the cooling measures, still seem to be rising?

If prices are indeed falling as the minister is saying, shouldn't the latest BTO prices be falling too?

Surely, arguably, the most effective price cooling measure, may be to start reducing BTO prices.

But then, this may result in the HDB's profits dropping too - is it?