Sep 12, 2010
Wait-and-see over property measures
Analysts say more people are sitting on the sidelines and prices unlikely to head south any time soon
By Joyce Teo
Last Wednesday, one mass market condominium project in Pasir Ris attracted 160 buyers on its preview day.
This caught many property experts by surprise because the Government had just announced measures aimed at cooling the property market on Aug 30.
But the market has since largely settled into a stalemate, as buyers wait for prices to fall while sellers refuse to budge on their prices.
But property experts say robust sales at the 642-unit NV Residences in Pasir Ris Grove have not affected the general mood in the market.
'Most people are still in the wait-and- see mode,' said ERA Asia Pacific associate director Eugene Lim.
'NV Residences is near the MRT station and keen buyers got the first cut. This was the initial response, which is usually good,' he said.
'We'll have to see how quickly the rest of the project sells.'
Experts believe buyers were likely drawn to the project's affordable pricing. Also, agents had started drumming up interest in the project some time back, before the cooling measures were introduced.
Said ECG Property chief executive Eric Cheng: 'We can't judge the market by one launch. There are other projects that are not performing as well.
'I believe market sentiment has been affected by the measures and developers will have to be realistic.'
Property experts say sales volume will drop as more prefer to sit on the sidelines. They are unsure if prices will head south but if they do, it will not be any time soon.
Mr Cheng's advice for buyers is: 'If you're not in need of a property immediately, you can wait a while. We feel that prices will stabilise or fall slightly by 3 per cent to 7 per cent.'
The new measures include tighter lending rules for those with existing mortgages looking to buy another property. They can now borrow up to only 70 per cent of the property's value, down from 80 per cent.
Those who buy an HDB resale flat on or after Aug 30 must sell their private property - including any held overseas - within six months of the HDB purchase.
'I think the HDB resale market prices will correct first,' said Chesterton Suntec International's research and consultancy director, Mr Colin Tan.
'If we bar investment monies from flowing into this HDB segment, prices may start to correct, especially if these hot monies have been mainly responsible for the rise in resale flat prices.'
But at the moment, liquidity is still very strong, said Mr Tan.
'It is a global problem and it is not easy to tackle... We may have slowed down the price increases, but prices are still rising.'
Another property expert said: 'We will have to wait till the end of the year to see if there is a price correction in the HDB market.'
But certainly, 'sellers can no longer ask for high COVs unless their flats are very special. For example, if they were very nicely renovated', said ERA's Mr Lim.
COV is cash over valuation, the amount of cash a buyer has to fork out on top of the valuation price.
An experienced industry source who declined to be named said: 'Things won't likely change very much in the next few months.
'I think people will still buy and prices may still rise. We will have to wait till perhaps early next year when supply kicks in, in both the HDB and private markets.'
The Government will offer more than 16,000 new build-to-order flats this year and up to 22,000 next year.
It is also pushing out a record amount of land for sale in the second half of this year.
joyceteo@sph.com.sg
Monday, September 13, 2010
TODAY ONLINE : Cooling measures not meant to punish but to protect
Cooling measures not meant to punish but to protect
by Colin Tan
05:55 AM Sep 10, 2010
There have been numerous analyses recently on how the housing market is reacting to the Government's property cooling measures.
But to date, the only impact we can be truly certain of is the huge toll they have taken on the health of overworked reporters. Many have taken ill after rushing out market updates and analyses.
Beyond that, it is too early to assess how much the market has changed. The strongest buying interest has always been for new launches. The correlation between launches and sales is high.
Understandably, developers have held back their projects, taking time to re-assess the market and come up with new pricing strategies. Without new launches, we are never going to be sure of the effectiveness of the measures.
It is two weeks now since the big announcement but many are still not getting it. There have been an unusually high number of complaints about the unfairness of the measures.
Contrary to what some may think, the measures are not meant to penalise any group of buyers but to protect the financial system. It is to weed out risky buying - be it from speculators, investors or even genuine upgraders. What has fairness got to do with it?
If risky buying is allowed to continue, the bubble will become bigger as prices and fundamentals grow further apart. If it bursts, the system may collapse. Nobody benefits - everyone is a loser.
For speculators and investors, the message is clear: Manage your risks to make your money but do not be so greedy as to put the entire system at risk.
To genuine upgraders: If the timing of your sale and purchase under the new rules is so precarious financing-wise, you should seriously reconsider whether you should be upgrading at all in the current overly bullish market.
Do remember that the authorities see an overall heightened market risk, hence they have put in place the measures.
For most of us, property buying is almost always an emotional decision. Often, a great deal of objectivity is lost during the buying stage. A year or two later, these same measures may be looked upon as a blessing in disguise.
Some recent analyses also appear to assume that prices will always be rising. Prices do and will come down eventually. It should not be a case of upgrade now or never. It is much safer to upgrade during a stable or market correction phase.
Similarly, new ownership rules for HDB resale flats that exclude private property owners unless they sell their private homes first are meant to solve the shortage of resale flats for genuine occupiers, not to penalise investors. Surely even they cannot begrudge the advantage given to those who have yet to own their first property.
But what got me really baffled was the advice to people not to give up owning an HDB flat as it keeps its value better than a leasehold private apartment. Surely, a golden rule of investing is to buy low and sell high.
If prices of HDB resale flats have reached record highs with little further upside expected, is it not better to sell? One should not be unduly fixated on whether it has turned into something that sometimes money cannot buy.
The measures are meant to stabilise the resale market, which means less volatility going forward. Less volatility means less opportunity for profit making. Such advice does not make sense for investors.
For the average Singaporean, it would not matter much anyway. The majority of Singaporeans have enough financial resources to own only one property. And if they upgrade, most cannot afford to keep their previous property.
That is the reality. It is the reason why most are unhappy about runaway property prices. They see their upgrading dreams dashed, not because they lost out on making money.
The writer is head of research and consultancy at Chesterton Suntec International.
by Colin Tan
05:55 AM Sep 10, 2010
There have been numerous analyses recently on how the housing market is reacting to the Government's property cooling measures.
But to date, the only impact we can be truly certain of is the huge toll they have taken on the health of overworked reporters. Many have taken ill after rushing out market updates and analyses.
Beyond that, it is too early to assess how much the market has changed. The strongest buying interest has always been for new launches. The correlation between launches and sales is high.
Understandably, developers have held back their projects, taking time to re-assess the market and come up with new pricing strategies. Without new launches, we are never going to be sure of the effectiveness of the measures.
It is two weeks now since the big announcement but many are still not getting it. There have been an unusually high number of complaints about the unfairness of the measures.
Contrary to what some may think, the measures are not meant to penalise any group of buyers but to protect the financial system. It is to weed out risky buying - be it from speculators, investors or even genuine upgraders. What has fairness got to do with it?
If risky buying is allowed to continue, the bubble will become bigger as prices and fundamentals grow further apart. If it bursts, the system may collapse. Nobody benefits - everyone is a loser.
For speculators and investors, the message is clear: Manage your risks to make your money but do not be so greedy as to put the entire system at risk.
To genuine upgraders: If the timing of your sale and purchase under the new rules is so precarious financing-wise, you should seriously reconsider whether you should be upgrading at all in the current overly bullish market.
Do remember that the authorities see an overall heightened market risk, hence they have put in place the measures.
For most of us, property buying is almost always an emotional decision. Often, a great deal of objectivity is lost during the buying stage. A year or two later, these same measures may be looked upon as a blessing in disguise.
Some recent analyses also appear to assume that prices will always be rising. Prices do and will come down eventually. It should not be a case of upgrade now or never. It is much safer to upgrade during a stable or market correction phase.
Similarly, new ownership rules for HDB resale flats that exclude private property owners unless they sell their private homes first are meant to solve the shortage of resale flats for genuine occupiers, not to penalise investors. Surely even they cannot begrudge the advantage given to those who have yet to own their first property.
But what got me really baffled was the advice to people not to give up owning an HDB flat as it keeps its value better than a leasehold private apartment. Surely, a golden rule of investing is to buy low and sell high.
If prices of HDB resale flats have reached record highs with little further upside expected, is it not better to sell? One should not be unduly fixated on whether it has turned into something that sometimes money cannot buy.
The measures are meant to stabilise the resale market, which means less volatility going forward. Less volatility means less opportunity for profit making. Such advice does not make sense for investors.
For the average Singaporean, it would not matter much anyway. The majority of Singaporeans have enough financial resources to own only one property. And if they upgrade, most cannot afford to keep their previous property.
That is the reality. It is the reason why most are unhappy about runaway property prices. They see their upgrading dreams dashed, not because they lost out on making money.
The writer is head of research and consultancy at Chesterton Suntec International.
TODAY ONLINE : Will proposed supply lead to more proposals?
Will proposed supply lead to more proposals?
by Dr Megan Walters
05:55 AM Sep 10, 2010
For any young Singaporean looking to get married and start a family, the new measures to help first-time buyers, together with those to maintain a stable and sustainable property market, should come as welcome news.
The Government and the Housing and Development Board (HDB) have done a good job in keeping the cost of public housing broadly in line with general inflation.
Recent research by Jones Lang LaSalle shows after adjusting for consumer price inflation, HDB flat prices had been largely rising at just below or in line with the rate of inflation from 1998 to 2007.
But in the last couple of years, HDB prices have started to accelerate away.
The recent rise in HDB flat prices beyond the general inflation rate is down to the supply and demand characteristics of the housing market.
So the announcement from the HDB that it will be offering 16,000 new flats this year is good news - as it is close to the number of households formed by first-time marriage, thereby broadly balancing supply with demand.
Household formation from first-time marriages in Singapore is around 17,500 per year. Not all of these young couples will want to live with their parents. Many will want a place of their own. Ramping up new flat supply to 16,000 units a year is a good start. However, it is likely that the HDB will need to further increase supply and go ahead with its preparations for 22,000 flats next year.
This additional supply will help to bring housing prices back into a long-term sustainable rate of increase and prevent prices from escalating out of control. In recent years, the rate of HDB market supply has been well below what is required to meet the first-time marriage rate. There are two reasons for this.
First, the HDB has done a good job of refurbishing and redeveloping older estates to meet the rising wealth and aspirations of the population. But the downside is that this temporarily reduces net additional supply into the market, as withdrawing the older flats reduces the net supply of new flats any particular year.
Second, and more importantly, is the move from walk-in selection to build-to-order. In the switch to build-to-order, on an annual basis, fewer flats are delivered and available to live in, due to the longer time to build the flats. The decision to switch to build-to-order was a sensible move as it maximised Singapore's resources and stopped any oversupply of empty flats from occurring.
The downside is that it may take another two years to get supply back up to a rate that meets the demand from first-time marriages. The new HDB plans to shorten build-to-order waiting times from 3 years to 2.5 years will help alleviate this problem.
While the recent move to increase supply will bring the HDB market roughly in line with demand from first-time marriages, what is more difficult to determine is the number of flats required to meet the shortfall that has built up over the last few years.
So the recent moves by the Government and the statement by the HDB that it can ramp up supply to 22,000 units, if required, is welcome news for young couples currently living with their parents.
Furthermore, helping more newly-weds own a home of their own might have the welcome side effect of boosting the nation's falling birth rates.
The writer is head of research for Asia-Pacific capital markets, Jones Lang LaSalle.
by Dr Megan Walters
05:55 AM Sep 10, 2010
For any young Singaporean looking to get married and start a family, the new measures to help first-time buyers, together with those to maintain a stable and sustainable property market, should come as welcome news.
The Government and the Housing and Development Board (HDB) have done a good job in keeping the cost of public housing broadly in line with general inflation.
Recent research by Jones Lang LaSalle shows after adjusting for consumer price inflation, HDB flat prices had been largely rising at just below or in line with the rate of inflation from 1998 to 2007.
But in the last couple of years, HDB prices have started to accelerate away.
The recent rise in HDB flat prices beyond the general inflation rate is down to the supply and demand characteristics of the housing market.
So the announcement from the HDB that it will be offering 16,000 new flats this year is good news - as it is close to the number of households formed by first-time marriage, thereby broadly balancing supply with demand.
Household formation from first-time marriages in Singapore is around 17,500 per year. Not all of these young couples will want to live with their parents. Many will want a place of their own. Ramping up new flat supply to 16,000 units a year is a good start. However, it is likely that the HDB will need to further increase supply and go ahead with its preparations for 22,000 flats next year.
This additional supply will help to bring housing prices back into a long-term sustainable rate of increase and prevent prices from escalating out of control. In recent years, the rate of HDB market supply has been well below what is required to meet the first-time marriage rate. There are two reasons for this.
First, the HDB has done a good job of refurbishing and redeveloping older estates to meet the rising wealth and aspirations of the population. But the downside is that this temporarily reduces net additional supply into the market, as withdrawing the older flats reduces the net supply of new flats any particular year.
Second, and more importantly, is the move from walk-in selection to build-to-order. In the switch to build-to-order, on an annual basis, fewer flats are delivered and available to live in, due to the longer time to build the flats. The decision to switch to build-to-order was a sensible move as it maximised Singapore's resources and stopped any oversupply of empty flats from occurring.
The downside is that it may take another two years to get supply back up to a rate that meets the demand from first-time marriages. The new HDB plans to shorten build-to-order waiting times from 3 years to 2.5 years will help alleviate this problem.
While the recent move to increase supply will bring the HDB market roughly in line with demand from first-time marriages, what is more difficult to determine is the number of flats required to meet the shortfall that has built up over the last few years.
So the recent moves by the Government and the statement by the HDB that it can ramp up supply to 22,000 units, if required, is welcome news for young couples currently living with their parents.
Furthermore, helping more newly-weds own a home of their own might have the welcome side effect of boosting the nation's falling birth rates.
The writer is head of research for Asia-Pacific capital markets, Jones Lang LaSalle.
TODAY ONLINE : Condo launch draws the crowds
Condo launch draws the crowds
by Joanne Chan
05:55 AM Sep 11, 2010
SINGAPORE - Almost two weeks after the Government unveiled its latest round of property cooling measures, demand was high for the newest condominium project to hit the market.
On Friday, the afternoon rain did not deter the interest of home-seekers who flocked to NV Residences in Pasir Ris, the latest condo to be launched.
Huttons, the marketing agent for NV Residences, said the cooling measures have weeded out the speculators but there was still a "healthy demand" from those looking for a unit for owner-occupation or mid- to long-term investment.
One buyer, a 48-year-old IT trainer, bought a 2-bedroom unit for rental investment. He said the recent changes, which includes a higher cash outlay, meant he had to lower his expectations and buy a smaller unit.
Huttons Asia senior associate director Daniel Lim noted a greater interest from permanent residents in the project - and he attributed this partly to the anti-specutive measures.
Said Mr Lim: "In order for them to buy an HDB resale flat now, they would have to give up their properties back home ... So perhaps due to this, PRs are more keen to buy private property now."
At 5pm on Friday, the condo's developer, City Developments Limited, said 40 units have been sold since Wednesday's launch. This brings the total number of units sold to 200, out of the 250 units released so far.
Suntec Chesterton International head of research and consultancy Colin Tan observed: "For some investors and buyers who are on the margins, (the cooling measures) would make them think twice or even go for smaller flats. But there are still lots of other people who are interested, so they probably more than make up for those who fall by the wayside."
Mr Tan said the response to NV Residences would probably give other developers the confidence to go ahead with their launches. And prices are likely to maintain at current levels or even rise further, fuelled by continued demand, he added.
by Joanne Chan
05:55 AM Sep 11, 2010
SINGAPORE - Almost two weeks after the Government unveiled its latest round of property cooling measures, demand was high for the newest condominium project to hit the market.
On Friday, the afternoon rain did not deter the interest of home-seekers who flocked to NV Residences in Pasir Ris, the latest condo to be launched.
Huttons, the marketing agent for NV Residences, said the cooling measures have weeded out the speculators but there was still a "healthy demand" from those looking for a unit for owner-occupation or mid- to long-term investment.
One buyer, a 48-year-old IT trainer, bought a 2-bedroom unit for rental investment. He said the recent changes, which includes a higher cash outlay, meant he had to lower his expectations and buy a smaller unit.
Huttons Asia senior associate director Daniel Lim noted a greater interest from permanent residents in the project - and he attributed this partly to the anti-specutive measures.
Said Mr Lim: "In order for them to buy an HDB resale flat now, they would have to give up their properties back home ... So perhaps due to this, PRs are more keen to buy private property now."
At 5pm on Friday, the condo's developer, City Developments Limited, said 40 units have been sold since Wednesday's launch. This brings the total number of units sold to 200, out of the 250 units released so far.
Suntec Chesterton International head of research and consultancy Colin Tan observed: "For some investors and buyers who are on the margins, (the cooling measures) would make them think twice or even go for smaller flats. But there are still lots of other people who are interested, so they probably more than make up for those who fall by the wayside."
Mr Tan said the response to NV Residences would probably give other developers the confidence to go ahead with their launches. And prices are likely to maintain at current levels or even rise further, fuelled by continued demand, he added.
ST : A good time to buy resale flats
Sep 11, 2010
FIRST-TIME BUYER
A good time to buy resale flats
Old dreams, new hopes, real options. The recent anti-speculative measures have changed all the rules for property owners, buyers, sellers and hopefuls. Tan Hui Yee and Joyce Teo find out what it means for six people at various stages of life.
MR ALEX TEO, 28, bank executive
OLD DREAMS
If Mr Teo had his way, he would be living it up in a semi-detached house with a covered car porch and indoor swimming pool.
The house would have bedrooms on the ground floor, so the eldest son's parents need not climb the stairs should they have problems moving around. And there would be a family dog, an adorable cocker spaniel, to complete the picture.
But that is a distant dream now. In the meantime, he and his fiancee, both recent graduates of Nanyang Technological University, have been shopping for a matrimonial three- or four-room Housing Board resale flat in the east, where both their parents live. They plan to tie the knot in 2012.
His ideal flat?
'Just somewhere not so noisy, away from the road or highway. Preferably with front and back windows aligned and next to an MRT station.'
Mr Teo and his fiancee started viewing flats in the last week of last month, just one week before the recent changes to home-buying rules were announced. They had a budget of $550,000, including $60,000 to cover their 5 per cent cash down payment and cash-over-valuation amount.
Back then, the market was red-hot and they even came across a four-room flat in Marine Parade with a cash-over-valuation amount of $100,000.
'I felt a bit sian,' Mr Teo says, using the Hokkien term for weariness.
Then, they chanced upon a sixth-level, three-room flat in Marine Parade going for $390,000 plus another $35,000 cash-over-valuation. 'We liked it but thought we should view more flats before deciding. The next day, it was sold.'
He thought: 'Housing in Singapore is quite expensive. Just imagine, two graduates find it so difficult to get a small, nice home in a mature estate in the east. What about diploma holders and others?'
WHAT CHANGED ON AUG 30
The changes did not affect Mr Teo directly, but he will have to factor in new rules that will apply to him once he buys an HDB resale flat. These buyers now have to live in the flat for five years even if they have not taken a housing subsidy. Previously, they could sell it after just three years. Mr Teo would also not be able to invest in private property within five years of buying that flat.
NEW HOPES
The couple's budget has not changed, but Mr Teo hopes they can get a bigger, better flat now, with the sombre mood of today's market.
But he does wonder what it means for his plans to eventually upgrade to private property as his future income rises. He notes: 'The new rules make it quite tedious for people who want to change homes. It looks like the Government is trying to tell everyone that your first home should be your dream home.'
REAL OPTIONS
In three words: Go for it!
Housing experts say there is no better time for first-time buyers to purchase their resale Housing Board flats now that market sentiment has been dampened by the recent changes.
Mr Albert Lu, managing director of C&H Realty, expects the overall median cash-over-valuation amount to drop by $10,000 over the next three months.
'I won't advise you to wait, I suggest that you continue to hunt for your ideal home. A good time to buy is when the market is quieter and not when buyers are rushing out to buy.'
Dennis Wee Group director Chris Koh suggests that first-time buyers take the Central Provident Fund housing grant (of $30,000 to $40,000) to fund their purchase. Under the old rules, those who did not take the housing grant were subjected to a lower minimum occupation period of three years. With the changes, the five-year occupation period now applies to everyone.
But Mr Alastair Tong, senior manager of marketing, recruitment and training at HSR Property Group, warned these couples to temper their expectations of upgrading or investing in private property within five years of buying their flat.
FIRST-TIME BUYER
A good time to buy resale flats
Old dreams, new hopes, real options. The recent anti-speculative measures have changed all the rules for property owners, buyers, sellers and hopefuls. Tan Hui Yee and Joyce Teo find out what it means for six people at various stages of life.
MR ALEX TEO, 28, bank executive
OLD DREAMS
If Mr Teo had his way, he would be living it up in a semi-detached house with a covered car porch and indoor swimming pool.
The house would have bedrooms on the ground floor, so the eldest son's parents need not climb the stairs should they have problems moving around. And there would be a family dog, an adorable cocker spaniel, to complete the picture.
But that is a distant dream now. In the meantime, he and his fiancee, both recent graduates of Nanyang Technological University, have been shopping for a matrimonial three- or four-room Housing Board resale flat in the east, where both their parents live. They plan to tie the knot in 2012.
His ideal flat?
'Just somewhere not so noisy, away from the road or highway. Preferably with front and back windows aligned and next to an MRT station.'
Mr Teo and his fiancee started viewing flats in the last week of last month, just one week before the recent changes to home-buying rules were announced. They had a budget of $550,000, including $60,000 to cover their 5 per cent cash down payment and cash-over-valuation amount.
Back then, the market was red-hot and they even came across a four-room flat in Marine Parade with a cash-over-valuation amount of $100,000.
'I felt a bit sian,' Mr Teo says, using the Hokkien term for weariness.
Then, they chanced upon a sixth-level, three-room flat in Marine Parade going for $390,000 plus another $35,000 cash-over-valuation. 'We liked it but thought we should view more flats before deciding. The next day, it was sold.'
He thought: 'Housing in Singapore is quite expensive. Just imagine, two graduates find it so difficult to get a small, nice home in a mature estate in the east. What about diploma holders and others?'
WHAT CHANGED ON AUG 30
The changes did not affect Mr Teo directly, but he will have to factor in new rules that will apply to him once he buys an HDB resale flat. These buyers now have to live in the flat for five years even if they have not taken a housing subsidy. Previously, they could sell it after just three years. Mr Teo would also not be able to invest in private property within five years of buying that flat.
NEW HOPES
The couple's budget has not changed, but Mr Teo hopes they can get a bigger, better flat now, with the sombre mood of today's market.
But he does wonder what it means for his plans to eventually upgrade to private property as his future income rises. He notes: 'The new rules make it quite tedious for people who want to change homes. It looks like the Government is trying to tell everyone that your first home should be your dream home.'
REAL OPTIONS
In three words: Go for it!
Housing experts say there is no better time for first-time buyers to purchase their resale Housing Board flats now that market sentiment has been dampened by the recent changes.
Mr Albert Lu, managing director of C&H Realty, expects the overall median cash-over-valuation amount to drop by $10,000 over the next three months.
'I won't advise you to wait, I suggest that you continue to hunt for your ideal home. A good time to buy is when the market is quieter and not when buyers are rushing out to buy.'
Dennis Wee Group director Chris Koh suggests that first-time buyers take the Central Provident Fund housing grant (of $30,000 to $40,000) to fund their purchase. Under the old rules, those who did not take the housing grant were subjected to a lower minimum occupation period of three years. With the changes, the five-year occupation period now applies to everyone.
But Mr Alastair Tong, senior manager of marketing, recruitment and training at HSR Property Group, warned these couples to temper their expectations of upgrading or investing in private property within five years of buying their flat.
ST : Change in retirement plan
Sep 11, 2010
FLAT AS INSURANCE
Change in retirement plan
MR GINO LIM, 38, regional sales manager
OLD DREAMS
Mr Lim is decades away from retirement but is nursing the perfect retirement plan: Rent out his two-bedroom condominium unit in the Hillview area for a regular income, and live in an HDB flat.
Having two properties would assure him and his wife of 'perpetual income', insuring them against the vagaries of the employment market.
He says: 'Right now, there's a lot of uncertainty in the economy and you can never be sure of your job. There are a lot of booms and busts.
'Already, I don't see my colleagues getting high pay increments. What if things turn sour tomorrow?'
A resale HDB flat fits into his plans because 'it is the cheapest property you can find', and also a relatively safe asset in an increasingly volatile property market.
But concerned about the fast-rising prices of resale flats, and how expensive they would get by the time he was ready to retire, he moved forward his plans to buy one.
'HDB flat prices may not come down because Singapore is planning to add another million to its population,' he reasons. 'By the time I retire, I will definitely need to move back to an HDB flat. But when I want to downgrade, the price will be very high.'
And so, he began his hunt for a three- or four-room HDB resale flat recently, with a budget of $400,000.
WHAT CHANGED ON AUG 30
Mr Lim's plan was thwarted because HDB disallowed concurrent ownership of private homes and HDB flats within the flat's minimum occupation period of five years.
Buying a resale flat would have meant that he had to sell his condominium unit within six months of the purchase. He would also not be allowed to buy a private home for five years.
NEW HOPES
He now plans to wait for another two years.
He says: 'I want to save a bit more and then look for a studio apartment. The price will be higher so I really have to think about it carefully.
'I am not going to get a (shoebox) studio so my choices will be limited.'
Selling his condo unit now is out of the question. It is located near an upcoming MRT station, which means he will lose out on the potential rise in value, should he sell before the station is fully operational.
Mr Lim thinks the Government should allow locals to own one HDB flat and a private property.
'The regulations should be easier on the locals...I think buying an HDB flat should be a privilege (kept) for Singaporeans.'
REAL OPTIONS
Experts say Mr Lim should just stick to private property, unless he wants to sell his existing condo unit.
But he will have to deal with a lower loan ceiling of 70 per cent - instead of 80 per cent - should he choose to buy another private home while servicing the mortgage of his Hillview home.
C&H Realty managing director Albert Lu says: 'It is still better to invest in another private property than to leave your money in the bank, which offers less than 1 per cent interest.
'Property investment usually offers higher returns, with rental income of at least 3 per cent per annum. Plus, property values may appreciate with time.'
FLAT AS INSURANCE
Change in retirement plan
MR GINO LIM, 38, regional sales manager
OLD DREAMS
Mr Lim is decades away from retirement but is nursing the perfect retirement plan: Rent out his two-bedroom condominium unit in the Hillview area for a regular income, and live in an HDB flat.
Having two properties would assure him and his wife of 'perpetual income', insuring them against the vagaries of the employment market.
He says: 'Right now, there's a lot of uncertainty in the economy and you can never be sure of your job. There are a lot of booms and busts.
'Already, I don't see my colleagues getting high pay increments. What if things turn sour tomorrow?'
A resale HDB flat fits into his plans because 'it is the cheapest property you can find', and also a relatively safe asset in an increasingly volatile property market.
But concerned about the fast-rising prices of resale flats, and how expensive they would get by the time he was ready to retire, he moved forward his plans to buy one.
'HDB flat prices may not come down because Singapore is planning to add another million to its population,' he reasons. 'By the time I retire, I will definitely need to move back to an HDB flat. But when I want to downgrade, the price will be very high.'
And so, he began his hunt for a three- or four-room HDB resale flat recently, with a budget of $400,000.
WHAT CHANGED ON AUG 30
Mr Lim's plan was thwarted because HDB disallowed concurrent ownership of private homes and HDB flats within the flat's minimum occupation period of five years.
Buying a resale flat would have meant that he had to sell his condominium unit within six months of the purchase. He would also not be allowed to buy a private home for five years.
NEW HOPES
He now plans to wait for another two years.
He says: 'I want to save a bit more and then look for a studio apartment. The price will be higher so I really have to think about it carefully.
'I am not going to get a (shoebox) studio so my choices will be limited.'
Selling his condo unit now is out of the question. It is located near an upcoming MRT station, which means he will lose out on the potential rise in value, should he sell before the station is fully operational.
Mr Lim thinks the Government should allow locals to own one HDB flat and a private property.
'The regulations should be easier on the locals...I think buying an HDB flat should be a privilege (kept) for Singaporeans.'
REAL OPTIONS
Experts say Mr Lim should just stick to private property, unless he wants to sell his existing condo unit.
But he will have to deal with a lower loan ceiling of 70 per cent - instead of 80 per cent - should he choose to buy another private home while servicing the mortgage of his Hillview home.
C&H Realty managing director Albert Lu says: 'It is still better to invest in another private property than to leave your money in the bank, which offers less than 1 per cent interest.
'Property investment usually offers higher returns, with rental income of at least 3 per cent per annum. Plus, property values may appreciate with time.'
ST : Cancelled condo purchase
Sep 11, 2010
HDB UPGRADER HOPEFUL
Cancelled condo purchase
MR B. RAMASWAMY, 36, project manager
OLD DREAMS
Mr Ramaswamy became a Singapore citizen six years ago and has taken quite enthusiastically to its property fever. For the past four months, he has traversed across Singapore in search of his perfect condominium unit.
The former Indian national bought a new Housing Board (HDB) executive flat in Sengkang after he got his pink identity card six years ago, and lives there with his wife and two sons.
He used his Central Provident Fund (CPF) savings to pay for his flat, but squirrelled away enough cash for the down payment of his dream condo unit - a $1.35 million three-bedroom apartment at Sanctuary Green in the upscale Tanjong Rhu. 'I've been living simply and saving to buy a private condominium for about seven years.'
Mr Ramaswamy planned to hold on to his HDB flat as a home and rent out his condo unit for at least two years before moving into the private property to enjoy the facilities.
'I am the only family member who is working. I want to invest in property because of the regular rental income.'
He almost got there.
Two days before the Government imposed stricter lending rules on property buyers, Mr Ramaswamy gave his agent a cheque for the 1 per cent option fee to book the unit.
But he realised on the morning that the changes were announced that he would not have enough cash for the down payment. 'I took back my cheque,' he said. And the owner kindly allowed him to, without penalty.
WHAT CHANGED ON AUG 30
Under the revised regulations announced on Aug 30, a buyer with one or more outstanding housing loans must stump up a down payment of 30 per cent when buying an additional property.
This is up from 20 per cent previously.
At least 10 per cent of this down payment has to be in cash, up from 5 per cent previously. The rest of the down payment can be paid using CPF monies.
Those who do not have any outstanding housing loans can continue to borrow up to 80 per cent of the property's price.
NEW HOPES
With the new rules, Mr Ramaswamy's cash savings of $270,000 would be enough to buy him only a $900,000 property, instead of the $1.35 million Sanctuary Green unit.
'I don't see the measures as draconian but I am disappointed,' he said. He now wants to wait for a few months before trying again for a lower-priced condo in the west of Singapore.
On the flip side, he hopes the cooling measures will bring down prices, which would put his condo dream within reach again.
'I may not get what I want now, but there will be other opportunities,' he said. 'I have not lost anything and life is just not all about property.'
REAL OPTIONS
The outlook is not all that gloomy for upgraders. ECG Property chief executive Eric Cheng said Mr Ramasawamy just has to downsize his expectations and go for a smaller property or one that is further away from the city.
HSR Property Group's senior manager of marketing, recruitment and training, Mr Alastair Tong, says property sellers are more 'realistic and reasonable' now.
'We should see more serious sellers in the market instead of sellers asking for inflated prices,' he said. Besides, in the mid to long term, buyers can expect to see positive returns on their purchases.
HDB UPGRADER HOPEFUL
Cancelled condo purchase
MR B. RAMASWAMY, 36, project manager
OLD DREAMS
Mr Ramaswamy became a Singapore citizen six years ago and has taken quite enthusiastically to its property fever. For the past four months, he has traversed across Singapore in search of his perfect condominium unit.
The former Indian national bought a new Housing Board (HDB) executive flat in Sengkang after he got his pink identity card six years ago, and lives there with his wife and two sons.
He used his Central Provident Fund (CPF) savings to pay for his flat, but squirrelled away enough cash for the down payment of his dream condo unit - a $1.35 million three-bedroom apartment at Sanctuary Green in the upscale Tanjong Rhu. 'I've been living simply and saving to buy a private condominium for about seven years.'
Mr Ramaswamy planned to hold on to his HDB flat as a home and rent out his condo unit for at least two years before moving into the private property to enjoy the facilities.
'I am the only family member who is working. I want to invest in property because of the regular rental income.'
He almost got there.
Two days before the Government imposed stricter lending rules on property buyers, Mr Ramaswamy gave his agent a cheque for the 1 per cent option fee to book the unit.
But he realised on the morning that the changes were announced that he would not have enough cash for the down payment. 'I took back my cheque,' he said. And the owner kindly allowed him to, without penalty.
WHAT CHANGED ON AUG 30
Under the revised regulations announced on Aug 30, a buyer with one or more outstanding housing loans must stump up a down payment of 30 per cent when buying an additional property.
This is up from 20 per cent previously.
At least 10 per cent of this down payment has to be in cash, up from 5 per cent previously. The rest of the down payment can be paid using CPF monies.
Those who do not have any outstanding housing loans can continue to borrow up to 80 per cent of the property's price.
NEW HOPES
With the new rules, Mr Ramaswamy's cash savings of $270,000 would be enough to buy him only a $900,000 property, instead of the $1.35 million Sanctuary Green unit.
'I don't see the measures as draconian but I am disappointed,' he said. He now wants to wait for a few months before trying again for a lower-priced condo in the west of Singapore.
On the flip side, he hopes the cooling measures will bring down prices, which would put his condo dream within reach again.
'I may not get what I want now, but there will be other opportunities,' he said. 'I have not lost anything and life is just not all about property.'
REAL OPTIONS
The outlook is not all that gloomy for upgraders. ECG Property chief executive Eric Cheng said Mr Ramasawamy just has to downsize his expectations and go for a smaller property or one that is further away from the city.
HSR Property Group's senior manager of marketing, recruitment and training, Mr Alastair Tong, says property sellers are more 'realistic and reasonable' now.
'We should see more serious sellers in the market instead of sellers asking for inflated prices,' he said. Besides, in the mid to long term, buyers can expect to see positive returns on their purchases.
ST : State not obliged to help people go private
Sep 11, 2010
State not obliged to help people go private
DR GILLIAN KOH, senior research fellow at the Institute of Policy Studies
'The Singapore Dream, in its materialist interpretation, is about opportunities to strive through sheer dint of hard work or enterprise to move OUT of this public housing space; it is not to be found in the Housing Board flat but outside of it. And yet, the HDB does concede room for executive condominiums, and now design, build and sell scheme flats, for the yuppies. And while we know that the sale of a flat might provide a good downpayment for a private apartment, the HDB is not obliged, its role isn't to help people upgrade to private housing in the first instance. The housing policy has to make sense and be sustainable in its own right.
'We must draw a line between the state and the market. The private property development sector must have its space too. Citizens should not expect the state to make it possible for people to leap into that private market.
'Choices have to be made. They will be uncomfortable, but if citizens and foreign residents wish to gain access to public housing, it is not unreasonable that they meet some conditions. The social compact is clear, it is a reasonable and reasoned position and it leaves a lot of room for the private sector to thrive.'
State not obliged to help people go private
DR GILLIAN KOH, senior research fellow at the Institute of Policy Studies
'The Singapore Dream, in its materialist interpretation, is about opportunities to strive through sheer dint of hard work or enterprise to move OUT of this public housing space; it is not to be found in the Housing Board flat but outside of it. And yet, the HDB does concede room for executive condominiums, and now design, build and sell scheme flats, for the yuppies. And while we know that the sale of a flat might provide a good downpayment for a private apartment, the HDB is not obliged, its role isn't to help people upgrade to private housing in the first instance. The housing policy has to make sense and be sustainable in its own right.
'We must draw a line between the state and the market. The private property development sector must have its space too. Citizens should not expect the state to make it possible for people to leap into that private market.
'Choices have to be made. They will be uncomfortable, but if citizens and foreign residents wish to gain access to public housing, it is not unreasonable that they meet some conditions. The social compact is clear, it is a reasonable and reasoned position and it leaves a lot of room for the private sector to thrive.'
ST : Time is running out
Sep 11, 2010
FLAT RESELLER
Time is running out
MR GOH LYE CHONG, 43, production manager
OLD DREAMS
Mr Goh and his radiographer wife have been living in a five-room Housing Board flat in Sengkang for the past 10 years, but will soon be selling it to move closer to his ageing parents' Mountbatten home.
His second matrimonial home in Boon Keng will also be a new HDB flat, albeit smaller. The keys to his new four-room flat will be available before December. Once he collects them, he will need to sell his Sengkang home within six months.
Given the exuberant market before Aug 30, he was hoping to sell his Sengkang flat for $450,000, with a cash- over-valuation component of $25,000 to $30,000.
WHAT CHANGED ON AUG 30
The changes effectively shrank the demand for Mr Goh's flat.
Anybody who buys an HDB resale flat will have to live in it for five years, before he is able to sell it or sublet it. Before that, a buyer who did not use a subsidy had to live there for only three years.
The changes disallow the resale flat owner from investing in private property within those five years, where there were no such rules before.
Private property owners who buy resale flats also have to sell off their existing private properties.
NEW HOPES
These changes have lowered Mr Goh's expectations. 'Everybody is playing the waiting game,' he notes, but time is not on his side.
'By hook or by crook, I have to sell it within six months of getting my flat. If I can't find a buyer by next year, I will expect a lower COV for my flat.'
He thinks he is more likely to get at most $430,000 to $440,000 for his flat now.
Fortunately, he has set aside savings to finance the renovations of his new flat, which means that whatever proceeds he gets from the sale of his Sengkang flat will be a bonus.
'The Government definitely had to do something to cool the market. Even though, as a reseller, I feel the impact of the changes, I can understand why the Government did it.
'I just count myself unlucky.'
REAL OPTIONS
For owners of HDB flats, it's time to get realistic. Demand for resale flats is expected to shrink as some private property owners - both locals as well as permanent residents - stay away in order to keep their existing properties.
Mr Albert Lu, managing director of C&H Realty, says: 'If there is a genuine offer and the offer is near your expected price, let the flat go.
'Even if you have to sell at a lower price now, bear in mind that you may also be buying at a lower price especially if you are upgrading or downgrading to another HDB resale flat.'
Besides, the changes do not rule out future appreciation in prices. Mr Alastair Tong, senior manager of marketing, recruitment and training at HSR Property Group, says these measures were not put in place to prevent growth in the property market.
'These measures are made to ensure that we are able to have a stable and sustainable market.'
FLAT RESELLER
Time is running out
MR GOH LYE CHONG, 43, production manager
OLD DREAMS
Mr Goh and his radiographer wife have been living in a five-room Housing Board flat in Sengkang for the past 10 years, but will soon be selling it to move closer to his ageing parents' Mountbatten home.
His second matrimonial home in Boon Keng will also be a new HDB flat, albeit smaller. The keys to his new four-room flat will be available before December. Once he collects them, he will need to sell his Sengkang home within six months.
Given the exuberant market before Aug 30, he was hoping to sell his Sengkang flat for $450,000, with a cash- over-valuation component of $25,000 to $30,000.
WHAT CHANGED ON AUG 30
The changes effectively shrank the demand for Mr Goh's flat.
Anybody who buys an HDB resale flat will have to live in it for five years, before he is able to sell it or sublet it. Before that, a buyer who did not use a subsidy had to live there for only three years.
The changes disallow the resale flat owner from investing in private property within those five years, where there were no such rules before.
Private property owners who buy resale flats also have to sell off their existing private properties.
NEW HOPES
These changes have lowered Mr Goh's expectations. 'Everybody is playing the waiting game,' he notes, but time is not on his side.
'By hook or by crook, I have to sell it within six months of getting my flat. If I can't find a buyer by next year, I will expect a lower COV for my flat.'
He thinks he is more likely to get at most $430,000 to $440,000 for his flat now.
Fortunately, he has set aside savings to finance the renovations of his new flat, which means that whatever proceeds he gets from the sale of his Sengkang flat will be a bonus.
'The Government definitely had to do something to cool the market. Even though, as a reseller, I feel the impact of the changes, I can understand why the Government did it.
'I just count myself unlucky.'
REAL OPTIONS
For owners of HDB flats, it's time to get realistic. Demand for resale flats is expected to shrink as some private property owners - both locals as well as permanent residents - stay away in order to keep their existing properties.
Mr Albert Lu, managing director of C&H Realty, says: 'If there is a genuine offer and the offer is near your expected price, let the flat go.
'Even if you have to sell at a lower price now, bear in mind that you may also be buying at a lower price especially if you are upgrading or downgrading to another HDB resale flat.'
Besides, the changes do not rule out future appreciation in prices. Mr Alastair Tong, senior manager of marketing, recruitment and training at HSR Property Group, says these measures were not put in place to prevent growth in the property market.
'These measures are made to ensure that we are able to have a stable and sustainable market.'
ST : Condo now the cheapest option
Sep 11, 2010
PROPERTIED PERMANENT RESIDENT
Condo now the cheapest option
MR SEBASTIAN CHOW, 35, sales executive
OLD DREAMS
Mr Chow grew up in Batu Pahat in Johor but has been living and working in Singapore for the past six years. He owns a single-storey house there because his aged parents, who live in the house, transferred its ownership to him two years ago.
Meanwhile, the Malaysian national lives with his Singaporean wife, a housewife, in a rented three-room flat in Toa Payoh.
The couple have been saving diligently over the past two years to buy an HDB resale flat in Woodlands. The idea was to start a family once they moved in.
Although Mr Chow wants to raise their children in Singapore, he hopes to keep his house in Batu Pahat.
'If something happened to my job, I would still have a property to go back to in Malaysia. That is, after all, my hometown.'
WHAT CHANGED ON AUG 30
Those who buy an HDB resale flat now must dispose of their private property - including any held overseas - within six months of buying an HDB resale flat.
If Mr Chow were to sell his Malaysian property and buy a resale flat, he would not be able to buy a private property here or overseas until he fulfils the minimum occupation period of five years in the flat.
NEW HOPES
Mr Chow says: 'I was quite upset with the rule changes. The measures are targeted at investors. We are just looking for a place to live in so we shouldn't be affected. I think it's not fair.'
He will continue renting for another two years before deciding what to do next.
He does not intend to transfer the ownership of the Malaysian property back to his parents, who are in their 70s. 'My parents are quite old, which is why they transferred the property to me in the first place.'
He cannot afford a condominium unit now but will 'work harder' to save towards it as it is now the cheapest option for him.
Still, he prefers the HDB neighbourhood to the condo crowd.
'I've lived in a condo before and didn't really like it. In a condo, the neighbours can be quite snobbish but in an HDB estate, people are friendlier. If I need help, I think they will come to help me.'
REAL OPTIONS
Permanent residents who are unable to sell their private property because their parents are living in them can appeal to the Housing Board for a waiver of the rule.
However, if that appeal is unsuccessful, they will have to decide if they want to make Singapore their home.
Housing experts say that permanent residents can opt to transfer the ownership of their overseas properties to relatives if selling them is a problem.
But don't try lying about overseas property ownership.
Those caught making a false declaration to HDB can be fined up to $5,000 and/or jailed for up to six months and risk having their HDB flat acquired compul-sorily.
ERA Asia Pacific associate director Eugene Lim says if permanent residents are willing to sell their overseas property, now is a good time to buy HDB resale flats as the drop in demand from private property owners is expected to lead to lower prices.
C&H Realty managing director Albert Lu said: 'If you are planning to stay in Singapore for a long period of time, it is better to buy an HDB resale flat than to pay rent.'
--------------------------------------------------------------------------------
KEEP HDB PRICES REASONABLE
'The Government has allowed the HDB to be used for speculation, which is not its original intention. The HDB flat should be kept at a reasonable price for people who need it.'
Mr Chan Kok Hong, 64, managing director of property management firm
FRIENDLIER HDB NEIGHBOURS
'I've lived in a condo before and didn't really like it. In a condo, the neighbours can be quite snobbish but in an HDB estate, people are friendlier. If I need help, I think they will come to help me.'
Permanent resident Sebastian Chow, 35, a sales executive
PROPERTIED PERMANENT RESIDENT
Condo now the cheapest option
MR SEBASTIAN CHOW, 35, sales executive
OLD DREAMS
Mr Chow grew up in Batu Pahat in Johor but has been living and working in Singapore for the past six years. He owns a single-storey house there because his aged parents, who live in the house, transferred its ownership to him two years ago.
Meanwhile, the Malaysian national lives with his Singaporean wife, a housewife, in a rented three-room flat in Toa Payoh.
The couple have been saving diligently over the past two years to buy an HDB resale flat in Woodlands. The idea was to start a family once they moved in.
Although Mr Chow wants to raise their children in Singapore, he hopes to keep his house in Batu Pahat.
'If something happened to my job, I would still have a property to go back to in Malaysia. That is, after all, my hometown.'
WHAT CHANGED ON AUG 30
Those who buy an HDB resale flat now must dispose of their private property - including any held overseas - within six months of buying an HDB resale flat.
If Mr Chow were to sell his Malaysian property and buy a resale flat, he would not be able to buy a private property here or overseas until he fulfils the minimum occupation period of five years in the flat.
NEW HOPES
Mr Chow says: 'I was quite upset with the rule changes. The measures are targeted at investors. We are just looking for a place to live in so we shouldn't be affected. I think it's not fair.'
He will continue renting for another two years before deciding what to do next.
He does not intend to transfer the ownership of the Malaysian property back to his parents, who are in their 70s. 'My parents are quite old, which is why they transferred the property to me in the first place.'
He cannot afford a condominium unit now but will 'work harder' to save towards it as it is now the cheapest option for him.
Still, he prefers the HDB neighbourhood to the condo crowd.
'I've lived in a condo before and didn't really like it. In a condo, the neighbours can be quite snobbish but in an HDB estate, people are friendlier. If I need help, I think they will come to help me.'
REAL OPTIONS
Permanent residents who are unable to sell their private property because their parents are living in them can appeal to the Housing Board for a waiver of the rule.
However, if that appeal is unsuccessful, they will have to decide if they want to make Singapore their home.
Housing experts say that permanent residents can opt to transfer the ownership of their overseas properties to relatives if selling them is a problem.
But don't try lying about overseas property ownership.
Those caught making a false declaration to HDB can be fined up to $5,000 and/or jailed for up to six months and risk having their HDB flat acquired compul-sorily.
ERA Asia Pacific associate director Eugene Lim says if permanent residents are willing to sell their overseas property, now is a good time to buy HDB resale flats as the drop in demand from private property owners is expected to lead to lower prices.
C&H Realty managing director Albert Lu said: 'If you are planning to stay in Singapore for a long period of time, it is better to buy an HDB resale flat than to pay rent.'
--------------------------------------------------------------------------------
KEEP HDB PRICES REASONABLE
'The Government has allowed the HDB to be used for speculation, which is not its original intention. The HDB flat should be kept at a reasonable price for people who need it.'
Mr Chan Kok Hong, 64, managing director of property management firm
FRIENDLIER HDB NEIGHBOURS
'I've lived in a condo before and didn't really like it. In a condo, the neighbours can be quite snobbish but in an HDB estate, people are friendlier. If I need help, I think they will come to help me.'
Permanent resident Sebastian Chow, 35, a sales executive
ST : Retirement plans affected, but new rules 'make sense'
Sep 11, 2010
EMPTY NEST DOWNGRADER
Retirement plans affected, but new rules 'make sense'
MR CHAN KOK HONG, 64, managing director of property management firm
OLD DREAMS
When the children have grown up and moved out, it's time to downsize. So the Chans reckoned when their elder daughter moved to Australia after marriage and their younger one took off for the United States to study.
They now live in a 4,400 sq ft semi-detached house in East Coast. Mr Chan, whose wife is a finance director, worries about the time when he will have to retire and rely on his savings for daily expenses.
'I thought of buying a five-room flat and renting out my house for $10,000 a month. That would be a nice income.'
Mr Chan was looking to buy an HDB resale flat in Sengkang or Punggol, 'where homes are still cheap', or Woodlands, where he can 'save more money' because he can pop across the Causeway to shop.
Plus, 'you get a lot of subsidies' when you live in an HDB flat, he says cheekily, referring to the financial goodies that are often reserved for public housing residents.
However, they never got down to house-hunting. 'My wife and I just talked about it.'
WHAT CHANGED ON AUG 30
Those buying resale flats will no longer be allowed to own private property - both local and overseas - within the minimum occupation period of five years.
They will have to sell their private properties within six months of buying their flat.
NEW HOPES
They missed the boat. Mr Chan recalls his wife's chiding. 'My wife said, 'See, you just talk and talk, now we can't buy it.''
Now, his best option is to buy a resale executive condominium as he thinks they are most affordable.
All he wants is 'a simple lifestyle', where he has a roof over his head and can 'move around' and do what he likes.
But he thinks the changes 'make a lot of sense'.
'The Government has allowed HDB flats to be used for speculation, which was not its original intention. HDB flats should be kept at a reasonable price for people who need it.'
At the same time, he thinks the Government should make certain provisions for older private property owners like him, who were counting on buying HDB flats as part of their retirement plan.
REAL OPTIONS
Older private property owners will need to do their sums to figure out if they really need to sell their property to fund their retirement needs.
Dennis Wee Group director Chris Koh thinks most retirees who want to move into HDB flats would not be affected much by the changes because they sell their private properties anyway to fund the flat purchase.
'Besides, these retirees will keep the balance money in a bank or use it to buy an annuity,' he says.
In the larger scheme of things, it is likely that the children of retiree downgraders will bear the greater brunt of the changes. Fewer will get to inherit these private properties.
EMPTY NEST DOWNGRADER
Retirement plans affected, but new rules 'make sense'
MR CHAN KOK HONG, 64, managing director of property management firm
OLD DREAMS
When the children have grown up and moved out, it's time to downsize. So the Chans reckoned when their elder daughter moved to Australia after marriage and their younger one took off for the United States to study.
They now live in a 4,400 sq ft semi-detached house in East Coast. Mr Chan, whose wife is a finance director, worries about the time when he will have to retire and rely on his savings for daily expenses.
'I thought of buying a five-room flat and renting out my house for $10,000 a month. That would be a nice income.'
Mr Chan was looking to buy an HDB resale flat in Sengkang or Punggol, 'where homes are still cheap', or Woodlands, where he can 'save more money' because he can pop across the Causeway to shop.
Plus, 'you get a lot of subsidies' when you live in an HDB flat, he says cheekily, referring to the financial goodies that are often reserved for public housing residents.
However, they never got down to house-hunting. 'My wife and I just talked about it.'
WHAT CHANGED ON AUG 30
Those buying resale flats will no longer be allowed to own private property - both local and overseas - within the minimum occupation period of five years.
They will have to sell their private properties within six months of buying their flat.
NEW HOPES
They missed the boat. Mr Chan recalls his wife's chiding. 'My wife said, 'See, you just talk and talk, now we can't buy it.''
Now, his best option is to buy a resale executive condominium as he thinks they are most affordable.
All he wants is 'a simple lifestyle', where he has a roof over his head and can 'move around' and do what he likes.
But he thinks the changes 'make a lot of sense'.
'The Government has allowed HDB flats to be used for speculation, which was not its original intention. HDB flats should be kept at a reasonable price for people who need it.'
At the same time, he thinks the Government should make certain provisions for older private property owners like him, who were counting on buying HDB flats as part of their retirement plan.
REAL OPTIONS
Older private property owners will need to do their sums to figure out if they really need to sell their property to fund their retirement needs.
Dennis Wee Group director Chris Koh thinks most retirees who want to move into HDB flats would not be affected much by the changes because they sell their private properties anyway to fund the flat purchase.
'Besides, these retirees will keep the balance money in a bank or use it to buy an annuity,' he says.
In the larger scheme of things, it is likely that the children of retiree downgraders will bear the greater brunt of the changes. Fewer will get to inherit these private properties.
ST : Keeping the dream alive
Sep 11, 2010
Keeping the dream alive
DR TAN ERN SER, associate professor of sociology at the National University of Singapore, who studied the Singapore Dream for his masters thesis in the early 1980s
'There are three levels of motivation for home ownership: as a comfortable dwelling place, as a prestige symbol, and as an investment.
'To keep the Singapore Dream alive, we need to keep housing as a decent dwelling place affordable for all citizens and housing as a prestige symbol still doable for the middle class. I guess this beats the situation in some countries, where palatial homes stick out like a sore thumb in the midst of slums.
'Given that the three levels of motivation for home ownership affect Singaporeans differently, I would expect that policy contradictions will always be present. The challenge is to find an optimal balance.
'The bottom line is that Singaporeans want to live the Dream, and if the goal posts are perceived as always shifting, it would lead to anxiety and frustration. This is something we need to manage.
'Can we count on Singaporeans to learn contentment, even while they continue to count on Singapore to facilitate their achieving the Singapore Dream?'
Keeping the dream alive
DR TAN ERN SER, associate professor of sociology at the National University of Singapore, who studied the Singapore Dream for his masters thesis in the early 1980s
'There are three levels of motivation for home ownership: as a comfortable dwelling place, as a prestige symbol, and as an investment.
'To keep the Singapore Dream alive, we need to keep housing as a decent dwelling place affordable for all citizens and housing as a prestige symbol still doable for the middle class. I guess this beats the situation in some countries, where palatial homes stick out like a sore thumb in the midst of slums.
'Given that the three levels of motivation for home ownership affect Singaporeans differently, I would expect that policy contradictions will always be present. The challenge is to find an optimal balance.
'The bottom line is that Singaporeans want to live the Dream, and if the goal posts are perceived as always shifting, it would lead to anxiety and frustration. This is something we need to manage.
'Can we count on Singaporeans to learn contentment, even while they continue to count on Singapore to facilitate their achieving the Singapore Dream?'
ST : Of dreams and bubbles: Right-sizing home ownership
Sep 11, 2010
COMMENTARIES
Of dreams and bubbles: Right-sizing home ownership
Is public housing now seen more as a consumption good or investment good? And with all that has been said about an 'asset bubble', should we be worrying about an 'expectations trap' instead? Assistant Professor Eugene Tan and Associate Professor Sing Tien Foo give their take on what the changes augur.
By Eugene Tan
HOUSING is not just what a typical Singaporean thinks of, it is also what he thinks with. Residential property, either public or private, is the single largest asset in the vast majority of Singaporeans' household portfolios. In turn, residential property also constitutes one of the largest financial assets in our economy. This means that what happens in the property market has an impact on financial, social and political behaviour, social stability and the larger economy. Indeed, given that 85 per cent of Singaporeans live in 900,000 Housing Board flats, public housing prices intimately affect the private-sector property market as well.
In announcing the latest suite of measures on Aug 30 to restrain the residential property market's runaway exuberance, National Development Minister Mah Bow Tan duly acknowledged: 'If you ask me whether it has got anything to do with the elections, the answer is 'yes'. Everything has got to do with the elections.'
The raison d'etre of home ownership has evolved since the HDB's establishment in 1960. As the basis of a stakeholder society, home ownership helped forge a sense of rootedness and nationhood. Affordable public housing is now regarded as a social right, a non-negotiable in Singapore's social compact. Although universal home ownership remains a cornerstone of Singapore's public housing policy and the social compact, there is no denying that this principle has become diluted over the years.
It used to be that HDB flats were just roofs over heads. But since the mid-1980s, the Government and HDB flat owners have regarded the flats as possessing tangible pecuniary value that can be grown and monetised if need be. Various HDB upgrading programmes, awarded to precincts that strongly supported the ruling party at the ballot box, added to this wealth-seeking imperative. In the last two decades or so, HDB housing became regarded as tradable assets or investments. The property booms have further shifted the focus from ownership to a commoditisation of residential properties - a means by which quick profits can be churned.
Condominium living has become immortalised as one of the 5Cs (the others being cash, car, credit card and country club membership) and integral to the Singapore Dream. The deep fear of being priced out, of the dream property becoming rapidly unattainable, and the attempts to 'speculatively invest' in property have contributed to the property booms and associated anxieties for both the housing haves and have-nots.
It seems that it is not enough to be a home owner. The desire to enhance and exploit the value of one's property has grown in tandem with Singapore's affluence. But it also means that the abiding self-interest in home equity - and increasing one's wealth through the value of one's home - is increasingly at odds with the fundamental of social equity, of what is fair and sustainable.
Concerned about the rising prices, better-off Singaporeans are acquiring additional properties to give their children a head start in life. This inter-generational transfer of wealth creates a strong potential for increased social stratification and inter-generational inequalities to persist.
This undue focus on the home as a tradable asset has given rise to a spiral of ever-growing expectations. And with housing prices out of sync with the macro-economic fundamentals, housing has become a hot-button issue.
Prime Minister Lee Hsien Loong attempted to address this concern as part of the larger engagement over immigration, the overarching bugbear. Rising property prices and the sense of overcrowding in Singapore have been attributed to the rapid influx of new immigrants and foreign workers in the last decade. Mr Lee committed to ensuring an adequate supply of affordable HDB flats. The latest slew of measures to maintain a 'stable and sustainable property market' seeks belatedly to recalibrate the expectations of Singaporeans by re-emphasising home ownership.
Affordable housing within the context of universal home ownership is necessary to sustain Singapore's social compact. But the obsession with unlocking home equity has resulted in an 'expectations trap', and the real possibility of a 'performance gap' on the part of the Government.
At a minimum, prospective home owners expect the state to provide for affordable and quality public housing. For existing home owners, the state is expected to enable healthy property value increases regularly. Yet the Government will find it increasingly difficult to cope with the surge in expectations of such private benefits within a creeping culture of ostentatious materialism and affluent consumerism.
Furthermore, there could be another performance gap where public housing is concerned and exemplified by The Pinnacle@Duxton. Its central location, pseudo-iconic image and price upside potential would be hard to match. While it is an impressive milestone in our public housing, the reality is that it is one of its kind. Very few HDB projects will be like it in the foreseeable future. But would-be HDB flat owners already expect their future homes to be similar pinnacles of housing envy.
Sooner or later, the expectations bubble will deflate or, worse, burst. Economic prosperity is not pre-ordained, especially when Singapore's economy is so influenced by external economic forces. The coincidence of the performance gap and the expectations trap will generate centrifugal tensions, exacerbated by rising expectations being unrealised.
Notwithstanding the rise in absolute value in home equity across all residential properties, the relative wealth positions for most Singaporeans remain unchanged. In short, a Singaporean may feel richer because of the rise in property values. But that is a mere paper gain. This then produces a 'treadmill effect' in which the marginal utility of increased wealth declines. Realising that paper gain throws up the real question of whether a similar property can be bought at the same price. Probably not, since property prices have risen significantly in the last decade. This only feeds into the cycle of anxiety.
To compound matters, many prospective home owners born after independence know only a prosperous Singapore. Their housing expectations are higher than those of their parents. What happens when their dream homes do not materialise?
Seen in that light, the latest measures to right-size the housing aspirations are not surprising. Clearly, housing is inherently political in Singapore. How the People's Action Party Government assures Singaporeans in their housing aspirations will also significantly affect the PAP Government's performance legitimacy.
The writer is an assistant professor of law at the Singapore Management University. He lived in police quarters in the first four years of his life. Since 1974, he has been an HDB heartlander in Marine Parade.
COMMENTARIES
Of dreams and bubbles: Right-sizing home ownership
Is public housing now seen more as a consumption good or investment good? And with all that has been said about an 'asset bubble', should we be worrying about an 'expectations trap' instead? Assistant Professor Eugene Tan and Associate Professor Sing Tien Foo give their take on what the changes augur.
By Eugene Tan
HOUSING is not just what a typical Singaporean thinks of, it is also what he thinks with. Residential property, either public or private, is the single largest asset in the vast majority of Singaporeans' household portfolios. In turn, residential property also constitutes one of the largest financial assets in our economy. This means that what happens in the property market has an impact on financial, social and political behaviour, social stability and the larger economy. Indeed, given that 85 per cent of Singaporeans live in 900,000 Housing Board flats, public housing prices intimately affect the private-sector property market as well.
In announcing the latest suite of measures on Aug 30 to restrain the residential property market's runaway exuberance, National Development Minister Mah Bow Tan duly acknowledged: 'If you ask me whether it has got anything to do with the elections, the answer is 'yes'. Everything has got to do with the elections.'
The raison d'etre of home ownership has evolved since the HDB's establishment in 1960. As the basis of a stakeholder society, home ownership helped forge a sense of rootedness and nationhood. Affordable public housing is now regarded as a social right, a non-negotiable in Singapore's social compact. Although universal home ownership remains a cornerstone of Singapore's public housing policy and the social compact, there is no denying that this principle has become diluted over the years.
It used to be that HDB flats were just roofs over heads. But since the mid-1980s, the Government and HDB flat owners have regarded the flats as possessing tangible pecuniary value that can be grown and monetised if need be. Various HDB upgrading programmes, awarded to precincts that strongly supported the ruling party at the ballot box, added to this wealth-seeking imperative. In the last two decades or so, HDB housing became regarded as tradable assets or investments. The property booms have further shifted the focus from ownership to a commoditisation of residential properties - a means by which quick profits can be churned.
Condominium living has become immortalised as one of the 5Cs (the others being cash, car, credit card and country club membership) and integral to the Singapore Dream. The deep fear of being priced out, of the dream property becoming rapidly unattainable, and the attempts to 'speculatively invest' in property have contributed to the property booms and associated anxieties for both the housing haves and have-nots.
It seems that it is not enough to be a home owner. The desire to enhance and exploit the value of one's property has grown in tandem with Singapore's affluence. But it also means that the abiding self-interest in home equity - and increasing one's wealth through the value of one's home - is increasingly at odds with the fundamental of social equity, of what is fair and sustainable.
Concerned about the rising prices, better-off Singaporeans are acquiring additional properties to give their children a head start in life. This inter-generational transfer of wealth creates a strong potential for increased social stratification and inter-generational inequalities to persist.
This undue focus on the home as a tradable asset has given rise to a spiral of ever-growing expectations. And with housing prices out of sync with the macro-economic fundamentals, housing has become a hot-button issue.
Prime Minister Lee Hsien Loong attempted to address this concern as part of the larger engagement over immigration, the overarching bugbear. Rising property prices and the sense of overcrowding in Singapore have been attributed to the rapid influx of new immigrants and foreign workers in the last decade. Mr Lee committed to ensuring an adequate supply of affordable HDB flats. The latest slew of measures to maintain a 'stable and sustainable property market' seeks belatedly to recalibrate the expectations of Singaporeans by re-emphasising home ownership.
Affordable housing within the context of universal home ownership is necessary to sustain Singapore's social compact. But the obsession with unlocking home equity has resulted in an 'expectations trap', and the real possibility of a 'performance gap' on the part of the Government.
At a minimum, prospective home owners expect the state to provide for affordable and quality public housing. For existing home owners, the state is expected to enable healthy property value increases regularly. Yet the Government will find it increasingly difficult to cope with the surge in expectations of such private benefits within a creeping culture of ostentatious materialism and affluent consumerism.
Furthermore, there could be another performance gap where public housing is concerned and exemplified by The Pinnacle@Duxton. Its central location, pseudo-iconic image and price upside potential would be hard to match. While it is an impressive milestone in our public housing, the reality is that it is one of its kind. Very few HDB projects will be like it in the foreseeable future. But would-be HDB flat owners already expect their future homes to be similar pinnacles of housing envy.
Sooner or later, the expectations bubble will deflate or, worse, burst. Economic prosperity is not pre-ordained, especially when Singapore's economy is so influenced by external economic forces. The coincidence of the performance gap and the expectations trap will generate centrifugal tensions, exacerbated by rising expectations being unrealised.
Notwithstanding the rise in absolute value in home equity across all residential properties, the relative wealth positions for most Singaporeans remain unchanged. In short, a Singaporean may feel richer because of the rise in property values. But that is a mere paper gain. This then produces a 'treadmill effect' in which the marginal utility of increased wealth declines. Realising that paper gain throws up the real question of whether a similar property can be bought at the same price. Probably not, since property prices have risen significantly in the last decade. This only feeds into the cycle of anxiety.
To compound matters, many prospective home owners born after independence know only a prosperous Singapore. Their housing expectations are higher than those of their parents. What happens when their dream homes do not materialise?
Seen in that light, the latest measures to right-size the housing aspirations are not surprising. Clearly, housing is inherently political in Singapore. How the People's Action Party Government assures Singaporeans in their housing aspirations will also significantly affect the PAP Government's performance legitimacy.
The writer is an assistant professor of law at the Singapore Management University. He lived in police quarters in the first four years of his life. Since 1974, he has been an HDB heartlander in Marine Parade.
ST : Difficult to buy low and sell high for upgraders
Sep 11, 2010
Difficult to buy low and sell high for upgraders
By Sing Tien Foo
THE new measures aimed at restraining property speculation will have different implications for four different groups: the speculators, unconstrained housing investors, constrained home owners or upgraders, and those about to become home owners.
Speculators are short term 'flippers', who take advantage of imperfect information about the markets to profit by buying and selling property whenever housing prices deviate from economic fundamentals.
Unproductive 'flipping' inflates housing prices. Cash- strapped first-time buyers, who cannot fork out cash to make the down payment, will be temporarily crowded out of the market. The extension of the seller's stamp duty imposition period from one year to three years adds costs to this flipping.
The lowering of the loan-to- value ratio for the second housing loans to 70 per cent means that the speculators have to come up with more cash upfront, which increases their opportunity costs of investing in the housing market.
The new rules will create disincentives for short-term investors. Unless those short-term returns are commensurate with the risks arising out of illiquidity in the housing markets, speculators may channel their capital into more liquid stock and bond markets.
Unconstrained house buyers are those who invest in multiple houses and hold them for long-term price appreciation. These investors are less affected by the new stamp duty rules. However, the rule disallowing dual home ownership in HDB flats and private houses will exclude them from the resale HDB market. This will reduce the demand distortion in the resale HDB market and make more resale flats available to new home buyers.
Unlike other consumption goods, housing is location-dependent and indivisible. Home buyers may not find the flats of the most optimal design, size and floor level at the time of the purchase. They meet their changing needs and wants over time by trading their smaller flats for bigger flats, or moving from public housing flats to private condominiums with full facilities.
Upgraders who 'flip' their existing HDB flats for private condominiums are usually motivated by capital gains accrued to their existing flats. The ban on concurrent HDB and private home ownership will mean that they will have to time the purchasing of new houses to coincide with the disposal of their existing homes. This rule will have a more adverse effect on upgraders in thin markets, when demand is weak and price depressed. HDB upgraders will find it difficult to follow the 'buy low and sell high' strategy.
The extension of the five-year minimum occupation period (MOP) for HDB resale flats levels the playing field for new flat and resale flat owners, should they choose to upgrade. Both will have to evaluate the opportunity costs associated with the five-year lock-up periods.
Increases in the amount of land sold for Design, Build and Sell Scheme (DBSS) flats and executive condominiums will dampen housing prices, but the effect will not be immediate because the homes take time to be built. Even with the shortening of the completion period for new flats, buyers will have to wait 21/2 years to collect their keys.
The Government's intervention in the housing markets will make a clearer distinction between the public and private housing markets. Public housing has become more a consumption good, and less of an investment good, where home owners could make abnormal gains in the short-term. With a smooth functioning dual housing market comprising a more regulated public housing market as well as a free private market that allows risk-taking by investors and speculators, housing can be made more affordable.
The targeted anti-speculation measures will exclude housing investors and speculators from the public resale housing market, and curb upgraders' demand for mass-market condominiums in the short term. When flipping activities slow down, the momentum of price increases should be contained in the short term. Coupled with strong supply in the pipeline, it will allow housing prices to be adjusted to a level that is in line with market and economic fundamentals.
While the Government's measures should be targeted at stabilising the market, it should not over-correct the market, as that could trigger a downward spiral in prices. A large decline in prices coupled with the large stream of potential supply coming into the market could have an undesirable impact on the market.
The writer is an associate professor at the National University of Singapore's department of real estate. He lives in Pine Grove, a privatised HUDC estate.
Difficult to buy low and sell high for upgraders
By Sing Tien Foo
THE new measures aimed at restraining property speculation will have different implications for four different groups: the speculators, unconstrained housing investors, constrained home owners or upgraders, and those about to become home owners.
Speculators are short term 'flippers', who take advantage of imperfect information about the markets to profit by buying and selling property whenever housing prices deviate from economic fundamentals.
Unproductive 'flipping' inflates housing prices. Cash- strapped first-time buyers, who cannot fork out cash to make the down payment, will be temporarily crowded out of the market. The extension of the seller's stamp duty imposition period from one year to three years adds costs to this flipping.
The lowering of the loan-to- value ratio for the second housing loans to 70 per cent means that the speculators have to come up with more cash upfront, which increases their opportunity costs of investing in the housing market.
The new rules will create disincentives for short-term investors. Unless those short-term returns are commensurate with the risks arising out of illiquidity in the housing markets, speculators may channel their capital into more liquid stock and bond markets.
Unconstrained house buyers are those who invest in multiple houses and hold them for long-term price appreciation. These investors are less affected by the new stamp duty rules. However, the rule disallowing dual home ownership in HDB flats and private houses will exclude them from the resale HDB market. This will reduce the demand distortion in the resale HDB market and make more resale flats available to new home buyers.
Unlike other consumption goods, housing is location-dependent and indivisible. Home buyers may not find the flats of the most optimal design, size and floor level at the time of the purchase. They meet their changing needs and wants over time by trading their smaller flats for bigger flats, or moving from public housing flats to private condominiums with full facilities.
Upgraders who 'flip' their existing HDB flats for private condominiums are usually motivated by capital gains accrued to their existing flats. The ban on concurrent HDB and private home ownership will mean that they will have to time the purchasing of new houses to coincide with the disposal of their existing homes. This rule will have a more adverse effect on upgraders in thin markets, when demand is weak and price depressed. HDB upgraders will find it difficult to follow the 'buy low and sell high' strategy.
The extension of the five-year minimum occupation period (MOP) for HDB resale flats levels the playing field for new flat and resale flat owners, should they choose to upgrade. Both will have to evaluate the opportunity costs associated with the five-year lock-up periods.
Increases in the amount of land sold for Design, Build and Sell Scheme (DBSS) flats and executive condominiums will dampen housing prices, but the effect will not be immediate because the homes take time to be built. Even with the shortening of the completion period for new flats, buyers will have to wait 21/2 years to collect their keys.
The Government's intervention in the housing markets will make a clearer distinction between the public and private housing markets. Public housing has become more a consumption good, and less of an investment good, where home owners could make abnormal gains in the short-term. With a smooth functioning dual housing market comprising a more regulated public housing market as well as a free private market that allows risk-taking by investors and speculators, housing can be made more affordable.
The targeted anti-speculation measures will exclude housing investors and speculators from the public resale housing market, and curb upgraders' demand for mass-market condominiums in the short term. When flipping activities slow down, the momentum of price increases should be contained in the short term. Coupled with strong supply in the pipeline, it will allow housing prices to be adjusted to a level that is in line with market and economic fundamentals.
While the Government's measures should be targeted at stabilising the market, it should not over-correct the market, as that could trigger a downward spiral in prices. A large decline in prices coupled with the large stream of potential supply coming into the market could have an undesirable impact on the market.
The writer is an associate professor at the National University of Singapore's department of real estate. He lives in Pine Grove, a privatised HUDC estate.
ST : Singapore Dream?
Sep 11, 2010
Singapore Dream?
Today's home buyer is tomorrow's upgrader. Recent cooling measures make it easier for first-time buyers to get on the housing ladder, but harder for them to climb up. What does it mean for the Singapore Dream? And how will it affect the income divide?
By Tan Hui Yee
THE Singapore Dream, or one version of it, used to go like this: Buy a Housing Board flat and live there for a few years. Then, sell it for fat proceeds and upgrade to a private property. When the children have grown up and moved out, cash out and move back into an HDB flat to live out the golden years.
But with property prices spiralling in a red-hot market, pushing the stepping stone to that dream out of reach for most, it became untenable for the Government not to step in to cool things down.
And so it did with new rules to curb speculation and over-leveraging on Aug30.
But while these measures might work to rein in runaway prices, they have also made property buying and selling more conditional and complicated for existing and future home owners.
If you own a resale flat, you can no longer buy private property within the first five years of the purchase. When you do so after five years, you will have to put a higher down payment if your first loan is not all paid up. And when you move into an HDB flat again, you can no longer bequeath your private property to your children or rent it out for income.
Meanwhile, permanent residents will have to part with any property they own in their homeland in order to buy an HDB resale flat.
The many people affected by the changes have made their dismay heard loud and clear. Given that property gains play a big part in generating wealth here, the measures have left many middle-class aspirants wondering: Is the Singapore Dream slipping away?
Not so mobile now?
BECAUSE, to be sure, the Singapore Dream is not found in the HDB flat, but in how fast you can move out of it. For Institute of Policy Studies' (IPS) senior research fellow Gillian Koh, the dream, 'in its materialist interpretation, is about opportunities to strive through sheer dint of hard work, or enterprise to move out of this public housing space'.
It is a dream encapsulated in the notion of upward mobility, and oiled in the past by the largely steady rise in HDB flat values as well as the HDB's former policy of giving second subsidised loans only to flat owners trading in their home for a bigger one.
It is also driven by the regime governing HDB flats which, before the recent clampdown on speculation, were seen as a safe asset class with relatively high rental yields and an almost sure-fire chance of appreciating in value some years down the road.
New HDB flats are off limits to investors; the safe haven of starter families shielded from competition from private property owners and, to some extent, cash-rich second-time buyers.
The waters are muddied somewhat when it comes to resale flats. What is ostensibly public housing was - until recent changes - traded very much like private property. Practically any Singaporean or permanent resident family could buy resale flats as long as they planned to live in them. The buyers could also rent them out after a minimum period, which before the recent changes stood at just three years. Also, at one point, certain buyers needed to live in the flats for only one year before flipping them for profit.
But such relaxed rules came with costs.
If the private housing market was a gentrified game of golf among the cash-rich bigger boys, the HDB resale market was the equivalent of the high school rugby scrum where one and all scrambled for the prize. Here, foreign nationals eyeing affordable accommodation, Singaporean private property owners, and singles disqualified from new flats jostled with anxious couples looking for matrimonial homes they could move into quickly.
And it was a brisk, bruising, high-stakes game. While the private housing market, buoyed by cheap credit and the recovering economy, surged 38.2 per cent in the year leading up to June, the HDB resale price index climbed 15 per cent in the same period. More significantly, the median resale cash-over-valuation amount - which hits buyers directly in the pocket because it cannot be paid for with loans - grew 10 times from $3,000 to $30,000.
The brewing bubble caused an outcry, with the loudest voices coming from soon-to-wed couples worried that their dream homes were getting out of reach.
Yet the market hardly wavered in its climb, even as the HDB flooded the market with new flats, raised the minimum occupation period for resale flats, and reduced the quantum of subsidised loans it was giving to those receiving it for the second time.
The private market was even more unstoppable, surging ahead despite two previous rounds of cooling measures, which included the imposition of a seller's stamp duty, of about 3 per cent, if a home was sold within one year.
That was, until Aug 30.
It is not clear to what extent home prices will drop after the changes, but experts agree that this is the hardest-hitting lot of measures yet.
For house hunters like bank executive Alex Teo, 28, who baulked at a $100,000 cash over valuation in the asking price for a four-room Marine Parade flat he viewed recently, the measures are a welcome relief. He tells The Straits Times: 'Perhaps now I can get a better-quality flat with the budget I have.'
Yet, at the same time, he is wary of the rules that will bind him once he crosses that threshold to become a flat owner.
'The new rules make it quite tedious for people who want to change homes. It looks like the Government is trying to tell everyone - your first home should be your dream home.'
Going back to basics
FOR now, the Government had decidedly cast its lot with those at the first stage of the housing life cycle.
However, today's home buyer is tomorrow's upgrader. According to the latest HDB Sample Household Survey, the average married head of household lived in his previous home for just about 10 years.
This constant churn in the housing market makes it difficult to ease newcomers onto the property ladder without impacting everybody else down the line.
Political observers note that the measures were also timed to take the wind out of opposition criticism of Singapore's housing policies before the upcoming general election.
Singapore Management University's assistant professor of law Eugene Tan says: 'Fixing the runaway property market is an attempt to ensure that housing does not become a liability to the People's Action Party Government with the general election looming.'
It does not help that housing is intimately connected to immigration - another current hot-button topic. Since new immigrants are perceived to have chased up property prices, managing the housing issue would make Singaporeans more receptive to immigrants, Mr Tan says.
Or so the Government hopes.
But, mostly, observers say that the Government's latest stance on HDB flats is unavoidable and necessary, given that the HDB was set up 50 years ago to provide affordable housing to Singaporeans.
IPS' Dr Koh says: 'The Government has now gritted its teeth to reinstate the fundamental principle of HDB public housing.' Given the HDB's basic mandate, Dr Koh says that Singaporeans should not expect the state to 'make it possible for people to leap into that private market'.
Even those adversely affected by the changes have conceded that the principle is fair. Advertising and marketing consultant Tay Tatt Cheng, 59, for example, moved to Melbourne about eight years ago, but has been eyeing a resale HDB flat for his son - who is about to start his national service here. He has backed away from the idea now that the rules require him to sell his Australian properties in order to qualify for a resale flat.
He says: 'What was done is not wrong. The purpose of the HDB is to provide affordable housing for as many people as possible... It's housing for the deserving.'
In any case, the Singapore Government is not alone in its efforts to cool the overheating housing market. The mortgage loan ceiling in Hong Kong, where housing prices gained by 10 per cent from January to August, was last month lowered from 70 per cent to 60 per cent for properties worth HK$12 million (S$2.1 million) and above.
The wider concern, everyone recognises, is potential damage that can be inflicted on the economy when interest rates rise, mortgage defaults pile up and property values plunge.
Widening the divide?
WITH the latest changes, the line has been drawn clearly between the HDB and private property markets. Not since 1989, when the HDB first let private property owners and permanent residents into the HDB resale market, has the division been made so stark.
The onerous rules for private property owners now make buying resale flats a rather unpalatable option, unless they are genuine downgraders.
The new rules have also raised several questions.
Firstly, will they close or widen the income divide? For the majority of HDB flat owners, who rely on financing to invest in other properties, the days of easy gains are probably over. But not so for the well-off, who have enough cash to scoop up private property deals, regardless of financing rules.
National University of Singapore sociologist Tan Ern Ser says that if the changes have no impact on the rich, it 'would mean a wider divide between the rich on one side, and the middle class and the rest on the other side'.
Secondly, will the changes hasten the exit of some permanent residents? Buying resale flats is widely seen as the most affordable housing option for them, because housing costs can be paid for with Central Provident Fund savings instead of hard cash.
Now confronted with the condition of having to sell their properties back home - and possibly making their relatives there homeless in the process - they now have to think seriously about whether Singapore is attractive enough for them to stay in, for the long term.
And, finally, will the rules be changed further down the road? Those with long-enough memories will recall a time when some new HDB flats were sold as resale flats in the not-so-distant 2005 - and thus available to singles and permanent residents. Subletting rules were also relaxed in 2003 and 2007, before being tightened on Aug 30.
Given the Government's penchant for the pragmatic, the latest rules are, as usual, not set in stone.
Some wonder: If resale flat prices drop too steeply and there are enough vociferous older flat owners worried about their retirement nest eggs, will private property owners be welcomed onto the HDB resale scene again some day?
Or will the latest changes perhaps lay the groundwork for a new appreciation of housing - one that is not tied to hopes of windfalls - but as a home, a shelter, and a basic human need?
The Singapore Dream will take some time to readjust itself to new storylines. But until then, Aug 30, 2010, will be remembered as the day the HDB returned to its roots as a housing provider for starter families.
tanhy@sph.com.sg
Singapore Dream?
Today's home buyer is tomorrow's upgrader. Recent cooling measures make it easier for first-time buyers to get on the housing ladder, but harder for them to climb up. What does it mean for the Singapore Dream? And how will it affect the income divide?
By Tan Hui Yee
THE Singapore Dream, or one version of it, used to go like this: Buy a Housing Board flat and live there for a few years. Then, sell it for fat proceeds and upgrade to a private property. When the children have grown up and moved out, cash out and move back into an HDB flat to live out the golden years.
But with property prices spiralling in a red-hot market, pushing the stepping stone to that dream out of reach for most, it became untenable for the Government not to step in to cool things down.
And so it did with new rules to curb speculation and over-leveraging on Aug30.
But while these measures might work to rein in runaway prices, they have also made property buying and selling more conditional and complicated for existing and future home owners.
If you own a resale flat, you can no longer buy private property within the first five years of the purchase. When you do so after five years, you will have to put a higher down payment if your first loan is not all paid up. And when you move into an HDB flat again, you can no longer bequeath your private property to your children or rent it out for income.
Meanwhile, permanent residents will have to part with any property they own in their homeland in order to buy an HDB resale flat.
The many people affected by the changes have made their dismay heard loud and clear. Given that property gains play a big part in generating wealth here, the measures have left many middle-class aspirants wondering: Is the Singapore Dream slipping away?
Not so mobile now?
BECAUSE, to be sure, the Singapore Dream is not found in the HDB flat, but in how fast you can move out of it. For Institute of Policy Studies' (IPS) senior research fellow Gillian Koh, the dream, 'in its materialist interpretation, is about opportunities to strive through sheer dint of hard work, or enterprise to move out of this public housing space'.
It is a dream encapsulated in the notion of upward mobility, and oiled in the past by the largely steady rise in HDB flat values as well as the HDB's former policy of giving second subsidised loans only to flat owners trading in their home for a bigger one.
It is also driven by the regime governing HDB flats which, before the recent clampdown on speculation, were seen as a safe asset class with relatively high rental yields and an almost sure-fire chance of appreciating in value some years down the road.
New HDB flats are off limits to investors; the safe haven of starter families shielded from competition from private property owners and, to some extent, cash-rich second-time buyers.
The waters are muddied somewhat when it comes to resale flats. What is ostensibly public housing was - until recent changes - traded very much like private property. Practically any Singaporean or permanent resident family could buy resale flats as long as they planned to live in them. The buyers could also rent them out after a minimum period, which before the recent changes stood at just three years. Also, at one point, certain buyers needed to live in the flats for only one year before flipping them for profit.
But such relaxed rules came with costs.
If the private housing market was a gentrified game of golf among the cash-rich bigger boys, the HDB resale market was the equivalent of the high school rugby scrum where one and all scrambled for the prize. Here, foreign nationals eyeing affordable accommodation, Singaporean private property owners, and singles disqualified from new flats jostled with anxious couples looking for matrimonial homes they could move into quickly.
And it was a brisk, bruising, high-stakes game. While the private housing market, buoyed by cheap credit and the recovering economy, surged 38.2 per cent in the year leading up to June, the HDB resale price index climbed 15 per cent in the same period. More significantly, the median resale cash-over-valuation amount - which hits buyers directly in the pocket because it cannot be paid for with loans - grew 10 times from $3,000 to $30,000.
The brewing bubble caused an outcry, with the loudest voices coming from soon-to-wed couples worried that their dream homes were getting out of reach.
Yet the market hardly wavered in its climb, even as the HDB flooded the market with new flats, raised the minimum occupation period for resale flats, and reduced the quantum of subsidised loans it was giving to those receiving it for the second time.
The private market was even more unstoppable, surging ahead despite two previous rounds of cooling measures, which included the imposition of a seller's stamp duty, of about 3 per cent, if a home was sold within one year.
That was, until Aug 30.
It is not clear to what extent home prices will drop after the changes, but experts agree that this is the hardest-hitting lot of measures yet.
For house hunters like bank executive Alex Teo, 28, who baulked at a $100,000 cash over valuation in the asking price for a four-room Marine Parade flat he viewed recently, the measures are a welcome relief. He tells The Straits Times: 'Perhaps now I can get a better-quality flat with the budget I have.'
Yet, at the same time, he is wary of the rules that will bind him once he crosses that threshold to become a flat owner.
'The new rules make it quite tedious for people who want to change homes. It looks like the Government is trying to tell everyone - your first home should be your dream home.'
Going back to basics
FOR now, the Government had decidedly cast its lot with those at the first stage of the housing life cycle.
However, today's home buyer is tomorrow's upgrader. According to the latest HDB Sample Household Survey, the average married head of household lived in his previous home for just about 10 years.
This constant churn in the housing market makes it difficult to ease newcomers onto the property ladder without impacting everybody else down the line.
Political observers note that the measures were also timed to take the wind out of opposition criticism of Singapore's housing policies before the upcoming general election.
Singapore Management University's assistant professor of law Eugene Tan says: 'Fixing the runaway property market is an attempt to ensure that housing does not become a liability to the People's Action Party Government with the general election looming.'
It does not help that housing is intimately connected to immigration - another current hot-button topic. Since new immigrants are perceived to have chased up property prices, managing the housing issue would make Singaporeans more receptive to immigrants, Mr Tan says.
Or so the Government hopes.
But, mostly, observers say that the Government's latest stance on HDB flats is unavoidable and necessary, given that the HDB was set up 50 years ago to provide affordable housing to Singaporeans.
IPS' Dr Koh says: 'The Government has now gritted its teeth to reinstate the fundamental principle of HDB public housing.' Given the HDB's basic mandate, Dr Koh says that Singaporeans should not expect the state to 'make it possible for people to leap into that private market'.
Even those adversely affected by the changes have conceded that the principle is fair. Advertising and marketing consultant Tay Tatt Cheng, 59, for example, moved to Melbourne about eight years ago, but has been eyeing a resale HDB flat for his son - who is about to start his national service here. He has backed away from the idea now that the rules require him to sell his Australian properties in order to qualify for a resale flat.
He says: 'What was done is not wrong. The purpose of the HDB is to provide affordable housing for as many people as possible... It's housing for the deserving.'
In any case, the Singapore Government is not alone in its efforts to cool the overheating housing market. The mortgage loan ceiling in Hong Kong, where housing prices gained by 10 per cent from January to August, was last month lowered from 70 per cent to 60 per cent for properties worth HK$12 million (S$2.1 million) and above.
The wider concern, everyone recognises, is potential damage that can be inflicted on the economy when interest rates rise, mortgage defaults pile up and property values plunge.
Widening the divide?
WITH the latest changes, the line has been drawn clearly between the HDB and private property markets. Not since 1989, when the HDB first let private property owners and permanent residents into the HDB resale market, has the division been made so stark.
The onerous rules for private property owners now make buying resale flats a rather unpalatable option, unless they are genuine downgraders.
The new rules have also raised several questions.
Firstly, will they close or widen the income divide? For the majority of HDB flat owners, who rely on financing to invest in other properties, the days of easy gains are probably over. But not so for the well-off, who have enough cash to scoop up private property deals, regardless of financing rules.
National University of Singapore sociologist Tan Ern Ser says that if the changes have no impact on the rich, it 'would mean a wider divide between the rich on one side, and the middle class and the rest on the other side'.
Secondly, will the changes hasten the exit of some permanent residents? Buying resale flats is widely seen as the most affordable housing option for them, because housing costs can be paid for with Central Provident Fund savings instead of hard cash.
Now confronted with the condition of having to sell their properties back home - and possibly making their relatives there homeless in the process - they now have to think seriously about whether Singapore is attractive enough for them to stay in, for the long term.
And, finally, will the rules be changed further down the road? Those with long-enough memories will recall a time when some new HDB flats were sold as resale flats in the not-so-distant 2005 - and thus available to singles and permanent residents. Subletting rules were also relaxed in 2003 and 2007, before being tightened on Aug 30.
Given the Government's penchant for the pragmatic, the latest rules are, as usual, not set in stone.
Some wonder: If resale flat prices drop too steeply and there are enough vociferous older flat owners worried about their retirement nest eggs, will private property owners be welcomed onto the HDB resale scene again some day?
Or will the latest changes perhaps lay the groundwork for a new appreciation of housing - one that is not tied to hopes of windfalls - but as a home, a shelter, and a basic human need?
The Singapore Dream will take some time to readjust itself to new storylines. But until then, Aug 30, 2010, will be remembered as the day the HDB returned to its roots as a housing provider for starter families.
tanhy@sph.com.sg
ST : 'HDB only' rule won't stay
Sep 11, 2010
'HDB only' rule won't stay
As large supply comes on stream, ownership curbs will need revising
By Chua Mui Hoong
IS A Housing Board (HDB) flat an asset or a home?
This issue has come to the fore again, following recent moves to bar buyers of HDB resale flats from owning private property. From Aug 30, those who buy an HDB resale flat must dispose of any private property - in Singapore or overseas - within six months. They must also live in the flat for five years before it can be sold or leased out.
The rationale? HDB flats are 'meant for long-term owner occupation' and the changes are meant to 'dampen demand from those who are not in urgent need of housing', said HDB.
So, is an HDB flat meant to be a long-term home?
It certainly began that way. But over the years, the message shifted. From 1971, HDB flats could be sold on the resale market. From 1989, permanent residents (PRs) could buy resale flats and HDB owners could own private property. The biggest change came in 1993, when HDB relaxed financing to allow borrowing for up to 80 per cent of the market value or sale price of a flat.
Within a few years, the HDB resale market roared. By the 1990s, the Government was encouraging Singaporeans to view an HDB flat as an asset. Programmes to improve interiors and exteriors were part of the 'asset enhancement' scheme.
Today, a new subsidised HDB flat is both a newlywed couple's first home - and also their ticket to asset enhancement. Often, the flat can be sold for a tidy profit, and the couple can move on to another home, or to private property.
The churn in HDB flats has created an active market for resale flats. Given their relatively low prices and high rental income due to the influx of foreigners, many have been tempted to buy a resale flat, stay for the minimum occupation period and then rent it out. A three-room flat costing $250,000 can be rented out for $1,500 a month, a yield of 7.2 per cent.
But when it becomes too attractive an asset - as now - and the price gets out of reach of home buyers, then the Government has to step in to cool the market.
The Government has always had to strike a careful balance between treating the HDB flat as a home and an asset. Seen in this context, the latest series of measures can be interpreted for what they are: Short-term measures to cool an overheated market.
The rule 'Thou shalt have no other property except HDB' is aimed precisely at that small segment of the market most responsible for the froth. This is the group of cash-rich buyers - either PRs or Singaporeans with private property - who can afford to pay $100,000 or more in cash-over-valuations. Agents tell me some pay for their purchases in cash, without a bank loan.
Why should this small group be curbed?
Some argue that HDB flats sold on the resale market are not subsidised, if the buyers do not take up a subsidised HDB housing loan. What is the policy justification for imposing ownership restrictions on this group?
But the counter to that is that there is an implicit subsidy in any HDB flat because of the opportunity cost of the land. The Government would get a lot more for the same plot of land sold for private residential development. If HDB land were priced at levels the market is prepared to bid for, then HDB flat prices - new or resale - would probably go up.
There is another reason: The state does not favour the hoarding of HDB flats as rental-yielding assets by cash-rich buyers who already have a home, when there are young couples who need a first home.
This is a political decision - an understandable one - and a matter of equity.
One reason for high prices now is the supply lag in housing. It takes a flat three years to be built. HDB scaled down its building programme sharply in recent years. The number of dwelling units built was 2,733, 5,063 and 3,154 from 2006 to 2008, respectively.
Unable to get a new flat now, young couples want to buy a resale flat and are vexed to be priced out.
Solution: Temper discretionary demand from those who already own homes, let prices float down to reasonable levels and satisfy pent-up demand.
This is precisely the objective of the 'only HDB' rule. And in the short-run, perhaps up to three years, that is probably what will happen.
But different considerations would be at play after that. Supply will rise sharply, when the pipeline of flats being planned comes on stream. In all, 35,400 new flats, and another 15,000 executive condo or Design, Build and Sell Scheme flats, will start to be built in the next two years and be ready in three to five years.
That is more than enough to meet demand from the 25,000 couples who marry each year.
Demand for resale flats from first-time buyers will thus fall, and the market will need buyers from other groups - like cash-rich retirees and PRs.
Agents say PRs made up 20 per cent of resale flat buyers in recent months. The Government says those who already own private property make up 10 per cent. These groups will be needed to mop up demand for resale flats.
The HDB resale market depends on marginal demand for churn. There are 883,896 HDB dwelling units. Each year, around 30,000 change hands. Without that 3 per cent churn, there would be little demand for HDB resale flats - and it would truly just be a home for long-term occupation.
For now, the HDB flat has to go back to being a home first - to meet immediate demand from aspiring home owners.
It is only when that demand is met that the notion of an HDB flat as a repository of asset value can be touted. And in a society where eight in 10 households live in HDB flats, who can help an HDB home owner realise the value of his asset?
Why, the PR buyer, the cash-rich private property owner who wants the rental yield and the foreigner who seeks to rent an HDB flat.
So the rule that currently curbs such groups from buying or renting out an HDB flat will have to be reviewed.
In fact, I am willing to bet one box of Raffles Hotel's signature snowskin mooncakes with champagne truffle and ganache that this rule will have to be refined within the next three years.
muihoong@sph.com.sg
'HDB only' rule won't stay
As large supply comes on stream, ownership curbs will need revising
By Chua Mui Hoong
IS A Housing Board (HDB) flat an asset or a home?
This issue has come to the fore again, following recent moves to bar buyers of HDB resale flats from owning private property. From Aug 30, those who buy an HDB resale flat must dispose of any private property - in Singapore or overseas - within six months. They must also live in the flat for five years before it can be sold or leased out.
The rationale? HDB flats are 'meant for long-term owner occupation' and the changes are meant to 'dampen demand from those who are not in urgent need of housing', said HDB.
So, is an HDB flat meant to be a long-term home?
It certainly began that way. But over the years, the message shifted. From 1971, HDB flats could be sold on the resale market. From 1989, permanent residents (PRs) could buy resale flats and HDB owners could own private property. The biggest change came in 1993, when HDB relaxed financing to allow borrowing for up to 80 per cent of the market value or sale price of a flat.
Within a few years, the HDB resale market roared. By the 1990s, the Government was encouraging Singaporeans to view an HDB flat as an asset. Programmes to improve interiors and exteriors were part of the 'asset enhancement' scheme.
Today, a new subsidised HDB flat is both a newlywed couple's first home - and also their ticket to asset enhancement. Often, the flat can be sold for a tidy profit, and the couple can move on to another home, or to private property.
The churn in HDB flats has created an active market for resale flats. Given their relatively low prices and high rental income due to the influx of foreigners, many have been tempted to buy a resale flat, stay for the minimum occupation period and then rent it out. A three-room flat costing $250,000 can be rented out for $1,500 a month, a yield of 7.2 per cent.
But when it becomes too attractive an asset - as now - and the price gets out of reach of home buyers, then the Government has to step in to cool the market.
The Government has always had to strike a careful balance between treating the HDB flat as a home and an asset. Seen in this context, the latest series of measures can be interpreted for what they are: Short-term measures to cool an overheated market.
The rule 'Thou shalt have no other property except HDB' is aimed precisely at that small segment of the market most responsible for the froth. This is the group of cash-rich buyers - either PRs or Singaporeans with private property - who can afford to pay $100,000 or more in cash-over-valuations. Agents tell me some pay for their purchases in cash, without a bank loan.
Why should this small group be curbed?
Some argue that HDB flats sold on the resale market are not subsidised, if the buyers do not take up a subsidised HDB housing loan. What is the policy justification for imposing ownership restrictions on this group?
But the counter to that is that there is an implicit subsidy in any HDB flat because of the opportunity cost of the land. The Government would get a lot more for the same plot of land sold for private residential development. If HDB land were priced at levels the market is prepared to bid for, then HDB flat prices - new or resale - would probably go up.
There is another reason: The state does not favour the hoarding of HDB flats as rental-yielding assets by cash-rich buyers who already have a home, when there are young couples who need a first home.
This is a political decision - an understandable one - and a matter of equity.
One reason for high prices now is the supply lag in housing. It takes a flat three years to be built. HDB scaled down its building programme sharply in recent years. The number of dwelling units built was 2,733, 5,063 and 3,154 from 2006 to 2008, respectively.
Unable to get a new flat now, young couples want to buy a resale flat and are vexed to be priced out.
Solution: Temper discretionary demand from those who already own homes, let prices float down to reasonable levels and satisfy pent-up demand.
This is precisely the objective of the 'only HDB' rule. And in the short-run, perhaps up to three years, that is probably what will happen.
But different considerations would be at play after that. Supply will rise sharply, when the pipeline of flats being planned comes on stream. In all, 35,400 new flats, and another 15,000 executive condo or Design, Build and Sell Scheme flats, will start to be built in the next two years and be ready in three to five years.
That is more than enough to meet demand from the 25,000 couples who marry each year.
Demand for resale flats from first-time buyers will thus fall, and the market will need buyers from other groups - like cash-rich retirees and PRs.
Agents say PRs made up 20 per cent of resale flat buyers in recent months. The Government says those who already own private property make up 10 per cent. These groups will be needed to mop up demand for resale flats.
The HDB resale market depends on marginal demand for churn. There are 883,896 HDB dwelling units. Each year, around 30,000 change hands. Without that 3 per cent churn, there would be little demand for HDB resale flats - and it would truly just be a home for long-term occupation.
For now, the HDB flat has to go back to being a home first - to meet immediate demand from aspiring home owners.
It is only when that demand is met that the notion of an HDB flat as a repository of asset value can be touted. And in a society where eight in 10 households live in HDB flats, who can help an HDB home owner realise the value of his asset?
Why, the PR buyer, the cash-rich private property owner who wants the rental yield and the foreigner who seeks to rent an HDB flat.
So the rule that currently curbs such groups from buying or renting out an HDB flat will have to be reviewed.
In fact, I am willing to bet one box of Raffles Hotel's signature snowskin mooncakes with champagne truffle and ganache that this rule will have to be refined within the next three years.
muihoong@sph.com.sg
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