Tuesday, September 15, 2009

HDB flats: Prices and quantity

The affordability and availability of HDB flats were concerns raised by several MPs. This is an edited excerpt of the replies from National Development Minister Mah Bow Tan.

Cash over valuation

  • MP Lim Wee Kiak (Sembawang GRC): Is the practice of cash over valuation - the additional amount that buyers are willing to pay in cash above the bank value of a flat - a barrier to cash-poor Singaporeans buying resale HDB flats? Can a loan be provided?
Cash over valuation is not an HDB invention or imposed by the Government, but part and parcel of any property transaction. The additional amount has to be paid in cash because the banks and HDB lend up to only 90 per cent of the valuation.

Buyers can choose not to pay cash over valuation. Latest data shows that almost one-third of transactions are transacted at or below valuation.

Be prepared to shop around, do your homework and remember that not all cash over valuations that buyers ask for are realistic ones.

The Government will not ban cash over valuations, but leave it to the market of willing buyers and sellers.

Providing a loan is not prudent as it will cause flat prices to go up further, such that when they fall, buyers will get seriously hurt.

Supply of new flats

  • MP Liang Eng Hwa (Holland-Bukit Timah GRC): Are there enough new flats to meet the demand of first-time buyers? Is the current waiting time acceptable? Are there ready-made flats that HDB can sell to soon-to-be married couples?
HDB factors in the number of people who will buy resale flats when building new flats, to avoid over-building. It also takes into account such factors as marriage and immigration rates, and population growth.
Most new flats are on the Build-To-Order system, in which the flats are built in about three years after people commit to buying them.

Couples unable to wait so long can book a flat under the Fiance/Fiancee Scheme first, and submit their marriage certificate within three months of taking possession of the flat.

If they cannot afford to pay the 10 per cent down-payment in cash, they can tap on a scheme where they pay 5 per cent first and the other 5 per cent when they take possession of the flat.

But do not expect HDB to provide a flat in a mature estate at a comfortable price, as there is not enough land in the mature estates to build the number of flats that people want.

Under-building of flats?

  • MP Low Thia Khiang (Hougang): From the minister's answer, it seems that HDB is under-building flats to meet the demand of new flat buyers. Will it not push up the price of resale flats?
There is no basis to say that the HDB is under-building.

The Build-To-Order system is responsive to demand. In 2007, HDB built about 2,400 flats because there were still flats available. Last year, it built 8,000 flats when demand increased. This year, it will build about 8,000 flats as well.


  • MP Lim Biow Chuan (Marine Parade GRC): Prices of HDB flats today are much more expensive compared with previous generations, and have risen more quickly compared with increases in income. How would today's generation be able to afford that dream home?
 New flats are affordable. While HDB flat prices have been going up much faster than incomes over the years and are much higher than those a generation ago, the flats today in Punggol, Sengkang and Bishan are different.

First-generation HDB flats had to be built quick and cheap, so there were no lifts on every floor, no facilities and no MRT.

Homes have also appreciated in value over the years in tandem with the growth of Singapore.

Source, Straits Times, 15 Sep 2009

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