Leong Sze Hian
What has record HDB prices got to do with falling private property prices and the number of students graduating from tertiary institutions?
According to the article, “HDB prices hit record high” (Today, Jul 24), prices of HDB flats rose 1.4 per cent in the second quarter. Sales of HDB resale flats also surged 58 per cent, reflecting improved market sentiment, the report said.
Resale transactions were 10,184 in the second quarter, compared to 6,446 in the first quarter.
In contrast, “private home prices fell 4.7 per cent in the second quarter. It’s the 4th straight quarter decline but it is less than the 14.1 per cent sharp drop in the first quarter. (“Home prices dip 4.7%”, ST, Jul 24).
Historically, HDB and private property prices have more or less moved in close tandem with each other, most of the time. So, why are they moving in opposite direction now?
Well, the answer may lie in an altogether seemingly unrelated statistic – the number of graduates.
This year’s graduating cohort from the Nanyang Technological University – 8,000 students – is the largest ever (“8,000 students graduate from NTU this year“, CNA, Jul 23).
I estimate the total number of under-graduate and post-graduate students graduating in a year from all the universities and polytechnics to be about 40,000.
The admissions policy of the tertiary institutions reserves 20 per cent of first year admissions for foreigners. The balance 80 per cent goes to Singaporeans and PRs. I estimate that about 15 per cent go to PRs. So, the percentage for Singaporeans is probably about 65 per cent.
For graduate students, I estimate about 50 per cent are foreigners, and 15 per cent PRs. So, Singaporean graduate students make up probably about 35 per cent.
Some Singaporeans will leave the universities in their second year or later years for foreign universities, whereas probably very few foreigners leave for the basic reason that most foreigners are here on a tuition grant scheme, whereby they have to be bonded to work in Singapore for three years after graduation, and thus are financially less in a position to transfer to foreign universities compared to Singaporeans.
What this means in totality is that about 40 per cent of the entire student population are probably non-Singaporeans.
Since a foreign student on a tuition grant scheme is bonded to work for three years after graduation, he or she may soon become a PR, and eventually a citizen.
For housing, perhaps it makes more economic sense for him or her to buy a HDB flat instead of renting.
For example, renting just a room is about $450 to $650 per month, compared to a monthly repayment of only $400 for every $100,000 of a HDB concessionary loan for 30 years at 2.6 per cent.
So, PRs may try to marry a Singaporean quickly so that they can qualify for a new HDB flat with a HDB loan, or convert their bank loan to a HDB loan when they become citizens.
Of course, PRs with PR siblings, as well as married PRs, can also buy HDB resale flats with bank loans.
What all these mean may be that the demand for HDB flats and thus prices may go up.
Since HDB uses its “market subsidy” pricing policy to peg new HDB flat prices to resale prices, although nobody knows exactly what pricing formula is used, new HDB flat prices may consequently rise as well.
When the decision was made many years ago to have the “20% foreign students” policy, was any comprehensive study done on its implications on the demand and affordability of HDB flats?
Now let’s examine the question of demand and supply of HDB flats. After all, prices are a reflection of market supply and demand.
The HDB over-built about 16,000 5-room and larger flats which I understand took more than a decade to sell off.
Although the HDB is increasing its building of smaller flats, the fact that every BTO(Build-to-order) launch has been heavily over-subscribed is an indication that demand exceeds supply.
There is also the trend of more people down-grading to smaller flats to monetise their hone equity, which may also have fueled the demand for smaller flats.
With the record increase in the number of new PRs to 79,000 and new citizens to 21,000 last year, is it any wonder that HDB prices keep going up!
All these speculation could have been put to rest by making the relevant statistics available.
Is it not rather surprising that over the years, no MP has been able to ask a question in Parliament in such a way as to extract from the Government a simple answer as to the breakdown of the entire university population into foreigners, PRs and Singaporeans?
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aiyoyo
if really hdb price correlate to more graduates,
why not correlate hdb price to even more commoners?
alamak another logic cant really understand.
aiyoyo
There are many contributing factors and this may be one.
My view is that the control of the prices of new flats by HDB has the biggest influence over resale prices. It set a floor for prices for resale flat in the vicinity as it is touted by the govt that new flats enjoy “market subsidy”, hence the surrounding resale flats of equal sizes must be at least several tens of thousands of dollars over a new one, if not more.
In addition, you can bet your last dollar that HDB will not be leader when adjusting prices of new flats downward, but the converse will be true for upward revision. This contribute a slow decline in HDB resale prices during a property down cycle, but a faster increase during any property “bull run”.
Considering that more than 80% Singaporeans lease (altough the govt like you to believe you own) HDB flats, it would be a difficult political pothole to navigate if the govt allows the prices of HDB flats to decline substantially as many will suffer large losses in their balance sheets.
On the other hand, during a property upswing, the govt would like the prices to rise quickly so that everyone feel “rich” from the rise in asset prices making the ground sweeter. If it coincides with an election year, it will never hear the last of it how their policy had enhanced the values of your HDB flats.
These little concrete boxes are becoming like those large stones that the people on the Pacific Island of Yap used as “money” – no one could really explain their worth (and how they were valued), and no one else wanted them! Sounds familiar?
http://economistsview.typepad.com/economistsview/2005/09/yapping_about_m.html
Mr Leong, maybe you can look at the statistics Q4 2008. The HDB prices went up although less people were buying (25% less). Please explain how that can happen. In a free market, we assume that when demand is more than supply, prices will go up.
More graduates = high HDB prices = more default loan due to high jobless rate upon graduation? Who sufffer? our countrymen. That sucks big time isn’t it? so vote with your hands and legs for alternative parties because we have had enough of craps from pap.
lean supply firm demand less desperate sellers better price control and therefore, prices may even edge up for some prime units which translate to overall higher prices.
Its got to do with the opaque valuation process is what I think……
All confine to 700 sq km (much less if exclude reservoirs, parks, roads, canals, catchment areas, non resident areas, gahmen unused land etc) surrounded by water. One city, one nation. Every living area is almost urban and homogeneous in terms of density.
Even KL and its surburbs (Klang valley) is bigger than SIngapore in terms of population and land. Even HK has much suburban and rural land.
No countryside or suburbs to escape to for cheaper land, or grow your own food, unlike bigger countries.
So more foreigners, PRs, prices sure will rise, so will the spread of H1N1.
#David…agree with you.
More defaults.
More stress.
Especially to those who bought from the mid-90′s.
Since, 2001…these guys (HDB) have been meddling in something they don’t understand. It is now hitting them and its hitting then hard. Such, trends are not fundamentally right nor good for the people.
What good is it when PR’s or new citizens buy a property and then resell it after 2 and half year or 5 years and leave pocketing a hugh gain and leaving Singapore to their home country.Then coming back to buy again, when the prices are down.
Remember, this is public housing, meant to roof every Singaporean.
Why do this & what is the benefit in price control?
Is it to keep the people happy & asset rich?
Is it to control land prices?
Is it to control the private property prices from sliding down too much?
Will it contribute to greater bank defualts?
Will the banks be in trouble, just like in the USA?
Managing price is something which eventually will lead to failure. However, with this contiuing trend.
I hope to secure a private property(condo) which soon will become cheaper then a HDB flat. It’s a big comic hope nevertheless, but i live in Unique Singapore.
“I hope to secure a private property(condo) which soon will become cheaper then a HDB flat. ”
assuming you are a condo owner, will you sell your pte property cheaper than a HDB?
It used to take a graduate couple in S’pore about 10 yrs to pay off BOTH a housing (low end private) and car loan. I do not know about now but I do know that most young S’poreans will enter into a lifelong debt cycle trying to reach that castle in the air thats assuming you have a smooth lifelong career. Paying 4 figure monthly loan installments ifor 30 yrs s no joke, money could have been better used for other investments. One only have to look at japan and be more objective about paying sky high prices for properties, after all, most of us buy to live in, not to speculate.
I honestly feel that the HDB has seriously lost touch with providing cheap affordable housing.
It doesn’t matter if you have a degree or phd. Your lifelyhood and shelter is now subject to market forces. In a few years time, I can expect 4 room flats to go beyond 500K per unit.
What then will HDB address? That they’ve hit another sales high? That Singaporeans are getting richer?
Ofcos being a true blue Singapore, I do not take these HDB news as a sign of progress. I take it like it’s a property company talk.
Which leaves me to consider what values does Mr. Mah Bow Tan, Minister for National Development of Singapore have?
He is also the elected Member of Parliament of Tampines Group Representation Constituency (GRC) for the People’s Action Party.
This must be the work of a rotten tree of GRC to produce fruits of this nature. How the heck do you not link your lifelyhood to politics?
If you do bother about politics, it will still look for you one day. How does it not invoke a choice to not vote PAP? This is only one aspect of life. Please someone, lecture me.
Still, 1.4% increase in one quarter is not sufficient to tell a story.
However, I agree with Mr Leong’s analysis. The increasing number of PRs (graduates or newly arrivals) drives up the market of re-sale HDB flats.
Here is my further analysis:
1) END OF CHEAP NEW HDB FLATS
HDB carries out the BTO system. There is no more “build & build & the walk-in-selection” scheme. Hence, the new flats’ supply will be tuned to match the demand. In other word, the government controls the price of new flats.
2) NEWLY MARRIED COUPLES.
The traditional buyers for BTO are the newly weds. If this group of people doesn’t want to wait 4 to 5 years for the BTO flats, they go to the re-sales.
3) INCREASE OF FOREIGNERS.
You find them everywhere. I am not talking about those high skilled foreigners. Look inside our kopitiam, bus, shop, hospital, cleaning companines, etc. They need rental flats. So the HDB flat owners rent to them, and the owners happily move in with their sons/daughters in new flats. This adds to demand of housing in re-sale market.
All these 3 factors explains why flats are getting more costly.
Why ? This is a grand plan of the government. Be a slave to your property, service your mortgage until you die, work hard, no relax, and more importantly don’t meddle with politics, government is always right.
Luckily I always buy within my means, and never be a slave to my HDB flat (99 lease only, maybe a shorter 25 years with en-bloc, so why pay more ?).
The relentless rise in the price of HBD prices is not attributable to the growth of the student population alone. Look at the number of PR and foreign population growth every year. These PRs when they are here will buy a unit of HBD from the re-sale market and then occupied one or two rooms, renting out the rest to other PRs or foreigners. In this way, the loan repayment will be subsidised by the rent collected and at the end of the loan repayment period, the PR will own a HDB flat. Unlike Singaporeans, where the whole family usually occupied one whole unit of HDB flat, the PR do not mind squeezing as many residents into a HDB flat, as most of them will be working during the day and the flat is using for sleeping at night only. That is why, during holidays period you will find the roads, shopping malls and open space are full of foreigners and PRs, as the rooms are two crowded since these people are not working.
Furthermore, some Singaporeans also buy a unit of HDB flats, occupying one or rooms and sub-letting the rest to PRs and foreigners. This leads to too many occupants in the flats, as the flats is used by foreigners for sleeping only. These PRs or Singaporeans just rent a bed for the night on a monthly basis. Therefore during holiday periods, you can see a lot of PRs and foreigners on the roads, shopping malls, open spaces, etc as the flat is too crowded when these people are not working.
there is some truth to hindsight observation. which leaves us at the mercy of the foreigners actually. you just hope the gahmen keeps the jobs flowing for these foreigners who have been feeding the property market – especially rental market because, if the jobs dry out – or if we heed the opposition complains about these foreigners invading our spaces and jobs etc – your home value and everything that goes along with it will fall like a ton of brick hitting the roof of your 40 storey HDB flat, giving our version of 911.
which gives you a new appreciation of foreign presence here doesn’t it? LOL
GCT promised low cost affordable housing and a shelter for every citizen. Now? Only rich can afford…. They are saying these graduates should marry buy a $700,000 dpss, exhaust all their cpf and be burdened till end of life.
Anyway, just complain lah, nothing will change, we support them what.
true true true….rental for a single hdb room can yield $500 for an old folk ( can pay medical fees and buy tooth paste somemore) or supplement those financially challenged like pay for utilities or mortgage etc…..think about it….many old and poor will be suffering oh no wait….die…. without rental income.
praise pap and praise foreigners! lol
i’m a degree holder here ….on an unrelated method the same degree as mr loo in another article.
All I can say is that my media degree are pretty much worthless and I wont be getting the high basic pay as of other degree…
So what the F**k so thet think they can rise the cost of HDB just because of more graduates
dont blame the authorities.you could be a useless degree holder
To pointer:
Come work in the media industry and see how bloody low the pay is for long hours of work
21) yaris – i dont work in media industry, i clocked more than 12 hours a day, till 11pm or 12am. Sometimes i work on Saturday morning to clear all the emails etc.
Pay is low because the government says we need to accept LOW PAY IN ORDER TO BE COMPETITIVE. But they are paid millions right?! And they raise prices of everything to make Singapore 10 most expensive city. Commodities like public 99 years housing priced at such high prices and you media graduate meagre pay? Did you ever hear NTUC Lim SS say we need to accept low pay?
Dont complain lah, just support them, they are always right.
how low is low?
Leong Sze Hian
May I enquire if all the numbers quoted in your article are your assumptions or facts.
Leong Sze Hian
////////I estimate the total number of under-graduate and post-graduate students graduating in a year from all the universities and polytechnics to be about 40,000.
The admissions policy of the tertiary institutions reserves 20 per cent of first year admissions for foreigners. The balance 80 per cent goes to Singaporeans and PRs. I estimate that about 15 per cent go to PRs. So, the percentage for Singaporeans is probably about 65 per cent.
For graduate students, I estimate about 50 per cent are foreigners, and 15 per cent PRs. So, Singaporean graduate students make up probably about 35 per cent.
What this means in totality is that about 40 per cent of the entire student population are probably non-Singaporeans.//////
May I enquire if all the numbers quoted in your article are your assumptions or facts.
to pointer
1700 before cpf regardless of dilploma or degree
In order to keep the Rich-Poor gap narrow, also the GDP numbers will be nice, and, can hold back goon-doo Singaporeans CPF monies for generations. And…
Therefore, no matter what, it is good to keep HDB prices high even if it has to be by artificial means.
i want cheap comfortable housing to stay in … aka home.
some others want to make quick buck in selling.
some others like to see paper value of their properties goes up.
politicians want to please some people by increasing their properties value.
i am lost … in the end, who win?
Why link graduates to HDB prices? Why not link the number of Foreigners turn PR which helps to rack up the flat prices? No PR means less people buying HDB = less demand = lower prices. Recalled that PR starts flooding in since 1994, it began with HK hand over to china, later as China began to rise up, big floods of chinese came over starting from 2000. That is the real culprit.
When places in our universities are reserved for foreigners, it MEANS that even if your score is better than a foreigner’s score, the place will NOT be given to you (because the place has been “chopped” already)
I think (http://theonlinecitizen.com/2009/07/hdb-prices-hit-record-high/comment-page-2/#comment-90696) already shows us that such continual price hikes are due to foreigners, and that the demerits outweigh any merits.
The question is why are Singaporeans letting ourselves be subjected to this? Our population, our people, our culture are being diluted away.
I saw a NDP poster at the bus-stop today:
“ONE united people…OUR home…OUR Singapore”
I shook my head in disgust.
For every 2 of us, there is 1 of them! There are EVERYWHERE! Taking job opportunities, depressing wages, raising housing prices, etc etc etc. You see them every time you are on the streets, bus or train!
We should not let our country be “invaded” like this!
I am not proposing Hitler’s FINAL SOLUTION here. But there is a limit to tolerance. 忍无可忍就无须再忍！
Our education sys is one of the best in the world. WE ARE NOT DUMB. We cannot let this ridiculous situation go on.
any things that fuels the price increase is used, no matter how ridiculous.
higher prices = optimism = more profits for HDB
How can our universities be great if our people are so dumb? We have been dumb and numb to the rule of the emperor for so long… blind as well… why would ppl want to study in our local uni? i personally studied a private uni and wont consider any local singapore uni. i am afraid i become dumb like the 66% singaporeans who voted for the world class govt.
Dont envy the foreigners who studied in our local uni…they are blind.
Dear Mr Ngiam Tong Dow,
I know that you are one way or another will read this.
Please……..
Enlighten us on all these ‘misunderstanding’.
You are surely in position to know more than any man on the street.
And I do believe you are a good man with good brain and good heart.
Thanks.
“”"Is it not rather surprising that over the years, no MP has been able to ask a question in Parliament in such a way as to extract from the Government a simple answer as to the breakdown of the entire university population into foreigners, PRs and Singaporeans?”"”
Well, in a democracy, as long as the people continue to accept as they always have, i mean from a majority point of view and i wonder is there any example at all in the history of singapore , a so-called 1st world full of highly intellectual citizens, that the majority has demonstrated beyond reasonable doubt they DO NOT ACCEPT any policy or rules or law?
juz a questiong onlys leh. cans or nots?
peace
34) ObserverOne on July 27th, 2009 11.47 pm
“”Dear Mr Ngiam Tong Dow,
I know that you are one way or another will read this.”"
ROFL kekekekeke :) ;P ;)
hahahahahaha! funny!!!!
cyberia squat coonter intellijohns.
Does all local graduates get high income jobs or are the so call immigrants the one that get high income job. Is time to think. We have University that rank high but its graduates are not earning that much. Worst some has been jobless for years.
28) doctor who – i have not seen a silly person like you. who wins? the government always win in every competition/corner/deal. raising evaluation price is to please some people? are you sure? how can these people gain?
Sell higher and end up still buying high. If you sell a 5 room at $400k or higher, you end up buying flats at $700k++. Who wins? The bank and the government win… and bank belongs to government also.
When did citizen win?
cant affort a decent home very soon i will have to sleep on the street
\\\39) shenshi.c on July 28th, 2009 1.24 pm
cant affort a decent home very soon i will have to sleep on the street///
whether what u say makes sense or not is secondary cos as long as the people and young people accept, that is all that will matter.
its not about accepting or not, the freedom to choose is diminishing as time passes.
fresh grads are often told to moderate expectations when it comes to salary ler.
cannot be 90% homeowners are fools and the few complaining here are the smart ones right?
from coffeeshop uncles and aunties to shenton way polish professionals, they are queuing up at show flats to buy these “over priced” real estate.
if they are really “over priced” why are these homes selling like….hotcakes?
42) obsurf
Even if you understand that you are being over-charged, you have no choice, but to follow the herd.
If you do not follow the herd, the flat prices may even be higher when you decide to buy later. It is fear that drives us into this herd mentality.
42) obsurf
Actually everyone knows they are being ripped off, but they have no choice.
Singapore has limited land. very very limited.
In this game of musical chairs, if you do not sit somewhere (a flat) before the music ends, you will be left standing.
As long as the govt admits an endless flood of foreigners into our country, the game of musical chairs will never end. Sighs.
One day when foreigner makeup more than 50% of our population, housing prices, food prices etc will be as high as Tokyo. We will be the land of the working poor…if we are not already….
they are following the herd who are following the pot of gold
“ripped off”?
the people are not stupid with their money. i think they have become very rich “ripped off”.
45) obsurf
Yes there is the greater fool theory. That someone will take it off your hands for a higher price. Are you sure you won’t be the last fool left crying?
The truth is we do not know about many factors
-There is a chance H1N1 may be mutate. It is currently still spreading and killing
-The manufacturing sector of Singapore seems to be ever shrinking.
-I am not entirely sure PAP will keep taking in foreigners. Our roads, land and jobs are already very tight.
-The US GDP is 70% consumer spending and the US GDP is 25% of the world’s GDP total. Currently they are heavily in debt and imports have been falling. Without them to buy, world trade has already dropped by more than 10%. Singapore is VERY trade dependent. Without trade, Singapore’s economy…ahem…use your imagination.
If you think you can get rich buying a flat now, it is your choice. Hope your investment yields well.
My money is my blood and sweat money. I am more conservative. Falling into negative assets is a serious matter. I do not have that much spare cash to wait-out this prolonged recession, during which I believe the Singapore property market will collapse.
44) Jerry
//////One day when foreigner makeup more than 50% of our population, housing prices, food prices etc will be as high as Tokyo. /////////////
Is Japan smaller than SG in land size?
Has Tokyo got 50% foreigners?
If no, why is their housing price higher than SG?
47) KopitiamApek
Singapore land area: 581.5 sq km
Japan land area: 394,744 sq km
On the surface, it seems that Japan is larger than SG by more than 6 times.
However, you need to understand that only 20%-25% of Japan is flat land. Hongkong has similar problems too.
Instead of just looking at population or land area, you need to study population density:
Japan’s pop density =340/km2
Singapore pop density =8200/km2!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Despite the scary figures, Singapore is still ok, as Singaporeans like to stay home.
But, I am afraid this cannot last. Foreigners like to go out more.
As their population overcomes ours, our flats will be pricier. We have to stay outside, work longer house. Also when HDB flats get smaller and smaller, we will also HATE staying at home. We will try outside for longer times like the Japanese and Hong Kong people.
When this happens. There will be waves of people EVERYWHERE you go and I am undoubtedly sure housing prices will rise to Tokyo levels.
The million-dollar question is whether the govt is willing for this to happen. The ball is not in our court.
47) KopitiamApek
TO catch a glimpse of what bears ahead for Singapore’s future, pls read:
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/10/26/international/i081406D49.DTL (Photos are available)
http://www.smh.com.au/news/world/no-hiding-place-for-homeless/2008/08/29/1219516735792.html
I am not trying to scare my SG brothers but I fear this is our common future as the government continues to let foreigners settle amongst us with restraint.
*without restraint
49) Jerry
///////Instead of just looking at population or land area, you need to study population density:
Japan’s pop density =340/km2
Singapore pop density =8200/km2///////
Fair enough, lets look at density.
340/km2 includes or excludes the uninhabitable land?
So if SG is no 20x more dense than Tokyo, why is Toyko’s house price more ex than SG?
And has Tokyo got 50% foreigners?