According to Eugene Lim, Associate Director of ERA Asia-Pacific, the prices of resale HDB flats have shot up by 38 per cent over the last three and a half years.
What’s more shocking is that 40 per cent of the buyers are permanent residents from data gathered from recent ERA’s resale transactions.
The prices of HDB resale flats hit a record high in June this year and is set to rise by another 1 to 2 per cent.
Despite the sky-rocketing prices, both the National Development Minister Mah Bow Tan and HDB continue to insist that HDB flats remain affordable to ordinary Singaporeans.
HDB has been busy of late replying to letters in the Straits Times forum on the rising prices of HDB flats. It claimed that public housing is still affordable in Singapore because its prices lie below the 30 per cent international benchmark for housing affordably.
As PRs do not qualified to buy new flats from HDB directly, they will have no choice but to buy their homes from the resale market thereby pushing the prices up.
Some of these PRs earned an income of more than $8,000, but they opted for public housing instead of more expensive private housing as they may not have the intention of settling down permanently in Singapore. Since they are able to afford the COVs relatively easily, it has led to sellers asking for astronomical COVs in order to maximize their profits.
A 30 year old 3-room resale HDB flat in Toa Payoh was sold recently with a COV of $70,000. Some flats in the prime areas like Bishan and Ang Mo Kio have COVs of over $50,000.
HDB said that it has no jurisdiction over COVs and it is up to the seller to decide on its value. However, COVs are unique only to HDB flats and not in the private market.
Considering that buyers have to pay 10% of the flat’s value upfront by cash, the COVs will only go to exert greater burden on their finances. Unless they already have a property to capitalize on its value, it is highly unlikely that they are able to fork out so much cash, especially for young couples who had just started working.
It is widely known that prices have risen over the past few years and that Singapore had a large influx of new residents. It is strange that counter- measures were not put into place earlier considering this happened over a sustained period of three-and-a-half years.
Another interesting statistic in the ERA report was how 86% of ERA’s HDB recent resale transactions were concluded with Cash-Over-Valuation (COV). This number seems to come into conflict with what Mr Mah Bow Tan said recently about a third of HDB resale transactions are done at or below valuation.
Minister Mah had earlier urged Singaporeans to be less “fussy” and consider flats located in the outlying areas without COVs. He cited unknown statistics showing that one-third of the resale flats are sold without COV or below valuation.
Both HDB and the government appear to be oblivious to the plight of ordinary Singaporeans who are struggling to afford the hefty mortage loans.
Instead of addressing their concerns, they are often dismissed with the cursory assurance that public housing is affordable. One minister even made the ludicrous claim that rising prices will generate wealth for Singaporeans when a study done by NUS last year had proven otherwise.
As the government is the largest landlord and property developer in land-scarce Singapore, Singaporeans will have no choice but to pay for these over-priced public housing at prices determined by HDB and the sellers.
Source : Temasek Review – 28 Sep 2009
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