Saturday, September 5, 2009

Affordability of HDB flats - a young couple's story

I REFER to HDB's reply on Monday, 'How HDB keeps it affordable'.

From the points raised, I feel HDB has not adequately addressed the affordability concern.

My husband and I are a young couple still looking for our first matrimonial flat. We belong to the sandwich generation that exceed HDB's income ceiling for subsidised housing yet need an HDB flat in a mature estate to support elderly parents.

While it is true that cash over valuation (COV) is the excess amount over a flat's valuation that a buyer willingly pays for a resale flat in a free market, in current market conditions buyers who pay COV only when there are perceived merits in the flat beyond its valuation will be sidelined. In time-sensitive situations (such as a young couple getting married), buyers have little choice but to pay COV to outbid other bidders and secure their flat of choice. Market rationality becomes clouded, creating an upward price spiral.

Property agents' typical answer when asked to justify COV is that this is what the market is commanding now. Almost none can point out exceptional fundamentals of the flat not already taken into account in the valuation.

I have recently seen flats in need of renovation with a COV of $15,000. It was unbelievable that buyers were willing to pay this amount. And the sellers were happily sitting on the sidelines, waiting for an even better offer. As a young couple, we are priced out of the market by COVs at such levels, despite a combined household income in excess of $8,000.

Grace Ho (Ms)

Source: Straits Times Online Forum, 5 Sep 2009

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