Tan Kin Lian's Blog: Price of HDB flat

Friday, March 26, 2010

Price of HDB flat

Dear Mr Tan,
Will HDB Minister Mah Bow Tan and all other PAP Ministers again defend that this is an exception rather than norm... That PRs are NOT driving public housing prices in Singapore? Today's Asiaone article:
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A TAIWANESE couple have paid $650,000 for a four-room flat in Bain Street - smashing Housing Board (HDB) records and reflecting the strength in the red-hot resale market.
The sale price works out to be $736 per sq ft for the 30-year-old flat on the 25th floor of a block at Bras Basah.
That is the highest psf price paid for an HDB property and is on a par with prices of private homes in suburban areas.
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Regards,
Concerned but feel hopeless Singapore Citizen

COMMENT BY TAN KIN LIAN
The problem is the use of the "market price" as the benchmark for deciding on the price of new flats. If the price of new flats is based on cost and there is adequate supply to meet demand (and the state has a lot of land and airspace that can be developed) the people will not need to fear and drive up the prices further. It is better to have property based on "cost plus" rather than "market".

24 comments:

Parka said...: Or have the first property based on cost price, and the second based on market price.; March 26, 2010 10:47 AM
Anonymous said...: Some ppl buy old flats hoping they will go en-bloc so they have a chance to choose a new flat. If not, why would anyone buy a 30 yrs old flat?; March 26, 2010 11:27 AM
Anonymous said...: I used to hear quote "Let Market Forces Decide".........now it seems like "Let Foreign PRs Decide" so surely there should be a mechanism to cap Public Housing prices and leave the Privates Properties alone!; March 26, 2010 11:32 AM
Anonymous said...: I do not like see prices of property go up quickly as I like to invest at a low. However, I would like share a story of my neighbour which goes...

Auntie Tan has 2 adult children, one married and has her own HDB and one single, going 35years old this year, staying with Auntie Tan.

One day at a chit chat, she complains HDB house very expensive cos younger child wants to buy but very tough to afford. All the PRs drive up price so she upset. The chat continues to she says her older child bought a condominium and rents out the HDB at a very good price (to PRs) so they can use the rental to fund the purchase of condo. This child invites her to stay with them so Auntie Tan can rent out her HDB or sell if the price is good. Then she worry if the price is good...

sets me thinking...Auntie Tan's family actually gain from all the PRs coming in. I am more jealous of Auntie Tan's family with all the houses to rent and manipulate! What do u think?; March 26, 2010 1:32 PM
C H Yak said...: In my opinion, Mr Tan's point is very valid for the general interest of Singaporeans to ensure true affordability of HDB flats.

To prevent too big a consolidation in the "resale market" if policies are changed and implemented to solve problem highlighted by Mr Tan, I consider a 2-prong strategy to create a "dual market by segreation" might work without hurting the HDB resale market badly, while offering a solution as suggested by Mr Tan.

I described this approach in my blog :-

http://de-leviathan.blogspot.com/2010/02/how-to-ensure-affordable-low-cost.html

My suggestion still leaves an option of "leaving it to free market forces" but this is left entirely to personal choice rather than through compulsion due to current entrenched Govt / HDB policies. And the HDB can still perform its role well to supply at "cost plus", as when it was its initial vision on formation. It should not conflict its own interest by entering the market too aggressively just because of so called "asset enhancement policy" which is no more effective and sustainable today in Singapore. HDB is resisting to "CHANGE" of this policy without thinking about the "enslaving" impact on Singaporeans generally.

When new immigrants enter the fray to speculate or unknowingly join to find a nest in the HDB resale market, prices shot up ridiculously last year, and was aggravated by short supply.

It was also due to HDB upgraders finding new immigrants as "scape-goats" to help leverage and allevaite them into the fray of speculation in the private condominium market, which has shot up by at least S$200-$250 psf from previous market highs based on the same category or property class for new launches.; March 26, 2010 1:54 PM
citizen complains said...: Prices go up- complain
Prices come down - complain

prices dont move- Gov must do something..

Singaporean are really very dependent on 3rd party to solve their expectations.

Just like airlines:
Arrive early- complain
Arrive late- complain
Arrive on time- also complain: must change times, must change aircraft, etc.

Reflections of our times.; March 26, 2010 2:24 PM
Anonymous said...: Let's look at HK government housing model and modify it:

HDB's selling price for a flat = cost of construction & admin charges (A) + land premium (B)

Buyer (citizen) pays only (A) for a flat and have to top up the amount (B) to HDB before selling it to the public after a min. period. (A) should be around $180 / sq ft or less based on current construction cost.

(B) is to follow URA's land cost index. Flat owner can apply to HDB for the current land premium (B) before selling the flat. Once this flat is sold to the public, the future transaction price will subject to free market value.

This will ensure the 1st hand buyer a reasonable priced flat without being affected by the speculative property market. He is insulated from fructuation of land cost.

This may not be a universal solution to all HDB buyers but can at least provide a mean of affordable housing to the new starters.

Loh; March 26, 2010 4:32 PM
Anonymous said...: There is no solution because it is not a problem.

If you think it is expensive, it is because you cannot afford it. Then don't buy. Simple. Move on.

Buying a property is not a need. It is a want. There is NEVER a need to buy a property. You can always rent if you need a roof over your head. Just like there is never a need to own a car just because you need to travel from point A to B.

Remember the KISS principle: Keep it simple, stupid.; March 26, 2010 5:39 PM
Anonymous said...: """"sets me thinking...Auntie Tan's family actually gain from all the PRs coming in. I am more jealous of Auntie Tan's family with all the houses to rent and manipulate! What do u think?""""

We would rather not gain "from PRs coming" if we have a choice, and let the price stay "cost-plus", at least for the locals. What do u think??????; March 26, 2010 6:04 PM
Anonymous said...: High new or resale HDB prices are very bad for young Singaporean. The average Singaporean will have to struggle their whole life to pay up their housing loan. The situation will be aggravated if the bank lending rate were to increase sharply later.

On the other hand, some developer are happy to see property bubbles so that they could make tons of profit! The effect of high private properties would eventually drive up HDB prices! Young Sinpaporean will be the first to suffer from this escalation effect.; March 26, 2010 6:21 PM
-OTB- said...: @Anon March 26, 2010 1:32 PM,

The rich gets richer, the poor gets nothing.; March 26, 2010 6:23 PM
Wealth Journey said...: http://www.businessday.com.au/business/property/rba-watching-foreign-investment-in-housing-20100326-r2b8.html; March 26, 2010 6:49 PM
SD said...: Really, we cannot blame the PR on this issue. To begin with, the seller of the flats are mostly Singaporeans. How can I sell something to you and blame you for buying me at such a high price??; March 26, 2010 7:27 PM
Anonymous said...: Lobsided Property Market Prices .....HDB vs. Private Housing
Investors will be caught in a Money Trap World should there be a BUBBLE!; March 26, 2010 9:37 PM
Anonymous said...: Hi Anonymous (1:32 PM)

Ha ha...are you referring to the Auntie Tan at Woodlands ? The scenario sound like the Auntie Tan that i know of also....; March 26, 2010 10:07 PM
Anonymous said...: I agree with Hiei.

If I am selling a house now. I would be happy that the prices go up. would I complain or ask government to do something? Of course not.

If I am buying a house now, I would be unhappy that the prices go up. would I complain or ask government to do something? Of course yes.

Is it true that Singaporeans want to sell at high price to others and buy at low price from another?

There is no solution to please everyone. No seller would like to sell at low price and no buyer would like to buy at high price. And there is no such thing as a fair price because to the seller it is always too low and to the buyer it is always too high.

So best is to let market forces decide.; March 27, 2010 1:45 AM
Anonymous said...: REX comments as follows,

The price of hdb flats, however high they may be, are the same whether sold to PRs or citizens.

Therefore, if one wants to conclude that PRs are driving up prices, or are not, we have to prove that local singaporeans are not paying this kind of money for the flats.

All that Mr Mah Bow Tan needs to prove his point, is to recall the government database and highlight the transactions of top hdb sale/resale prices and identify if they are "PR" or "Citizen" for all to see.

The argument seems to point in favour of majority netizen views, since MR Mah is unable to provide statistics. A person of his calibre could easily prove the issue using the simple scientific evidences such as suggested above.

rex; March 27, 2010 8:26 AM
Anonymous said...: Get this right. Public housing is not meant for investment period.; March 27, 2010 3:33 PM
Anonymous said...: 2 Retirees were having talk:
Where on Earth, can a LESSEE make money$$$??? only in Singapore Public Housing!........Gahmen collect stamp fees / Agent collect handsome commission / Seller -Had Dreams Before!...all win win.; March 27, 2010 8:01 PM
heartlander said...: Yes, its not for investment

But remember what was said by some of our Gov people?.. "the 'value' of your flat will go up".

So, is there a 2 tier system for property prices?
one for public and the other private?

Wow,for a country the size of Batam Island.. thats really interesting.

My HDB flat can fetch 500,000 when I bought it for 150,000!.. grab the opportunity and run!!
Wait!.. run where? Sengkang? with smaller units and far away from town?.. fight with crowded MRT trains and buses?

Live in Johore?.. no thanks.
Migrate to Aussie land? No thanks
Rent out my rooms?... alright!; March 27, 2010 10:18 PM
Anonymous said...: This is government's cash cow, if new flats are priced at cost, then the huge gain will goes to the home owners ! Who will be so stupid to let such good meat slip away from its mouth !; March 28, 2010 1:34 AM
Anonymous said...: The government must have the WILL to control cost of living, because as this discussion has shown there are methods to moderate the cost of housing for the first time buyers which is the main objective of public housing, to provide good housing at affordable prices for
1st timers.

The government has provided good housing BUT it is no longer affordable!

Those who purchase a 2nd time should be treated differently.; March 28, 2010 3:22 PM
Anonymous said...: If you are so unhappy, you can also sell your flat & at a higher price than SGD650,000.; March 29, 2010 11:33 AM
Unknown said...: After finishing my national service in 1991, armed with a diploma, I got a starting pay of $1050. Back then, a New 5 rm Flat( ave 125sqm) cost est $100k plus/minus. Now, the starting pay of a diploma is about $1800 but the New 5rm Flat(ave 110sqm, so small) is est $400k plus/minus.

HDB should be LOW COST Public Housing, NOT HIGH COST "AFFORDABLE" Public Housing

Nicholas; April 09, 2011 2:43 PM