The Housing and Development Board can be very secretive indeed. Years of queries about flat construction costs yield only stonewalled silence. Even when statistics are released, key figures are often omitted, preventing the public from attempting alternative avenues of data analysis.

When the public is faced with such a dearth of data, they might reasonably expect the professionals – journalists well-versed in art of unearthing information – to redress the problem. Enter the grand old lady of the Singaporean press.

On 7 May (Friday), the Straits Times ran a story headlined “Most flats sold with low cash upfront: HDB”.

In the lede, Jessica Cheam and Esther Teo report that figures released by the Housing and Development Board (HDB) indicate that about 70 per cent of resale flat sales were done with less than $30,000 in cash over valuation (the amount paid upfront by buyers above the flat’s valuation, or COV). Given that a conscious editorial choice was made to prioritise and highlight this particular figure, it can be reasonably concluded that the Straits Times regards COVs below $30,000 as “low”.

More details emerge in subsequent paragraphs, but it is obvious why they are relegated behind the first figure. “More than half, or 54 per cent, of home buyers paid less than $25,000 cash upfront,” the report said (the actual percentage for the last two quarters, based on the table provided is actually 56 per cent).

“And about 40 per cent of flats sold in the September to March period were transacted with cash-over-valuations of below $20,000.”

The question we should ask is what provides the basis for judgement as to whether a particular COV level is “low” or “high”. The criteria are not clear, even though one might imagine it to be the underlying crux of the story.

Given that the fundamental concern for buyers in terms of public housing prices is that of affordability, perhaps that should be the primary criterion. Public sentiment reflects concern over the rising COV levels, and this in turn worries buyers as they may be forced to pay through their noses, or even be priced out of the market altogether.

But can Singaporeans who turn to the resale flat market readily part with up to $30,000 in COV? Intriguingly, the reporters seem to undermine themselves when they quote Colin Tan of Chesterton Suntec International, who said: “But at the $25,000 level, it may still be a high amount for some households.” Clearly $30,000 is not as “low” as the headline seemed to suggest.

Yet a substantial 44 per cent of buyers paid more than $25,000 cash upfront in the last two quarters. And when we compare across the two quarters, the proportion actually increased – from 43 per cent in fourth quarter 2009 to 46 per cent in the first quarter of this year.

Some in the real estate industry feel that even $20,000 in COV would already be beyond the reach of many Singaporeans. COVs that come to more than five per cent of the resale flat’s valuation would also be unaffordable for most.

As it were, Cheam and Teo made use of the $20,000 marker when they reported that about 40 per cent of resale flat sales from September 2009 to March 2010 were made with less than $20,000. That means about 60 per cent were paying over $20,000 – hardly the figure to highlight if your story is about low COVs.

Furthermore, over a quarter of buyers – 28 per cent to be precise – in the last two quarters paid over COVs of $30,000 and above. Perhaps more damningly, the proportion of buyers paying this much actually grew by four per cent in the first quarter this year to 30 per cent, up from 26 per cent in the fourth quarter of 2009.

It should be highlighted that this report arose from the HDB’s decision to release more detailed figures of COV levels for the first time. The reason for doing so, the HDB said, was that recent media stories on “extremely high COVs in areas like Bishan and Queenstown…do not provide a balanced picture.”

In essence, the HDB had been getting bad press and these set of figures were released to soften the blows.

In an email to the Straits Times, the HDB was also keen to add that “even in a market with rising COVs, there is always the flip side of transactions with lower COVs”. But as we’ve already pointed out, such statements involve an unqualified value judgement over affordability and market trends.

Whilst these additional statistics are more helpful, it does not help to resolve the problem that apparently many smaller flat buyers are complaining about, which is that the COV for smaller flats, like 3-room, are much higher than larger flats.

For example, 3-room COVs have been as high as $50,000, which is a much larger mark-up over valuation in percentage terms, than say a $10,000 COV for 5-room flats.  To illustrate this problem, a $50,000 COV on a 3-room flat of $250,000 valuation is a mark-up of 20 per cent, whereas a $10,000 COV on a 5-room of $500,000 valuation is a mark up of only 2 per cent.

When I attended the “HDB Affordability” public forum last month, organised by the People’s Association Youth Movement (PAYM), one of the speakers presented statistics indicating COVs for smaller flats were much higher than those for larger flats. This was derived from recent HDB resale transaction data.

Therefore, what we need is the break-down of the statistics for COVs into different flat types. Such a break-down of the data, may also confirm anecdoctal evidence that most of the zero COV transactions were for larger flats, and that almost all smaller flat transactions have COVs.

Without such information, it may be difficult to ascertain how significant and widespread is the COV issue, particularly for buyers of smaller flats who may have a greater difficulty in being able to afford the higher COV.

Although the median COV has risen at a slower pace by $1,000 to $25,000, it is still rising. This compounds the affordability issue for buyers, as HDB resale prices have increased again the last quarter to another record high.

After adding the cost of furnishing and fittings, some buyers may not be able to afford a resale flat at all.

Apart from looking at affordability, another way to justify the value judgement over whether a COV level is “high” or “low” is to compare the spot COV levels – perhaps the spot mean or median COV – with historical trends, such as five-year averages. If the statistics indicate a slide in COV levels, or fall below historical averages, then there would be a demonstrable case for saying that they are “low”.

But as the report indicates, this data was the first-ever released of detailed figures on COV levels by the HDB. The numbers necessary for a more quantitative analysis are not in the public domain.

The story concludes with quotes from a woman who bought with her husband a three-room flat without any COV – in fact, they paid $10,000 less than the valuation. There are two problems with this example. Firstly, it is anecdotal evidence. How reflective is this one couple of the general sentiment of buyers in the resale flat market is unclear, and indeed can only be pure speculation. Secondly, the couple concerned found their flat after “months of hunting for a good bargain”. Not everyone can afford to wait for long periods in the hope of securing a good deal.

The issue of COVs, should not be a case of the HDB continuing to provide selective data disclosure time and again, to show that the COV problem is not as bad as many people or the media say it is – such as saying that of the 58 out of the 37,000 resale transactions that had COVs above $70,000, only eight involved permanent residents (PRs).

Citing just only the top less-than-0.2 per cent of total resale transactions would not representative at all of the issue. Therefore, what we need is the median COV paid by Singaporeans compared to PRs.

As to only 1 in 5 resale flats were purchased by PRs, we also need the break-down for different flat types, as many seem to have the perception that a disproportionately larger number of smaller flats are being purchased by PRs.

The COV issue may be affecting Singaporeans much more than PRs, as PRs may generally have more cash to pay for COV. This is due to the fact that as foreigners (before they became PRs), their entire salary was in cash as they did not have to contribute to the Central Provident Fund (CPF). Even after becoming PRs, their CPF contribution rate is lower than Singaporeans for the first two years.

It appears that the crux of the story is derived from an HDB press release. But since the release is not available on the HDB website, we are not able to provide our own analysis of the data. It is also not clear if the spin placed on the numbers were fed by the HDB, or the result of the Straits Times reporters doing their own number crunching and exercising their own journalistic judgements.

Either way, the Straits Times was ultimately content to play along with the HDB, weaving a positive story from the numbers when those numbers provide several areas of concern. And as we’ve shown above, there are plenty more questions to be asked of the HDB, and more data on the resale flat market to be sought out.

Perhaps another poser to put forth is why were the reporters content to report the data as it is? Where was the sleuthing and snooping?

——————–

By: Leong Sze Hian & Wong Chun Han