Category Archives: HDB

THE Housing & Development Board (HDB) yesterday unveiled policy changes designed to hurt speculators and make it more expensive for non-Singaporeans to buy government-subsidised flats.

The Board also agreed to make a much campaigned-for change: it will now allow buyers to take a second concessionary loan from HDB even if they downsize to a smaller flat or move to a flat of the same size. Previously, only upgraders qualified for a second concessionary loan.

Announcing these and other measures in Parliament yesterday, National Development Minister Mah Bow Tan noted that public housing is an especially hot issue this year.

‘Someone asked me recently if I was feeling the heat and I don’t think he was talking about the weather,’ Mr Mah quipped, beginning his reply after a slew of questions from Members of Parliament (MPs).

Many MPs were concerned that some buyers were using HDB flats to speculate in the property market and driving up prices in the process. HDB resale prices hit a new high in Q4 2009, with prices climbing 3.9 per cent from the previous quarter. The median cash-over-valuation (COV) for all resale transactions doubled to $24,000 in Q4 from $12,000 in Q3.

Data from HDB shows that the proportion of flat owners who sell their units within three years of purchase rose to 8.9 per cent for the first 10 months of last year. And in 2008, 7.9 per cent of buyers sold their units within three years. In comparison, less than 7 per cent of buyers sold their flats within three years from 2005 to 2007.

To reduce the number of people using HDB flats to speculate in the property market, the time that buyers are required to stay in their flats before reselling them (minimum occupation period or MOP) will be increased to three years for all flats bought in the resale market. Currently, the MOP is 2.5 years for buyers who choose to take up an HDB concessionary loan and just one year for buyers who either take a commercial bank loan or do not take any loan.

‘I want to emphasise that HDB flats are provided primarily for owner-occupation and not speculative profit or rental return,’ said Mr Mah.

The decision to remove the upgrading condition for the second concessionary loan, in comparison, is to encourage greater financial prudence and flexibility among homeowners. Feedback from MPs said that by providing the second concessionary loan only to upgraders, some might inadvertently be driven to upgrade even though it may not be prudent to do so.

‘Since we are now seeing a situation of greater economic volatility, the flexibility to right-size will become more important,’ said Mr Mah.

But the new policy comes with strings attached. Currently, cash sales proceeds from the sale of a flat need not be used for the purchase of the next one. But with the change, sellers can only keep the greater of $25,000 or half of the cash proceeds. The remaining cash and CPF balance has to be used to finance the purchase of the next flat if they take up a HDB concessionary loan.

The lifting of the upgrading condition is expected to benefit about 1,000 households a year. Currently, HDB grants about 4,000 second concessionary loans each year, mostly to households upgrading to bigger flats.

Social impacts

HDB also said that 3,800 more elderly lessees will now benefit from its lease buyback scheme which has been revised. The scheme allows the elderly to monetise their flats by selling the tail end of the flat’s lease back to HDB.

Other measures are calculated to have social impacts. To encourage permanent residents (PRs) to take up citizenship, HDB will withhold $10,000 of the subsidies for a household made up of one citizen and one PR when they buy a HDB flat. Once the PR converts to citizenship, or when the couple has a Singapore citizen child, the Board will return the withheld subsidy.

‘These measures will give greater assurance to citizens that they are our priority, and at the same time, encourage our PRs to view citizenship more favourably,’ Mr Mah said.

A quota cap for PR households of 8 per cent in each block and 5 per cent within each neighbourhood was also announced. It will be applied on top of the ethnic integration policy (EIP) but will not apply to Malaysian PRs. The EIP was also tweaked slightly. In line with demographic shifts, the Indian/Others limit was raised from 10 per cent and 13 per cent at the neighbourhood and block levels to 12 per cent and 15 per cent respectively.

Property analysts said that the revision of the MOP to three years and the removal of the upgrading condition will affect the HDB market.

‘By standardising the MOP at three years, the ‘turnover’ rate is slowed down from one year to three years. This has the effect of preventing ‘flippers’ from pushing up resale prices with their short-term objectives,’ said Eugene Lim, associate director for ERA Asia Pacific.

But PropNex chief executive Mohamed Ismail said that there will be little impact from this policy which will, at most, just encourage buyers to adopt a mid-to-long term view when buying their flat. He feels that the most notable measure was the extension of the second HDB concessionary loan to downgraders.

‘We may see an increase in market activity due to an increase in downgraders,’ Mr Mohamed said. But he declined to predict if there will be an increase in resale flat prices as it is ‘too soon’ to assess the impact.

Noted Mr Lim: ‘With this change in policy, Singapore citizen households are likely to be attracted to take loans from HDB, leaving only PR households to take bank loans. Banks may now have to re-package their loans more attractively as they battle for market share.’

ERA has a 41 per cent share of the resale HDB market and based on its transactions, some 50 per cent of buyers use bank loans, another 40 per cent get loans from HDB and 10 per cent pay for their flats using cash.

Source : Business Times – 6 Mar 2010

NATIONAL Development Minister Mah Bow Tan spent some time in Parliament yesterday addressing popular misconceptions about Singapore’s public housing market.

MYTH: There are not enough HDB flats to meet demand.

HIS RESPONSE:

The HDB released 13,500 new flats last year and will release another 12,000 or more this year. This is more than the total number of flats in Clementi or Jurong East (about 23,000 flats each).

The massive oversubscription rates for new flats are misleading. That is because half the number of flat applicants choose not to book a flat when invited to do so. Many say this is because they could not get a flat of their choice, yet in recent selection exercises, one-third rejected flats on the first day of selection, when all the flats were available.

Some first-time buyers have complained that they have tried repeatedly to get a flat to no avail. But when the HDB reviewed 477 such cases in the last six months, it found only 29 appeals (6 per cent) were genuine.

CASE STUDY: Mr C complained about his lack of success in getting a flat. The HDB’s checks found that he had submitted four applications, three of which were in highly popular mature estates. In six months, he consecutively rejected three offers of flats: one offer of 121 flats in Punggol/Sengkang because he had been ‘targeting a unit in Buangkok’; another offer of 143 flats in Punggol because ‘the units left are facing the mosque’; and a third offer of 14 flats in Serangoon, Yishun, Ang Mo Kio, Tampines and Woodlands because these were not his ‘choice’ flats.

MYTH: HDB flats are unaffordable.

HIS RESPONSE:

On top of the CPF Housing Grant of $30,000 or $40,000, there is an Additional Housing Grant (AHG) for lower-income families of up to $40,000. As of Jan 31, the Government disbursed more than $330 million in AHG to more than 20,000 families.

The median house price is 5.8 times the median household income in Singapore. In comparison, the ratio is 7.1 in London and 19.8 in Hong Kong.

The average mortgage payment for new flats in non-mature estates sold in 2009 was 22 per cent of monthly household income. This is well below the affordability benchmark of 30 per cent to 35 per cent.

Four out of five Singaporean new flat buyers service their housing loans from CPF savings, without any cash payment.

CASE STUDY: Mr and Mrs S, with a $4,500 monthly income, bought a four-room flat in Punggol for $297,900. They received $10,000 in grants and took a concessionary loan of $268,100 (90 per cent of the price) from the HDB. The couple’s monthly instalment is $1,073, or 24 per cent of their income. They can use $1,035 from the CPF to service the mortgage and end up paying only $38 monthly in cash.

MYTH: PRs push up prices.

HIS RESPONSE:

The median cash-over-valuation (COV) paid by permanent residents have been the same as the median COV nationwide for the last two quarters.

Cases of PRs paying high COV are the exception. Of 37,205 resale transactions in 2009, 58 cases had COV exceeding $70,000. Of this, only eight (14 per cent) involved PRs.

MYTH: Private property owners push up prices.

HIS RESPONSE:

Their number is not large enough to push up prices. Of the 58 resale transactions last year with COV exceeding $70,000, only 11 cases (19 per cent) involved private property owners.

MYTH: Subletting of HDB flats is rampant.

HIS RESPONSE:

Of the 682,000 flats that have fulfilled current Minimum Occupation Period requirements, only 3 per cent are sublet. This suggests most flat owners are buying their flats for occupation, and not rental.

Source : Straits Times – 6 Mar 2010