ST : Analysts: Rules will rein in HDB market

Aug 31, 2010

new property rules

Analysts: Rules will rein in HDB market

Private home-owners and speculators effectively shut out

By Jessica Cheam

THE red-hot public housing market is set to cool significantly now that private home-owners including speculators have been effectively shut out of the market.

Market watchers say recent rapid growth in HDB resale prices will moderate as the pool of potential buyers grows smaller, and more flats are put on sale.

The new rules, unveiled yesterday, 'will have great ramifications' on the market, said property agency PropNex's chief executive Mohamed Ismail, as they will 'reduce speculation and short-term investment'.

He predicts that HDB resale transactions will fall in the second half of the year by 10 per cent from the same period last year.

Median values of cash upfront paid by buyers - known as cash-over-valuation - which hit a record $30,000 in the second quarter, may dip 10 per cent by year's end and by 20 per cent next year, he said.

HDB resale flat prices shot up 4.1 per cent in the second quarter, smashing records for the eighth straight quarter, prompting concerns that prices were beyond the reach of Singaporeans.

Jones Lang LaSalle's head of research for Singapore and South-east Asia, Dr Chua Yang Liang, said the new policy was well directed as it is 'more targeted at reducing speculative buying and not affecting (genuine) occupier demand'.

'This would promote a healthier investment climate for the Singapore residential market in the longer term... HDB resale flat prices could moderate to 1 to 2 per cent per quarter,' said Dr Chua.

He also observed that while the Government has maintained its stand about not interfering with the pricing of HDB resale flats, the stricter rules on ownership have now placed these properties firmly in the 'public housing' category.

Some home-seekers had lobbied the Government to cap or remove the cash-over-valuation payments for resale flats, but this aspect 'is more about market transactions, so they've left that to the market', Dr Chua said. 'But when it comes to ownership, I think it's more of a larger policy issue. The Government does not want people to hoard public housing and cause prices to go up.'

National Development Minister Mah Bow Tan said at a briefing yesterday that the new rules were meant to 'ensure equitable treatment' of all flat-owners during the minimum occupation period, which is now five years, up from three years.

He said that the measures will dampen demand for flats, and that combined with an increase in the supply of flats, 'hopefully the market will slow down'.

As prices surged in recent months, some critics had argued that private property owners were speculating on the HDB market as resale flats typically generate healthy rental returns - resulting in a high rental yield. They could also reap gains from a higher eventual sale price.

Mr Mah emphasised that the Government aims to 'pre-empt the overheating of the market' and will 'take whatever steps necessary to stabilise the market'.

'Obviously the intention is not to crash the market, but at the same time, if we don't rein in the market, and the bubble bursts then it will be even worse for everyone concerned, the economy as well as for individual buyers.'

Mr Mah said currently an average one in 10 resale flat-buyers owns private property. The new rules mean the buyers' pool for resale flats will be smaller.

Records indicate that out of the pool of private property owners who buy HDB resale flats, about half sell their private property, while the other half keep it.

Mr Mah said first-timers should welcome the change in policy 'as it means more choice for them' and does not affect those genuine home-buyers.

Assistant accountant Edward Kwa, 27, told The Straits Times that if the new rules mean lower resale prices, it will help in his house hunt.

Mr Kwa, who is getting married next year, has been balloting for build-to-order (BTO) flats since last year but has yet to be offered one. 'I'm glad to hear that there will be more choices and that the wait for a new flat will be shortened,' he said.

jcheam@sph.com.sg


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Mr Mah said that the measures will dampen demand for flats, and that combined with an increase in the supply of flats, 'hopefully the market will slow down'.