HDB reviewing rules to weed out speculators & rental investors
Source: Channel NewsAsia
The Housing and Development Board (HDB) is reviewing its rules to curb speculation and illegal subletting in the public housing market. National Development Minister Mah Bow Tan said the move is to ensure prices are not being artificially inflated. The review comes amid fresh concerns over the affordability of public housing sparked off by HDB’s latest data that showed resale flat prices continued to climb in the fourth quarter of last year. In addition, the median cash premium that home owners have to pay upfront doubled to S$24,000, prompting calls for the government to step in.
But Mr Mah noted that the resale market should be allowed to operate as a free market, with prices set on a “willing buyer, willing seller” basis. He said: “Now, if you are a buyer, you feel anxious because you want prices to be low. But if you are a seller, you want prices to be high. So it’s not possible for the government to set the resale prices.
“If you were to interfere in the COV (Cash—Over—Valuation), or the resale flat market, essentially, you are saying the government should set the resale flat prices which I think both parties will be unhappy. Why? Because the buyer may be happy today, but today if he’s a buyer, tomorrow he would be a seller. Then when we set the prices and he wants to sell, he will be unhappy.”
While promoting a free market, Mr Mah drew the line at speculation and stressed that HDB flats are for “owner—occupation, not speculation or rental investment.” As such, Mr Mah said the housing board is relooking rules to ensure that prices are not being artificially inflated.
“If somebody is coming in and buying because they hope to make money, through flipping or selling the flats later on, or to buy to rent without staying in there, I think that’s not possible. That’s not the idea of HDB flats,” he said. Mr Mah declined to say which rules are being studied. But he noted that the review will be completed in a few months’ time. How much impact will the review have? Housing analysts said speculators are not the main problem, because prices are not rising fast enough to lure them in.
ERA’s Asia—Pacific associate director Eugene Lim noted that for speculators to be lured into the market, prices have to be moving up very fast. But that’s not happening in the public housing market. For example, prices of HDB flats only increased by 8.2 percent in the past year.
He added that the mandatory holding period before you can sell your flat — one year if you’ve taken a bank loan; 2.5 years for those who borrowed from HDB — also acts as a deterrent against flipping.
Mr Lim said: “It’s basically a case of demand more than supply, because there are probably more people with immediate housing needs now, who cannot wait for the three years for new flats to be built. There is also an increasing population of PRs. They’re not allowed to buy from HDB direct, so they have to go to the resale market.”
But Mr Lim noted that while business from PRs now accounts for 25 percent of his firm’s business, up from 20 percent previously, that is still considered small. He added the review of rules is a sign that HDB is “leaving no stone unturned”.
But demand is being pushed up partly by those who buy flats to earn rent.
Mr Lim said: “If an investment gives you 7 to 8 percent (returns), it is certainly very attractive to look at. Because it’s quite easy to rent out HDB flat. It doesn’t cost much — with $300,000 or $400,000 you can get a HDB flat, you can get good returns, it does attract a fair number of people to look at this option.”
Latest HDB figures showed that between January 2008 and December last year, 56 homeowners were caught renting out their flats illegally.
And recent reports suggested that some flat owners at the newly completed Pinnacle@Duxton had rented out their entire units without a minimum occupation period. This is illegal under HDB’s housing rules.
Home buyers who received a grant from HDB must stay in their flat for a minimum of five years before they can sublet their entire unit. For those who do not use a grant, there’s a minimum occupation period of three years.
Offenders face a fine of between S$1,000 and S$21,000 and may even have their flats repossessed.
Mr Mah said: “I’ve asked HDB to also step up on any possible breaking of the rules. I don’t know if it’s extensive but anecdotally you do hear one or two cases. So we want to make sure that this is not happening.”
But observers said many of these transactions are done under the table. So even if rules are tightened, enforcement will be difficult.
However industry players like Chris Koh of Dennis Wee Realty noted that new rules requiring homeowners to report the details of their tenants are an incentive for them to be honest.
But he felt that there is scope to increase the penalties further, and to penalise agents who facilitate illegal transactions.
And to help curb demand, analysts suggested tweaking rules on how flats are financed.
Currently, a buyer can take out a loan to pay for up to 90 percent of the purchase price of a new or resale flat.
Analysts suggested HDB lower that quantum and make buyers fork out a larger down—payment. This could force them to reassess just how much they can afford, thereby serving as a check on escalating prices.
Dear Mr Chin
I am a SPR and am about to sign on the papers to buy a resale HDB flat. My investments are my life savings because I want to stay in Singapore long term and become a citizen.
However, I understand that HDB is about to change rules regarding resale.
If for some reason my SPR is not renewed, how do I sell my flat and pay off my bank loan? Do you see the govt extending the min period of possession to more than 2 years(which would leave me bankrupt)?
If the sentiment is negative,i will compensate the owner and bow out of the purchase.
What is your opinion?
Many thanks for your time.
Thank you for feedback.
I am against backing out of resale deal. You will be at the mercy of owners. Lose your deposit. Pay price difference between old and new price if new is lower. Pay legal fees. Pay agent’s fees because owners won’t do it themselves(troublesome) and any expenses that follow. Big loss is certain. Its your life savings.
Do not predict policies changes and make decisions based on uncertainties. The government is looking into it. Nothing is confirmed. Normally policy changes affect new transactions after the changes and not those before.
My opinions. Proceed with purchase. Follow resale schedule. Make a list of queries/worries and clarify with HDB officer during 1st appointment. On 2nd appointment, DO NOT allow extension of stay if previous owners/sellers request for it. Get your keys and move in. Good luck.
Hope this helps.
Dear Mr Chin
I read today in ST that HDB now will insist on all resale flats to have a minimum occupation period of 3 years. This will apply to ALL NEW APPLICATIONS from Friday onwards and will not apply to existing owners. Now, I completed my 1st appointment last week and will get my keys end of April. Where does this place me?
Thanks a lot
Sorry for late reply, was outstation.
You won’t be affected. New application refers to New OTP received after 05 Mar 2010.