Are permanent residents driving up resale flat prices?

IT IS easy to pin the blame on new migrants, given the news that Singapore let in a good 55,000 more permanent residents (PRs) in the year leading up to June. This means that the number of PRs grew by 11.5 per cent, the biggest jump in at least six years.

As a PR cannot buy a new flat directly from the HDB, his cheapest option is a resale flat. Typically, PRs pick up three- to four-room flats before upgrading to bigger homes once they become fully fledged citizens.

Major property agency ERA did not allay suspicions of the PR link to rising prices when it revealed last month that PRs made up 40 per cent of buyers in its resale flat deals. Three years ago, they accounted for just 20 per cent of its buyers.

Since ERA-only deals account for about 30 per cent of the HDB resale market, many home-seekers are quick to conclude that PRs are to be blamed.

But HDB statistics show that PRs bought only about 20 per cent of resale flats this year. That proportion has stayed roughly constant over the past three years.

The board stresses that price increases cannot be attributed to any single cause.

It tells Insight: ‘Prices of resale flats are influenced by various factors, such as the pace of economic growth and market sentiments.’

And ERA Asia Pacific’s associate director Eugene Lim is quick to concede that his company’s figures do not represent the national average.

He says: ‘One reason for ERA’s higher-than-average figure is that we are not a local brand, so PRs may have been more inclined to deal with an international company.’

The chief executive of property agency PropNex, Mr Mohamed Ismail, pleads for some empathy for PRs. Only about 10 per cent of resale deals registered with his agency involved PR buyers in the July to September period.

He says: ‘While PRs do create a demand for resale flats, it makes no sense for foreigners who intend to live here to rent a flat, given the high rental costs.’

The verdict? The PR effect on the price of resale flats may not be that strong, considering that they buy only one in five of the units sold.

Source: Straits Times, 17 Oct 2009