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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51) KopitiamApek
340/km2 considers all land. Do not think this means that they are denser than us.
At their densest in Tokyo, the population density is 5655 /km² less than SG’s 8200/km2
Why are their property prices more than SG’s? To understand this. Pls read the 1st article I recommended. Japanese cities and Hongkong have had a continuous flow of immigrants from the rural areas and mainland china respectively.
If you study the years where property prices skyrocketed, you will observe it is when immigrants overwhelm the city’s original residents. Soon, cells in Changi will be larger than our rooms. (see the 2nd article I recomended)
To make matters worse, we are invaded by people not of our country. Take a look at USA, how much of the native’s culture is retained? What does it mean to be a Singaporean anymore?
hi Jerry,
” I do not have that much spare cash to wait-out this prolonged recession, during which I believe the Singapore property market will collapse.”
somehow, my instincts tells me the same thing.
another article here “HDB prices hit record high” in TOC has a hint how unsustainably scary this bubble is, & the key words are “market sentiment”.
Be brilliant like this guy, who did not even finish uni and you may have a hiouse like this……..
http://www.youtube.com/watch?v=9738CIiY41k
52) Jerry
Agree.
Most cities of the world have a continuous flow of people from rural to urban centres.
The people are free to move to the city as they are all citizens of the same country.
The govt cannot use immigration control to stop the movement of people.
But the market forces will eventually drive people to suburban areas when city centres gets too pricely.
This phenomena happens all over the world.
SG has no rural population to deal with, only foreigners, which can be controlled by regulating immigration. Depending on your point of view, this can be an advantage or disadvantage.
52) Jerry
And if it makes you feel any better, look at the squalid conditions our forefathers lived in when the angmos ruled us in the colonial days from their posh black and white bungalows.
Mr Leong’s creative articles are amazingly interesting.
How about one on this:
Leaving your dirty plates on hawker centre table = Higher COEs
those who are hoping for singaporean assets to collapse irredeemably might as well hope that the pap goverment will disintegrate in the next few decades
the last prolonged housing depression was due to an oversight by the authority which will probably not repeated. i don’t think they are in the busisness of seeing their legacy wiped out along with singaporean most prized asset.
if it goes down and never recovers, this country is done for or…..our world has really changed.
Dear obsurf,
//might as well hope that the pap goverment will disintegrate in the next few decades//
Arh…Ahem….I hate to tell you this…but I don’t think many of us here at TOC are ardent supporters of PAP. Personally, I feel “few decades” is a bit slow. I was hoping like this year or next. Fingers crossed, that 66% will become less than 50% this time.
Not to say you are wrong to support PAP. You have your political freedom and we have ours.
I am not hoping the property market will collapse. OBVIOUSLY I am living SOMEPLACE here, it won’t do me much good to see my family’s flat depreciate to peanuts…ahem…excuse me….the salt on the peanuts.
Just as well, I think it is not prudent to advise others to jump on the bandwagon to buy a flat immediately. You and I cannot know what may happen. It is better to leave such a major decision to be made themselves and with less persuasion that there “are pots of gold to be found.”
nicely put jerry
the later the property bubble burst the worse the mess will be, for that any bubble.
37) NoMoreJoke
You are right. That is because govt set min wages for foreigners (Employment Pass, at least SGD2500, S Pass SGD1800) but not for our own grads. I have friends who are graduates of NUS earning less than SGD2500, while foreigners who came from lower rank university such as University of Malaysia earning more than SGD2500. Worse still, some of our graduates are even offered jobs that pay less than SGD1800. Seriously, there should be minimum wages imposed for our own graduates too!
I bought a box of fried kuay teow from under me HDB yesterday.
It cost $4.50!
Everything rises (except for wages). How can Singaporeans live in SG?
It seems only foreigners with their favorable exchange rates can work in SG and love it.
Just ban foreigners from renting HDB flats!
I’m sick of being dwelt the deal’s shorter end – if you are not happy/satisfied with the government – show it to them! Show it with your votes in the next elections!
It is our (Singaporeans’) fault that the Singapore Government has became so incompetent and arrogant! Our continued mindless vote for PAP – have given them the WRONG mentality that they have the “right” to bully and mishandle both our welfares and our lives.
Prosperity? Wealth? Think about it — how many of you out there are feeling rich right now?
If you want improvement and respect? You have got to earn it! Use your VOTE wisely. Its high time Singaporeans UNITE and send a STRONG message down to out PAP “Overlords”!
*NOTE* You don’t have to vote for the Opposition -just a spoilt/blank vote would do. Imagine the scenario where in contested zones, there’s cases of 70% spoilt votes and only a 20% vote for PAP – that would be a perfect STRONG signal to PAP – telling them that they have LOST the mandate of both the people and the nation!
*Majulah Singapura (Stand Up Singapore)*!!!
Yes I believe voting PAP out is the only choice.
I appreciate LKY and the other PAP pioneers for their contribution but….
I want to get married and have kids. I want to care for my parents.
To do that, I need to be able to afford a decent HDB flat.
I can’t do it now with the exhorbitant prices.
If I do not vote PAP out, my wages cannot rise and flat prices will continue soaring due to PAP’s pro-foreigner policies
Sorry PAP and MM Lee but you left me no choice
P.S I also believe that I must exercise my vote against PAP asap.
As more foreigners enter to be “citizens”, the power of my vote keeps getting diluted!
hmmm, maybe even foreigners get walked-over? ;)
Mr Leong Sze Hian,
My question in post #24 remains unanswered
I am 35yo single mum can’t understand why could’nt I get
a rental flat or 2room resale flat from direct HDB with
my child.
my current rental now is $650 it really cost me a bomb
and good meal for my child. hopes the HDB price drop
according to one’s ability ( a flat that not cost more than
60% of one’s pay).
To KopitiamApek :
I question your assumptions of 50% for postgraduates are foreigners.
Which faculty are you talking about?
You just need to check out the exam hall during an exam for the engineering faculty to know that the number is more than 80%.
15% of undergraduates places goes to PR?
I don’t know how you arrive at that.
Just go to the exam hall and you can tell.
55) KopitiamApek:
Yeah right? the govt cannot use immigration to control the movement of the people.
Which people are we talking about here? If they are immigrants, they are not Singaporeans in the first place and how is the Singapore govt going to control where they immigrate to.
If we set up standards for immigration, the likelihood of lousy immigrant coming in is smaller.
This is the first time, I ever heard the govt people telling us that they cannot control immigration. You can check around… no govt says that except this one.
this is one of those ultra liberal and irresponsible talk like: you cannot say with certainty that cPF life will absolutely pay out monies which is why you included a clause.
Then you compare cPF with a bank. Imagine a bank does that with your monies! would it be able to do that?
Higher HDB prices because
1) To sustain the profitability of HDB and feed the fat cats
2) To manage expectation, making the grads feel that they are indebted to pap by giving the $40k subsidy ( some 20% of population, so is their increasing shares of votes )
Note, $40k subsidies compared to $$50 billion loss in Temasek ! ( 1 out of 1,250,000 of the loss ) , using Mr Holy Goh’s wife famous quote, it is PEANUT !!
3) This is to manipulate the property prices so that CapLand and GIC land investment makes big $$, go to FAT CAT AGAIN
all economical calculation and benefits will convert to financial payout to the FAT CATS
to KopitiamApek:
The graduates of Japan make a lot more money than the ones in Singapore, that mitigates the high housing price problem.
Also, ultra high housing pricing in the 80s was a cause of the subsequent slump of the next 20 years. Do you want that for Singapore?
There are many people who sleeps in Cardboard in Japan.
Do u want that ?
So, why do you want high property prices?
Only 1 party benefit from this.
People who owns multiple properties and govt is one of them.
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