Tuesday, July 27, 2010

Selling a HDB flat

Read this story.

My view
We can stop the price escalation of HDB flats by providing a supply of flats for rental at controlled prices. The Government has the means to achieve this goal, if they wish to. We have plenty of land and idle manpower (remember the unemployed PMETs)  that can be put to build these flats. If rental flats are available at affordable prices, there is no need for citizens to panic and buy a HDB resale flat at inflated price.

When the property prices come down to a sensible level, i.e.5 years of average income, we will have a better economic and social structure.  We will not have some people, e.g. land owners, property developers, property agents, lawyers and government leaders, making so much money at the expense of the ordinary people.

For this to be possible, we need a government that truly care for the welfare of the people.


Recruit Ong said...

higher housing prices has a bad effect on the economy too... bcos too much funds gets locked up resulting in decline in domestic consumption, this a consequence that flies against the garment's aim to raise domestic consumption. (of cos domestic consumption can also be raised by simply importing digits to hit a 5.5 mil population hehe) So again we are seeing policy confusion from the pap, the head does not know what the hand is doing hahaha

C H Yak said...

Along with strong economic fundamentals, the red-hot HDB resale market is a result of an imbalance in demand and supply, and it will take a year or so for prices to stabilise, National Development Minister Mah Bow Tan said yesterday.

He has to say the "imbalance" would be one year ... that would most likely cover the period to the next Election...he is not answerable because it is DEMAND pulled...LOL.

"Demand is also hard to predict." Mr Mah said the indication is that there will be "some slowdown" in the economy later this year. He blamed it on Demand ... but he can regulate the prices for new flats.

If you push out more supply but does not regulate the price but tag to re-sale HDB prices ... it will not solve the problem ... but continue to spiral.

Read about this possible solution (see link below) which I bet the Minister will not be daring to implement...but it will keep prices affordable, after all as the writer's blog said ... even if HDB appreciate in price ... how could you realise and enjoy the appreciation? It is better to remain affordable than to appreciate in value now ... ridiculous.

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

Unknown said...

The only way to solve this issue over priced HDB is to remove BTO pricing pegging to resale flats pricings. When Mr Mah says that the market can be corrected by having more BTOs. Does HDB has any more resources to do it?

Unknown said...

Kin Lian,
Actually, the rental apartments will not solve the problem.
Why? Because of the difference between cold-hard-cash and untouchable-CPF-monies.

When we buy any form of housing, we can use our CPF money, which is not real money in a sense (since we can almost never really get to touch or use it anyhow otherwise), whereas when we rent, we pay cash.

That's why there will still be a dollar-for-dollar preferential towards buying, as opposed to renting, regardless of other known arguments for owning a property vs renting one, and the fallacy of which during times like this.

hanglian said...

Based on my understanding of Mr. Tan's suggestion, let me present a scenario. Please correct me if I'm wrong.

Based on the idea of having rental flats at "controlled" prices. Let's say $800/mth for a 4 room flat in Seng Kang. Which is more than the rental the government is charging at the moment (2rm at 275 max/mth), but is also a lot less compared to the open market rentals (around $1700/mth).

The current price of a 4 room HDB flat in Seng Kang costs about 350K.

If the rental flats scheme is introduced, the market MAY be moderated and let's say prices come down by 10% after 5 years.

Monthly mortgate payment for 80% of 350K, 2.6% interest rates for 30 years is $1261.00. Mortgate paid in 5 years: $75,660

Rental paid in 5 years is 48K ($800*12*5).

Savings if buying after 5 years is $35k.

Net rental spending is 13k and net monthly "rental" is 217.


1) Rental is immediate, you don't have to save 20% of the cost of the flat.

2) The amount spent in 5 years on mortgage and rental is a difference of 27K, which is very close to a 10% down payment for a new flat.

3) Although one forked out $48K in rentals, but save $35K in the new flat. The net monthly rental boils down to only $217 for a 4 rm flat, not bad at all!

4) People are less panicky about the HDB prices.

5) We may indirectly fix some issues with the low birth rates.

Some of the benefits highlighted above may not mean a lot for someone with heaps of CPF savings, but it makes a huge difference to young couples.

Mr. Chin Ann has a point in saying that using CPF to buy a flat is a good idea vs. using cold hard cash. But Mr. Tan's suggestion of rental flats does benefit a portion of the
population. The aim is to moderate the housing prices and not convert people to renters.

Disclaimer: Some of the numbers are assumptions (eg. $800 rental), so I'm not sure how feasible it's going to be. I just want to make the picture clearer by putting in some numbers.

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