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HDB Defaults – Good or bad News?

33,000 flat owners owed HDB arrears of three months or more
Long term measures to help HDB mortgage defaulters is best solution
By Cheryl Lim Mei Ling (Nov 18, 2008)

Channel NewsAsia SINGAPORE : The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments. It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort.

As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They make up less than 8 per cent of the 420,000 households with outstanding HDB loans. Giving this update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad Maliki Osman said home owners should buy within their means. But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit. More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats. Dr Maliki also said heavily subsidised rental flats should be given to those who are in dire need.

Source: ChannelNews Asia

This isn’t new news, but just thought I’ll log it down here. Imagine this: the whole subprime mess in the US has led to a default rate of about 9+% as of August 2008. This is already considered catastrophic!

Singapore has a default rate of 8% for HDB, public housing that are meant to be highly affordable. And the recession has just started in Singapore. This means that the default rate will rise even further.

Thankfully, HDB isn’t like commercial Banks. They are more lenient towards HDB flat owners who have taken HDB loans. Some HDB owners have not made payment in over a year, but have not been evicted by HDB, as that is their last resort – evicting the owner and selling the flat to repay the loan. Any remaining money from the sale will be returned to the owner.

So while it is bad news for defaulting owners, what this eventually means is that a percentage of these 33,000 defaults will eventually be repossessed by HDB and resold by HDB via their quarterly and bi-annually sales. This would allow more people to ballot for ‘new’ flats in mature estates, with a fresh 99 year lease.

To put things in a little perspective, according to caveat transactions over 27,000 HDB resale flats were bought and sold this year. This doesn’t include the number of new flats sold by HDB. If you take into account some flat owners who sold their flats also bought another flat, the actual number should be lower. This means that a default of 33,000 is essentially a couple of years supply of HDB flats!

This is also a ‘wake up’ call to HDB, to either be more stringent and prevent lower income families from overcommitting in their loans, and to start doing what they are supposed to do – provide affordable housing to the Nation.

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One Response to “HDB Defaults – Good or bad News?”

  1. Leong Sze Hian » The unofficial history of the poor in S’pore? (Part 3) Says:

    […] make up less than 8 per cent of the 420,000 households with outstanding HDB loans.” (“HDB Defaults – Good or bad News?”, Channel NewsAsia, Nov 18, 2008) – And this was in a good year, just before the […]

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