Arrears drop, despite recession

(Abstract from Today 3rd Nov, 2009 by Esther Ng)

~Shorter wait for rental flats; number of applicants fall~

SINGAPORE - Contrary to expectations, the Housing Development Board's (HDB) mortgage arrears rate dropped during the recession - to 7.5 per cent in September this year, from 7.9 per cent a year earlier.
The HDB said that this was partly due to the introduction of trained housing counsellors to help families find long-term solutions such as loans to downgrade to a smaller flat, and in some instances, to find the owner a rental flat so that he could sell off his existing flat.
However, Ngee Ann Polytechnic real estate lecturer Nicholas Mak said: "Arrears usually increase in a recession, but the HDB resale market was buoyant and these households could have benefited from this by selling their flat to pay off their debt and then moving in with relatives or to a smaller flat."
He pointed out that the economy only nosedived in the later half of the financial year. Since arrears take some time to build up, these could have contributed to the marginal improvement of HDB's mortgage arrears rate when its financial year ended in March.
Also noteworthy in HDB's annual report for FY2008-09 was the waiting time for rental flats, which fell to 13 months from 21 months a year ago.
Tighter eligibility rules introduced in February have seen the number of applicants fall to 3,465 in September from 4,550 in February.
Chief executive officer Tay Kim Poh said HDB's plans to increase rental stock from 42,000 to 50,000 units by 2012 is "progressing well" and there are now 1,567 converted and new rental flats.
Also, 425 elderly home-owners have taken up the Lease Buyback Scheme (LBS), up by 288 applications since it was launched in March. The plan allows low-income elderly Singaporeans to get a portion of cash upfront while HDB buys back the tail-end of the lease of their flat.
Asked if the figure is low when 20,000 seniors are eligible to apply for the scheme, Mr Tay said: "The LBS is just one option for the elderly to monetise their flat ... we don't expect it to be a very high number as they do have other options."
These include downgrading to a smaller flat and subletting out a room or the whole flat.
HDB's deficit almost doubled to $2.119 billion this financial year from $1.081 billion in the previous year. The biggest contributor was the increase in the number of flats offered for sale ($1.553 million) and higher construction cost, said Mr Tay. This was followed by upgrading activity ($696 million) and rental flat activity ($150 million).
Three projects will be completed next year: The Pinnacle@Duxton, Punggol Waterway, Treelodge@Punggol; as well as more new two-room and rental flats. Meanwhile, work on the 4.2km Punggol Waterway has started and the results of the housing design competition will be announced in two weeks' time.
HDB will also look into identifying towns for estate rejuvenation, especially since nearly one-third of flats were built before the 1980s.
A new department - the Building Research Institute - will look into sustainable development and green building technology.
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