Tag Archives: build-to-order

Cooling resale market: Not time to boost demand

THE cooling demand for resale Housing Board flats has put some sellers in a quandary.

These sellers are those who have already got, or will soon get, their keys to newly completed Build-To-Order (BTO) flats or executive condominiums.

They have to sell their existing Housing Board (HDB) flats within six months of getting their new homes. But with buyers thin on the ground, some can’t find buyers within that time frame. So far, the HDB has been flexible and given them more time to sell their flats.

But how tenable is this situation, and should more be done?

Anecdotally, a handful of sellers are asking to collect their keys later, or for an extension of the deadline to sell their flats. These will give them more time to find a buyer for their unit.

The issue was raised by MP Lee Bee Wah on her Facebook page recently.

In the first half of this year, the HDB got 18 requests a month to delay the collection of keys.

But is this a matter of sellers holding out for high prices?

One expert thought so. “I think most HDB resale flat sellers are finding it difficult to sell their flat because the price that is offered is too low for their consideration,” says R’ST Research director Ong Kah Seng.

But some sellers have said there were no viewers, let alone offers, for their flats.

How did this situation come about, of people being unable to sell their flats to gain possession of a new one?

It’s partly due to government property cooling measures.

Soaring HDB resale prices caused unhappiness during the 2011 General Election. Since then, a flood of new flats has been built. Home loan curbs have lowered demand, meaning lower prices and fewer flats sold.

As of June, the Singapore Real Estate Exchange’s HDB resale price index has fallen by 6.8 per cent from its peak in April 2013.

Last month, 1,315 flats changed hands, down from 2011’s average of more than 2,000. In this weak market, the difficulty some BTO buyers face in disposing of their existing flats may be an unintended consequence, but is also an unsurprising one.

The Government arguably bears some responsibility for their plight. But what should it do?

If the problem is a lack of buyers, the obvious solution might be to boost demand.

One reader wrote to me with the suggestion that property curbs be eased on the resale market, so that the market can pick up again.

Another reader had a specific tweak in mind: Allow private property owners to buy resale HDB flats, as was the case until 2010. Current rules require them to give up their private home if they want a resale flat. If this is relaxed, they could form a pool of ready buyers, said the reader.

But when posed this question by The Straits Times, some property experts dismissed this idea.

Any attempt to boost demand has wide-ranging effects, as this very problem demonstrates. The point of cooling measures was to reduce demand and bring prices down. Raising demand would risk raising prices again.

More to the point, it would be a very blunt solution for what is essentially a niche problem.

Most new flat owners don’t have an existing HDB flat to sell. Only “second-timers” do and they are a minority of BTO buyers. They form no more than 30 per cent of those buying two- and three-room flats, and 15 per cent for larger flats in non-mature estates.

For mature estates, a mere 5 per cent of the BTO supply is reserved for them. Of these, only a tiny number has problems disposing of the existing flat.

The 18 requests for delayed key collection each month in the first half of this year is a smaller proportion of all keys handed over than the 11 requests a month in the second half of last year.

Over the last one year, such requests represent less than 1 per cent of all flats to be handed over.

Mr Ong adds: “It may be better to grant such sellers a longer period to dispose of their flat, instead of introducing new types of buyers for resale flats, which might affect the dynamics and pricing equilibrium that the recent cooling measures have painstakingly hoped to better.”

The HDB has essentially been doing this, by considering and often granting deadline extensions. This may not seem like a long-term solution. But in the context of an ever-changing property market, it might well suffice.

OrangeTee head of research Christine Li thinks that HDB resale transaction volumes could bottom out this year.

Admittedly, things could also worsen. This year will see over 28,000 completed BTO flats and 17,000 private residential units.

This could mean a flood of people trying to offload their flats, making it harder to do so.

If the situation indeed worsens and more needs to be done, then targeted measures may be needed. For now, it is worth waiting to see if changing market conditions can do the trick.


In a bind when new flat’s ready but old one’s still unsold

Some home buyers can’t dispose of existing units, as required by HDB.

FOR Mr Balaji Lakshmanan, the four-year wait for his new Housing Board flat ended this week when he collected his keys. But another countdown began: to dispose of his existing flat, as required under HDB rules.

“I don’t know if I can sell this house within six months,” he said, referring to his three-room flat in Bukit Batok East.

He is part of an emerging group of home buyers caught between their newly ready Build-to-Order (BTO) flats and their old ones – which lack buyers in a sluggish market.

The 42-year-old manager has been trying to sell his old flat for half a year, with about 10 viewers but no offers so far.

It was valued at $340,000 in January – down from $380,000 the year before – and he is willing to accept $10,000 below that.

The wait itself will cost, given that he now has a new five-room BTO flat in Taman Jurong. “Now I have to pay for both.”

Under HDB rules, he must dispose of the old flat within six months of getting his keys.

But fewer and fewer flats are changing hands. There were just 3,781 resale deals in the first three months of this year, a record low.

Some BTO buyers have turned to their Members of Parliament for help in getting deadline extensions from the HDB.

Sembawang GRC MP Ellen Lee has seen five or six cases this year. Some have come up against the six-month deadline. Others would like more time before collecting their keys. “People try to delay taking the (keys to their) BTO flats now, in case they cannot sell their old flats,” she said.

Thus far, the HDB has been very helpful in granting extensions, often for three months at a time, she added.

Nee Soon GRC MP Lee Bee Wah started seeing such cases in the past two months.

For some, it is not just about the deadline, but needing the proceeds for their new flats, she said. “They have to have money in order to collect the keys.”

On Monday evening, she wrote a Facebook post about such requests, wondering if these were a “sign of oversupply of flats”.

A few years ago, both new and resale flats were seen to be in short supply, with tempers running high over tough BTO competition and soaring resale prices.

Since then, BTO supply has been boosted and the backlog cleared, while in the resale market, home loan curbs have cooled demand and lowered prices.

Said Ms Lee Bee Wah: “I would think that (the HDB) achieved the target of stabilising the price of property. That is a good outcome. But for those who want to sell their flats, they have to be more realistic now.”

The falling market is a factor, Pasir Ris-Punggol GRC MP Gan Thiam Poh agreed. But he does not think the situation is that bad.

Of the two or three cases he has seen, one was affected by the HDB’s ethnic quota and could sell only to someone of the same ethnicity. The unit was also on a low floor, so the case is not really representative, he said.

Nor does the problem seem widespread, even in usually less popular non-mature estates.

Some other MPs in Sembawang and Pasir Ris-Punggol GRCs have not seen such requests. But with over 28,000 BTO units to be completed this year and resale volumes still low, more buyers may find themselves struggling to sell in the coming months.

Said Sembawang GRC’s Ms Lee: “Looking at reports on the resale market, it may get worse.”

But for its part, the HDB said that if buyers need more time due to special circumstances, it will assess each request based on the merits of each case.