Feb 2, 2010

More on the HDB Market

Well, now that the news is public, I guess I can talk about it ....
    ST Jan 29, 2010
    HDB reviews rules to stamp out possible speculation
    By Jessica Cheam

    THE Housing Board is embarking on a review of its rules to ensure that property speculators are not abusing the system - and driving up flat prices.

    It will check if any rules are 'encouraging or allowing' people to speculate on HDB flats, said National Development Minister Mah Bow Tan.

    At the same time, it will step up efforts to make sure people do not get away with abusing the system.
No, Mah Bow Tan is not my uncle. However, back in December, I already knew that the HDB would be reviewing its rules to stamp out possible speculation.

How did I know? Back then I was looking for a place to rent. I viewed many homes. And one property agent told me, in a most assured tone, that the HDB was in the process of reviewing its rules and would announce this publicly, in February 2010.

How did she know? She said that she had heard it from her "source", a friend working in the HDB, who constantly gave her the "inside news". She further exclaimed that I was fortunate to have just sold my own HDB flat (otherwise, by February 2010, its market value would very likely have been dampened by the HDB public announcement).

So much for official secrets.
    Some disgruntled homebuyers, priced out of a rising market, worry that some HDB buyers are exploiting the rules to try to make a fast profit.

    They claim these speculators snap up flats on the resale market and then either rent them out illegally or sell them legally after the stipulated one-year period.

    Under HDB rules, citizens and permanent residents who buy resale flats without housing grants or HDB loans must live in the flats for at least one year before selling, or at least three years before renting out the entire flat.

    Speaking on the sidelines of a housing conference hosted by the HDB on Wednesday, Mr Mah said these claims were worth checking and he wanted to ensure that such factors were not inflating the market artificially.
The HDB initiative does not impress me. In my opinion, it is at least partially politically motivated.

Mah wants to do something (more importantly, to be seen as doing something). After all, public unhappiness with high HDB prices is already quite palpable. However, the rise in HDB prices has, in my opinion, very little to do with speculation (unless one applies a very liberal definition to the word "speculation"). That's because the existing HDB rules, such as these, already effectively eliminate most of the speculative activity:
    1. Resale flats bought on the open market without a CPF housing grant and with a private bank loan can be sold only one year after the date of resale.

    2. Owners of HDB flats are allowed to sublet the whole flat only after living in it for three years, (for those who bought it on the open market without a CPF grant), or after five years (for those who bought it directly from the HDB or on the open market with a CPF housing grant).

    3. Those who illegally sublet entire flats may have their flat compulsorily acquired or pay a penalty.
HDB flats are rising, simply because of the usual law of supply and demand. For years, this country encouraged a massive inflow of foreigners (and handed out citizenship and PR status generously), but the housing authority didn't factor this into their plans and projections at all. Now the demand for accommodation has outstripped the supply. Simple as that.

17 comments:

flotsam said...

It seems to me that the country has attained a critical mass of immigrants, of varying degrees of quality and allegiance, potentially basing themselves here for a good number of years.

And what is critical here, from this red herring indentified, is the message to these people goes like: "Come on, stay a little while longer."

Of course, this comes at somebody's expense.

And next, we had a high level committee unveiling ambitious plans yesterday aimed at transforming Singapore's economy over the next decade by making "significant improvements in productivity in every sector of the country's economy so as to achieve productivity growth of two to three per cent a year over the next 10 years".

sgcynic said...

Mah Bow Tan cannot admit that the rocketing HDB prices are a result of his BTO policy and underestimating demand over the last few years. No, that would make him look bad. So he has to find a scapegoat, at least dress up something to look like the goat. It's high time for him to retire.

Anonymous said...

Instead of focusing their resources on Singapore, his ministry is getting involved with township development for a city in northern China. One wonder who is funding who? Conflict of interest? Or should they call themselves Ministry of China Development rather than Ministry of National Development...

Anonymous said...

2. Owners of HDB flats are allowed to sublet the whole flat only after living in it for three years, (for those who bought it on the open market without a CPF grant), or after five years (for those who bought it directly from the HDB or on the open market with a CPF housing grant).



Mr Wang fails to realise that in reality HDB enforcement is as good as non-existent. And if the foreigner PRs sublet to their own countrymen there is no way to verify it is subletting.

Anonymous said...

it will be mathematically impossible to match supply to demand under current set of rules governing sale of new flats to singaporeans only and that only household with income less than $8000 can apply for new flats.

Lobo76 said...

Mr Wang,
1. Resale flats bought on the open market without a CPF housing grant and with a private bank loan can be sold only one year after the date of resale.


kind of depends on what you mean by speculation, doesn't it? Imo, if you are buying to sell, you are speculating. doesn't matter if it is 1 month or 1 year. It depends on the motive, rather than a specific time frame.


2. Owners of HDB flats are allowed to sublet the whole flat only after living in it for three years, (for those who bought it on the open market without a CPF grant), or after five years (for those who bought it directly from the HDB or on the open market with a CPF housing grant).

I have never rented out a flat before, and I already know of at least 1 'trick' to overcome this, even with enforcement which is near non-existent. So how does this prevent 'speculation'?

3. Those who illegally sublet entire flats may have their flat compulsorily acquired or pay a penalty.

see point 2.

Anonymous said...

"For years, this country encouraged a massive inflow of foreigners (and handed out citizenship and PR status generously), but the housing authority didn't factor this into their plans and projections at all. Now the demand for accommodation has outstripped the supply. Simple as that."

Neither did the Health Ministry and the Transport Authority.

World class helipcopter vision indeed.

Anonymous said...

I do know of one Singaporean citizen who is collecting rental from 2 HDB units monthly while residing in a third HDB flat.

How he does it, only god knows.

Anonymous said...

"I do know of one Singaporean citizen who is collecting rental from 2 HDB units monthly while residing in a third HDB flat."

I wouldn't be surprised if that citizen is a "new citizen" who bought his first flat as a PR, the second when he became a citizen, and then rented them out both, while residing in a flat owned by his wife.

lbandit said...

Won't curbing speculation reduce the amount of supply and thus make prices go up even further? It doesn't make sense.

Anonymous said...

Doesn't matter what is the reason why HDB flat prices escalated so much.

At the end of the day, will Mah Bow Tan lose his seat at the next election?

Will the PAP lose its 2/3 majority or even voted out?

Very, very unlikely. So hence doesn't matter what reasons. Or how bloggers argue among themselves to death, or how big the opposition election rallies.

The only benefit of all these, like exercise, is just to release some steam from the pent up anger and stresses. If not, one may suffer a stroke.

Lobo76 said...

lbandit said...
Won't curbing speculation reduce the amount of supply and thus make prices go up even further? It doesn't make sense.


Pls pretend that I am an idiot, and elaborate on this. My impression was that it is Demand that is reduced, not supply.

lbandit said...

Oh.. i kept thinking of speculation as selling something and forgot that in order to sell, they have to buy and thus creating demand. Silly me, lol.

Anonymous said...

my sis just sold her 5-room Tiong Bahru flat at $645,000. the buyers are ? a vietnamese couple ! gosh it seems like everyone is buying into the hdb market......

Serendipity said...

Spot on Mr Wang! All started with loose imports of foreigners and not following through by anticipating the demand and other social consequences. And why so much imports? All for growth sake. And how is growth measured? GDP only, on which their pay are tied to. Wrong driver?

Anonymous said...

Mr Wang, do you think that there is a chance that they purposely "overlook" the demand and supply of flats so that when the resale flats' price are push higher, they can launch the new flats at much higher prices. 10 x 300K = 20 x 150k. Gahmen monopolise the HDB market, thus they control the prices...they make more with each new unit sold.

auntielucia said...

Not only a matter of supply n demand. Low interest rates and high cash balances in bank accounts of many residents are other reasons.