Tan Kin Lian's Blog: Affordable HDB flats

Wednesday, December 30, 2009

Affordable HDB flats

The Minister for National Development said that HDB flats can be sold at a lower, more affordable price if the buyer accept that they have to be sold back to the Government at cost. He asked if Singaporeans would prefer to have this system.

I suggest the following approach:
a) Offer both choices to the citizens. Some prefer to pay more and have market values for their HDB flats. Others prefer to pay less and forego the capital gain. It depends on the personal circumstances. The PM once said that we cannot have "one size fits all".
b) The resale price to the HDB should be adjusted for inflation and for the shorter lease.
c) There should be a sufficient margin (say 30% to 40%) between the sale price of the "affordable" flat and the "marketable" flat.

We should also consider the Swiss system, where most people rent their flats. They can invest in property REITS, but they do not need to own their property. The properties can be owned by the REIT. This will give them the flexibilty to move closer to their place of work, following a change of job. They are not tied to their own purchased property.

Tan Kin Lian

9 comments:

C H Yak said...: The first HDB property which is said to be heavily subsidied by the state must be sold back to the Govt at cost. The Govt can then re-sell at near cost based on adjusted price with some appreciation in value to another first timer or second timer.

A first-timer who wants to upgrade to another bigger HDB flat or if he moves on to a private property, should sell back his first HDB flat to HDB at cost.

A second time HDB owner should either buy from the open market market at higher price or he should be allowed to buy from the HDB at an adjusted price (not subsidised) higher than cost (subsidised) but lower than market price. If a second timer chose to buy from HDB, he should sell back to HDB again. If he buys from the open market he sells back to the open market and not HDB.

There would then be 2 markets for HDB flats. The HDB should not behave like a private developer. It should managed one market for first timers and also those who prefer to buy the second time from HDB and keep the prices in this market low.

Those who choose to venture into the open market should transact at open market prices later on. For choice units bought back, the HDB should be allowed to release them into the open market but these would not be purchased back by HDB at open market prices.

Those who already enjoy 2 times purchases from HDB should only be allowed to transact in the "open" market i.e. they cannot purchased from HDB again.

This way the fluctuation and escalation in prices should be contained.

At present the HDB are pushing out new flats at high prices be it BTO or whatever and they are catching up close with private property prices. These new owners also expect a ridiculuos appreciation in property 5 years later. This appreciation is causing the escalation and "bubble" in HDB flat prices.; December 30, 2009 4:24 PM
KFC said...: I noticed that the size of new 5 Room HDB flat at the recently launched Dawson estate has shrunk to 98 sqm (including 2 sqm for air-con latch). The size is much smaller than the standard 5 Room flat (110 sqm including air-con latch). It seems to me that HDB has quietly reduced the size of flats in mature estate in order to reflect a lower selling price.; December 30, 2009 7:33 PM
Anonymous said...: Why make the system so complicated. The lower income group will not be able to do so much calculation as to which is more acceptable. If the system is so complicated , one day it will end up like Minibond and you know who is the culprit and make the most money. Allow more cheap rental flats to cater for people to rent it for various reasons! There is nothing wrong to rent a flat. A lot of professional in Europe are renting flats partly because they move from a town to another town. I notice there is no shortage of housing in Singapore . People are out to make money from housing whether from so called subsidized or not.; December 30, 2009 8:10 PM
Anonymous said...: I simply can't understand why so many people buy new flats and condos. These are really big ticket items. Some even queue for long hours to get their choice of unit. Are the flats and condos so cheap and almost everybody is grabbing it?

starlight; December 31, 2009 7:52 AM
Anonymous said...: Mr Tan,

I think the act of renting or buying a home is deeply rooted in cultural practice. Its not just the swiss that rent. Most of the "western" culture, eg. UK, US, EU.. people mostly rent.

However, Asians in general (almost regardless of race), prefer to buy a home, even if they are poor.

do you think so?; December 31, 2009 11:05 AM
Anonymous said...: It's aircon "ledge" not "latch".

With the huge influx of FTs turned PRs, our new HDB flats have to reduce in size just like those in HK.

If not where got space to build more "affordable" new HDB flats next time?; December 31, 2009 5:08 PM
Anonymous said...: I believe most peoples' instinct is to own their own property. This can be observed over tens of thousands of years of human history with neighbours, clans, tribes, countries, empires fighting and wasting millions of lives over patches of dirt.

You can see it in the US with the recent property craze and sub-prime fiasco. I lived a couple of years in UK, and the British are as house-proud(crazy) as any S'porean.

I feel the main dividing line between renting and taking out a mortgage for a home -- is essentially affordability and pricing difference. E.g. when I lived in UK, the rental for the 2-bedroom apartment was like 60% of the mortgage installment if I were to borrow 90% of the property valuation. Most big western cities have similar pricing gaps between renting and buying (20% to 40% difference). Hence most will naturally rent than to commit to higher mortgages for 25 years.

In S'pore, HDB rentals are artificially pushed high by influx of foreigners and PRs whose main intention is just to work and earn as mush as possible within 5-7 years. Therefore, leaving it to "free" market, it is still cheaper to buy a 4-rm HDB than to rent, as morbid as it sounds. Of course, sustainability to pay mortgage over 25-30 yrs is another thing.

The only way is for HDB to return to its roots as SIT (S'pore Investment Trust) and to provide low-cost rentals to citizens as its main priority, rather than trying to operate like a commercial property developer.; January 01, 2010 12:37 AM
Back2Nature said...: I like the Swiss way. By owning REITs, one is owning properties. By renting, one is flexible in location, thus shorter and cheaper transportations.

Seems Swiss has a number of good systems. Thus, I wonder why is it so? Good government?

Owning REITs is also flexible as one can starts from very small percentage of a property, e.g. 0.1% to many properties. Owning own property, for HDB, only one choice: 1 HDB per family.; January 02, 2010 2:25 AM
Anonymous said...: "Affordable housing" may not be affordable to us whose income remain stagnant for these few years. I do not meet the criteria of the "low income group" but I cannot afford a HDB flat. I am single, nearly 40 and not a professional, have an old father to support. My father and I are staying in an old HDB flat which is over 40 years now. Although the price in the resale market has gone up but it does not benefit us at all. Because if we sell this old flat, we have to buy another one from the resale market. With the rising prices of flat, I am lucky that I am still single and have a roof over my head. I alone cannot afford a HDB flat.; January 07, 2010 10:20 PM