Target segment for smaller HDB flats may be shrinking, say housing analysts

The Housing and Development Board’s (HDB’s) latest Build-To-Order (BTO) exercise saw lukewarm demand for smaller units in non-central areas.

Housing analysts said this may be due to a shrinking target segment for smaller flats.

Singaporeans like to think big, especially when it comes to housing. But Singaporeans wanting a bigger house may not be the only reason for the low demand for smaller flats.

Applications for two-room units were only 44 per cent filled in Bukit Panjang and 63 per cent filled in Sembawang, while demand for three-room units was only one to two times the number of flats offered.

This contrasted sharply with four-room flats, which were six to seven times over-subscribed.

Analysts said the smaller flats sold through BTO exercises target a select group – low-income families. But this segment is facing the squeeze, with supply appearing to outstrip demand.

Nicholas Mak, lecturer, Real Estate, Ngee Ann Polytechnic said: “One possible reason could be the low-income ceiling that is imposed by HDB, which is only about S$2,000 for a two-room flat.

“Over time, Singaporeans’ income level has actually risen. So I think it is time that HDB might have to review this income ceiling level.”

Smaller flats are priced lower for greater affordability, with two-room units in Bukit Panjang and Sembawang selling below S$100,000.

But low-income families hit by the economic downturn may still be unable or reluctant to commit to a property.

Chris Koh, director, Dennis Wee Group said: “Because of the economic situation, many people started to become a bit more conservative and reserve, and possibly not everyone had the confidence that the market has completely turned to go in and buy a property.

“So for the low-income group, I will admit the timing could not have been right for them.”

Mr Koh added HDB may have overestimated the demand for smaller flats, and suggested that fewer of such units be built.

HDB said since it resumed the building of two-room flats in 2006, 76 per cent have been taken up.

Mr Koh said: “To be fair, there will always be a small group of low-income families who require small flats. What I propose is that we don’t build that many small flats. We cater to the group that needs small flats and not build that many.”

3,700 smaller flats were offered this year, compared to 1,164 in 2008.

HDB said that although the demand for two-room flats may be lower initially at launch, take-up rates improve when the flats are nearer completion.

For instance, when Punggol Vista was first launched in August 2007, the take-up rate was 20 per cent for two-room flats. As the project neared completion, the take-up rate improved to 95 per cent.

HDB is monitoring the situation and will adjust the supply to meet the needs of Singaporeans.

Source: Channel News Asia, 31 Dec 2009