This is the second part of my report on the People’s Association Youth Movement (PAYM) policy forum @ Jurong GRC, which took place on Sunday (11 April). The discussion, entitled “HDB Flats: Towering Pinnacles, sky-high prices?”, was attended by about 50 people.
The first speaker, Mr Tommy Tan, managing partner of JATT Realty, gave some very interesting statistics about HDB:
- HDB resale prices increased by 40.2 per cent in three years (2007 to 2009)
- Pinnacle@Duxton set a new record for the highest priced new 5-room flat at $646,000
- 36,609 flats were constructed in 1998. In contrast, 10,082 flats were constructed in 2003. The numbers for the next five years, from 2004 to 2008, were 5,326, 5,673, 2,733, 5,063 and 3,154, respectively
- HDB rental yield at about 7 per cent is generally even higher than private property
- Even private property owners were buying HDB resale flats, which they could sell after just one year Minimum Occupation Period (MOP)
- Volume of resale transactions grew from 28,419 in 2008 to 37,205 in 2009
- Only 23 per cent of the market are 3-room flats, and about 70 per cent are 4-room and bigger
- Cash-over-valuation (COV) for 3-room flats, at $20,000 to $50,000, is generally higher than that for larger flats
The second speaker was Ms Tan Chew Ling, acting director of HDB’s estate administration and property development. She spoke on three main areas:
- Whether there are sufficient flats?
- Whether HDB flats are affordable?
- Whether permanent residents (PRs) are driving up prices?
She gave the following statistics:
- Build-to-order (BTO) flats – 95 per cent are reserved for first-time buyers, 30 per cent were under the fiancé/fiancée scheme
- For the October 2009 launch of Boon Lay Meadows BTO – 33 per cent of potential buyers dropped out on the first day, while 40 per cent did not book when invited to
- Reasons given for not booking or dropping out – 37 per cent opted out because they did not get their preferred units, while 26 per cent said they were re-considering housing options
In my view, the reasons given may need to be categorised more specifically and with more detailed, such as those who did not book because the flats offered were beyond their budget, because they were offered second floor units, due to distance from preferred location, unable to obtain a HDB or bank housing loan, etc.
For example, if you offer the same flat to everyone and there were no takers, we can’t say that 100 per cent did not book when invited, or if there are balanced flats because the ethnic quota has been reached, the reason for the rejection may be due to ethnic affordability.
- 2009 - Out of 13,400 flats offered, 1,300 were not booked
- 2004 - 16,900 flats offered, 7,700 not booked
- 2003 - 16,400 flats offered, 6,500 not booked
It was explained that the HDB only switched to the BTO system because of problems with building to projected demand. The previous policy of building to projected demand may depress prices and generate security issues for new residents in blocks of flats that are mostly empty. It also resulted in a surplus of 31,000 flats that could not be sold for many years, which some regarded as a waste of taxpayers’ money.
Therefore, Ms Tan explained, building to projected demand was not prudent.
In my view, perhaps the fundamental flaw in policy was the decision to stop building 2- and 3-room flats on the premise that there were 31,000 surplus flats available. Although it appeared that there was an issue of oversupply, the problem was that the wrong type of flats were being built under the previous system – mostly 5-room and larger flats. So, while there were surplus flats available, most people could not afford them.
The construction of smaller flats were resumed only in 2004 (3-room) and 2006 (2-room).
Ms Tan also said that since about 80 per cent of buyers were able to service their HDB loans entirely with their CPF Ordinary Account contribution of 23 per cent, HDB flats are affordable, especially for the lower-income who buy smaller flats.
I think the flaw is the assumption of 23 per cent CPF contribution, as the lower-income earners have a lower CPF contribution rate.
For instance, the example of a lower-income couple cited in Parliament recently as being able to get $460,000 of benefits in their lifetime, including $80,000 of CPF housing grants to purchase a resale 3-room flat at $200,000, may be an impossibility from the perspective of affordability. The husband, earning $1,000 a month, and his wife, earning $500 a month, would have a combined CPF OA contribution rate of only 18 per cent and not 23 per cent. Also, the cheapest 3-room flat is about $225,500 plus COV of about $20,000.
She also said that the belief that permanent residents driving up prices was not true because:
- only 1 in 5 flats were purchased by PRs
- for the 58 cases which had COV above $70,000, only eight involved PRs these were out of a total of 37,000 resale transactions
- So, PRs are not more cash-rich than Singaporeans as some have suggested
My view is that citing the statistics of only those COVs above $70,000 may not be appropriate, as what we need is the data as to what percentage of over median COVs were from PRs. Such selective data using only 58 out of 37,000 resale transactions, to come to such a conclusion, is at best untenable.
Also, what is the proportion of PR to citizen households in the population, relative to the 1 in 5 flats purchased by PRs? For example, if the PR to citizen ratio is say 1 to 8, then 1 to 5 flats purchased by PRs may be quite significant.
We should also break-down the data into different flat types. For example, what proportion of 3-room flats were purchased by PRs?
_________________________________
By Leong Sze Hian
_________________________________
HELP keep the voice of TOC alive!
If you like this article, please consider a small donation to help theonlinecitizen.com stay alive. Please note that we can only accept donations from Singaporeans. Thank you for your assistance.Do you have a flair for writing? Volunteer with us. Email us your full name and contact details to theonlinecitizen@gmail.com
“” Ms Tan also said that since about 80 per cent of buyers were able to service their HDB loans entirely with their CPF Ordinary Account contribution of 23 per cent, HDB flats are affordable, especially for the lower-income who buy smaller flats. “”
on which year’s price was this statement based? it does not appear to be based on prices after the major policy errors of supply and demand resulted in this unusual market phenomenon.
Lower income family with a household income of $1500 and below wil not be able to afford the current HDB price of $128,000 directly from HDB. Because the amount of CPF available to them for 30 years for housing use is only 108,000 ( ignoring interest paid and earned). So they have to be first time buyer to enjoy housing grant to afford this 3 room flats.
It only furthe confirm that HDB have been manipulating the statistic so to achive their purpose of feeding distorted Information to the general public
HDB in particular is very good at presenting the “right Info” to the audience. Even educated adults may not be able to read between the lines and find all these “loopholes” as identified by Sze Hian.
I don’t think HDB is interested in the truth anymore.
This is just like LTA saying the increase in COE prices is not due to the reduction of COE but the market demand-supply.
The PAP govt is getting ridiculous in their denial.
As I mentioned, governments usually begin to fall when they are in self denial, in our case the PAP has been in total self denial.
where did hdb get the number 80% that can service their loan?
a lot has been said over the last few months.
you all understand what has happened to our property market, and why it has happened.
this is easier to understand than sub-prime crisis and CDOs.
hdb and the ministers involved all understand the problem, whether or not they like to admit it or admit their mistakes. they are intelligent people from big universities, you will be misjudging their intelligence if you think they don’t understand the problems on the ground. it is precisely their intelligence that tells them how much to admit as mistake, and how much to disguise.
the story does not end here.
you have already lost. vast majority of people sitting in their flats have been taken in by the argument that in this life, they have it good because their flats have had the price inflated. they don’t realise it is impossible for them to better their lives any more. there is only one path for them to go – reduce their stake in this country and cash out to retire when it is time. theirs is a dead end game.
you have not shown them the truth of the matter. they are the majority. you have already lost.
Mah Bow Tan: “the reality on the ground is that every year, 12,000 flats are sold” (http://www.asiaone.com/Business/My%2BMoney/Property/Story/A1Story20100407-209011.html)
Mr Tommy Tan, managing partner of JATT Realty:
- 36,609 flats were constructed in 1998. In contrast, 10,082 flats were constructed in 2003. The numbers for the next five years, from 2004 to 2008, were 5,326, 5,673, 2,733, 5,063 and 3,154, respectively
- HDB resale prices increased by 40.2 per cent in three years (2007 to 2009)
hey! don’t compare 3 years. don’t compare 20 years. nor 40 years. nor 10, 9, 8 or 7 years.
you can only compare 11 years. (see Hazel Poa)
a multi-million dollar aire said so. so you better do as you’re told. bloody lesser mortal you …
the issue is we all know they are cooking stats and excuses for almost all lousy policies. now the bigger issue is… Mr Leong can do all his home work for us, but how many of us will vote against them?
all the analysis will go vain, so better think of something that will turn their hearts and vote.
=========
The reality on the ground, he says, is that every year, 12,000 flats are sold, and the average proportion of monthly income spent on mortgage repayments is about 22 per cent – a very healthy level, according to international standards. ‘So I ask, what are you questioning? Am I telling lies or fudging the figures? Which part is wrong? Point it out to me,’ Mr Mah says.
========
does he sound like a man who got cornered in an argument?
what did 22% of their income buy them 10 years ago? what can 22% of their income buy them 3 years ago?
what does 22% of their income buy them now?
lies or fudging, take your pick?
or just playing with words?
we are not stupid, mah. that generation is over. see you in 2011.
I don’t understand why HDB is so obsessed with the drop out and no-booking rate. Every BTO project is oversubscribed by a few hundred percent, so even if they have 33% drop out and 40% no booking, the project will still be sold out.
In any case, they now have the average drop out percentage which they can use to predict real housing demand. So what’s the excuse?
No-booking rate is not even relevant. If HDB offer a 2nd storey flat next to the rubbish collection centre, carpark and bus stop to 100 people, 100% will reject it which will push up the no-booking rate. It does not reflect real demand.
Finally if they want to reduce drop out, HDB should examine the reasons for high drop out rate of 33%.
1. Currently BTO projects are made known on a month to month basis. As a result, people tend to apply for any project, and hope that the project in coming months will suit them better. If it is better, they will drop the ones they have applied for. You cannot blame the people for doing this. It costs $10 per application yet HDB thinks people are doing it for fun.
HDB should list out all the BTO projects for the year so that people can make an informed decision and only apply for the project that is most suitable for them.
2. Application period for BTO is two weeks and information is given at such short notice. For example you would only know the unit size, price, locations and then the application will close in 2 weeks. As a result, people will just apply so that they won’t miss the dateline. Only later will they go to the site and have a look at the location and surroundings. Some people will then decide that they do not want to live there and drop out.
Able to service loan is not equal to able to afford – HDB flat is a basic need. Stinge on other expenditure to pay housing loan.
Why not do a profile of people who bought 3-room resale flats? Are they cheap PRs, downgraders who already had their so-called 2 bites of the cherry, or private property owners retiring? All these people are not eligible to buy direct. Why not make an exception with conditions attached, for some of these people to buy directly from the HDB rather than totally stop building them?
HDB has been in existence for ages.
Am i right to say only now that singaporeans bother to ask what is meant by ‘affordable’ ?
Or is it that they should have explained it in the very beginning?
This article has a definite certain value. Well done Author! well done TOC!
I am curious to know why the lady is only citing cases involving COVs which are $70k and more, which is the highest end of COVs. Does she think that anything from $69,999 is acceptable? Why not tell the public how many are PRs who paid even $1000 COV and onwards? Something to hide?
I would think that the PAP and their leaders have already dug their graves with questionable stats.
The thing is this,when there is a change of goverment, I am sure that there will be a call for heads to be rolled and investigations will start, from the HBD to Temasek. We have to give our suppport to the opposition. It will be another uncertain but better future for us local Singaporeans.
The people at HDB should all be fired! They have failed in their primary mission “We provide affordable homes of quality and value.”
It is better to have excess than not enough
why i don understand my friend was being en bloc and buy a 4 room flat high level at toa payoh central after susidy etc…..only need to pay $208K but for new applicant like me when i saw the price for a4 room flat walang is around 300-400k why the price diffen a lot don tell me that they sell 208k will lose money really kan si lan gwee (vr expensive )
Why is Public Housing at such expensive price?
We need to scrap this sort of things.
Extra money can only be good for u and me.
Lets make the decision.
HDB has been in existence for ages.
Am i right to say only now that singaporeans bother to ask what is meant by ‘affordable’ ?
= = = = =
interesting, isn’t it?
only now do we have such a big problem on our hands.
someone created this.
Mr Leong,
I love reading your articles! Very insightful and well-thought out! Awesome!
MCYS MINISTER SHOULD BE INCHARGE OF HDB RENTAL FLATS
HDB RENTAL FLATS HAS BECOME A COMMUNITY SOCIAL [MCYS] ISSUE,
not a housing [HDB] issue.
===========
Quote -
No child in S’pore will be left without a home, says Dr Balakrishnan
http://app.reach.gov.sg/reach/YourSay/YourDiscussionCorner/tabid/117/ptid/414/page/1/totrecs/15/threadid/3206/forumtype/posts/Default.aspx
” At a forum organised by REACH, the government’s online feedback portal, Minister for Community Development, Youth and Sports, Dr Vivian Balakrishnan, said:
“………..if you were a poor person, anywhere on this planet, Singapore is the one place where you will have a roof over your head, ……..”
http://zh.sgforums.com/forums/10/topics/394784?page=1
Throw this report at VB’s face, see what excuses he comes up with
For me, “they” lost it when they said that raising GST is to help the poor…
SO IS THE MINISTER LYING OR DRUNK??????????
============
quote-
MCYS GOT DELIVER 3 MEALS A DAY TO FEED THE POOR IN SINGAPORE?????
MCYS MINISTER SAID SO, BUT CANT FIND ANY DETAILS ON MCYS WEBSITE.
http://zh.sgforums.com/forums/10/topics/394784?page=1
Poor? Government “will deliver meals to you
At a forum organised by REACH, the government’s online feedback portal, Minister for Community Development, Youth and Sports, Dr Vivian Balakrishnan, said:
“If you were a poor person, anywhere on this planet, Singapore is the one place ………, where you will have food on the table. Even if you can’t afford it, we will have meals delivered to you.” ”
I have a serious problem with the way the government uses statistics. It’s ok if you draw a conclusion, but publish the entire base data upon which you draw the conclusion, so that a separate and independent analysis can be done.
Often I find the government unable to make a measured or balanced case on any issue as they seem to see only the data that supports their case, and ignores others.
The choice of 1999 as a base year in comparing affordability of flats against median incomes is an example.
Joseph, if the govt choose a larger data set it will be harder to calculate and also will skew the data even more towards the favour of the govt, anyway 10 year data good enuff. It is shown if u choose 2004 or 2006 data set, it will skew the data in favour of the housing prices.
I think uncle leong cant explain that even though its 1 to 5 and even 58 out of 37,000 transactions, and the most damaging is caused by our own local singaporean! How can fellow Singaporeans do this? We should all unite and punish everyone that pays any COV. Down with PAP!
Private home sales jumped 47% in March. HDB while pegged to prices of private properties are sure to escalate even further in the next few days.
We need an Effective Strategy to educate the masses about Statistics and how it is utilized in the world. Both the good aspects as well as the bad aspects.
More importantly , singaporeans should be educated to QUESTION statistics and learn not accept wholesale whatever is given to them. It is intellectually more satisfying when you question a claim and if found to be true, that much more we can trust the information. If found not true, all the cards may start falling.
PR siblings above 21 whose parents do not live here are allowed to buy resale flats. That’s one reason prices have been going up. In comparison, Singaporean singles canot buy resale flats together with their siblings unless both are single and above 35.
A 7% mismatch between supply and demand in the 1970s caused a quadrupling (4x) in oil prices …
To – MCYS MINISTER,As the MCYS Minister, you should not pull a stunt like this,“If you were a poor person, anywhere on this planet, Singapore is the one place ………, where you will have food on the table. Even if you can’t afford it, we will have meals delivered to you.” WHY TELL SINGAPOREANS SUCH THING WHEN IT IS NOT TRUE,”Even if you can’t afford it, we will have meals delivered to you.” [ALL SINGAPOREANS KNOW THAT GOVT/MCYS DONT DELIVER 3 MEALS A DAY TO THE HOMES OF POOR SINGAPOREANS WHO CANT AFFORD TO BUY FOOD] SHAME ON YOU DR VIVIAN B ALASKRISNAN.WHY PULL SUCH A STUNT LIKE THIS?????????????????????????????????????
I would think that the PAP and their leaders have already dug their graves with questionable stats.
The thing is this,when there is a change of goverment, I am sure that there will be a call for heads to be rolled and investigations will start, from the HBD to Temasek. We have to give our suppport to the opposition. It will be another uncertain but better future for us local Singaporeans.
//peppy
//Joseph, if the govt choose a larger data set it will be harder to calculate and also will skew the data even more towards the favour of the govt,
How do you know that?
Really? I don’t think so.
//anyway 10 year data good enuff. It is shown if u choose 2004 or 2006 data set, it will skew the data in favour of the housing prices.
Really? the conclusion from Hazel Poa was that MBT’s conclusion is wrong using a base in 2001, 2002 and 2006.
//I think uncle leong cant explain that even though its 1 to 5 and even 58 out of 37,000 transactions, and the most damaging is caused by our own local singaporean! How can fellow Singaporeans do this?
Don’t know what is your point.
It is the new Singaporeans who don’t have to serve NS, and who waited for 1 year to become Singaporeans who pays those high COV.
The ordinary S’poreans don’t have that kind of monies.
The 31,000 surplus flats is also questionable, because HDB did not advertise them or release them on the market to prevent the price from falling.
Last year in October, after much criticism & pressure, HDB held a sale where it suddenly became clear that they had 10,000 flats in stock!