Posts Tagged ‘cheapest resale hdb’

How to make HDB housing affordable (Part 2)

Thursday, May 5th, 2011

My Proposed Solutions – Plan B

(This is a continuation of a this and this post.)

This proposal tackles the issue of providing cost-plus low price housing without adversely affecting current HDB flat prices.

The current types of HDB available:

    Rental Flats – very cheap rental housing provided for poor and needy citizen families

    Studio Apartments – only available for folks 55 years and above, and have a short lease of only 30 years.

    Build-to-order (BTO) – 2/3/4/5 room flats make up the bulk of new flats, which a range of prices depending on the flat locations.

    Design Build and Sell Scheme (DBSS) – they are essentially condo-like flats, and thus are more expensive than BTOs.

    Executive Condominiums (EC)
    – first created to allow the sandwiched class to get a condo (with full facilities), but at a lower prices. ECs are fully privatised after 10 years.

Most of the Opposition parties are proposing BTO flat prices to be slightly above cost or pegged to the median household income. Seeing how flat prices has ballooned by as much as 50% in less than a decade, selling flat prices at much lower prices will definitely affect recent flat owners. Some would be sitting on homes worth more than their loans when these flats enter the resale market in 8 years.

But with flat prices going up, and families having to take up 30 year loans just to pay it off, future generations might never be able to buy a place they can call home. So something definitely has to be done.

What if a new category of flats were to be created? Let’s call these flat “Type B” flats, while existing BTO flats shall be known as “Type A”.

Type B flats:

    – Should be pegged to median household incomes
    – Should be delinked from the market
    – When sold, price will be pegged to prevailing median household income
    – Can only be sold to other 1st time buyers or Type B upgraders/downgraders
    – Cannot be sold to PRs
    – Are meant solely for owner occupation, and whole units cannot be rented out
    (this is to prevent people for buying said flats for investment purposes)
    – Like rental flats, will be within current estates to prevent a division of classes
    – Only first timers or Type B upgraders/downgraders are eligible to purchase

Type B flats will be affordable, but owners will not “profit” from the sale of their flats, unlike Type A flats which is pegged to market prices.

Type B flat owners can choose to switch to Type A resale flats should they want to benefit from normal market prices (which would benefit those who intend to upgrade to condos).

The existence of Type B flats will keep Type A flat prices in check, but will not adversely cause a drop in prices for Type A resale flats. As most first timers will choose to go for Type B flats, eventually, the demand for Type A flats will cool, but will not drop adversely there will still be buyers in the form of PRs, 1st timers who can’t afford to wait for a new flat to be build, or current HDB flat owners who wish to move, upgrade or downgrade.

Perhaps down the road, median income will grow at a faster rate, and the gap between Type A and Type B flats will close up. At that point in time, the classification could be dropped if they no longer serve its purpose.

Of course this is all hypothetical. It may or may not work. Just some thoughts. That’s all.

Cash-over-valuation for your HDB Flat? Think again

Thursday, April 2nd, 2009

Cheow Xin Yi
cheowxinyi@mediacorp.com.sg

THE public housing market, which is known for its resilience, has finally peaked, according to flash estimates.

In its first decline in three years, the Housing and Development Board’s (HDB) Resale Price Index fell 0.6 per cent in the first quarter of the year, after rising 1.4 per cent in the previous quarter.

Most analysts Today spoke to said they saw this as a reflection of the general deterioration in the economic and employment climate. “We have seen private property prices coming down and this has had a spillover effect on HDB. Once cash-over-valuations (COV) come down, transacted
prices also become lower,” said Mr Chris Koh, Dennis Wee Group’s vice-president.

Another reason, suggested Mr Colin Tan, research director at property consultant Chesterton Suntec International, could be HDB’s pushing out more supply, making new flats more “reasonably priced” and driving down the demand for resale flats.

ERA’s Asia Pacific associate director Eugene Lim said larger flats, such as five-room units or those above $500,000, are taking longer to sell and coming in below valuation. “For larger flats, the days of transactions with COV are over,” he said.

The downtrend is good news for buyers, especially newly-weds, although ERA’sMr Lim said resale prices are not likely to plunge. He expects HDB resale prices to come down by 5 to 10 per cent for the whole year, while PropNex chief executive Mohamed Ismail had a more optimistic estimate of2 per cent.

Mr Lim added: “It has taken some time for (HDB prices) to move to a new peak. Similarly, the downtrend is reflective of the environment, but it will happen in trickles.”

Would a declining public market exacerbate the already shaky private sector, especially when recent transactions in the latter has depended on HDB upgraders?

“Theoretically, when people are getting less after selling their HBD flats, they’ll have less to splurge on private developments,” said Chesterton’s Mr Tan.

But Mr Koh from Dennis Wee Group feels that an HDB flat owner “would want to upgrade now in absolute terms”, as the savings from the purchase of a private property would be higher than the loss he would incur from selling his HDB flat, given the bigger drop in prices in the private market.