Up to market to set prices of resale flats

NATIONAL Development Minister Mah Bow Tan said the Government has no intention of trying to fine-tune HDB policy for first-time buyers, preferring to leave it to the market.

His comments to Parliament yesterday also included the release of sales figures for the past two years that give a snapshot of how the markets for new and resale flats are faring.

He told MPs that about 8,000 first-time buyers bought resale HDB flats in each of the past two calendar years. This is out of about an average of 18,000 flats sold in each of those years.

Of the resale buyers, at least 6,800 had a monthly household income of less than $8,000, meaning they qualified for the CPF housing grant.

The new/resale ratio has fluctuated over the years. When resale prices were lower, such flats comprised as much as 70 per cent of total sales, but the proportion is coming down now as resale prices head north, he said.

Mr Mah was responding to a question from MP Lim Wee Kiak (Sembawang GRC), who asked if the Government will take steps to encourage more first-time resale buyers to allow for 'the renewing of estates'.

Dr Lim also asked if the Government would consider increasing the CPF housing grant or introducing another form of financing for the cash-over-valuation (COV) as a way of increasing the incentive for buying a resale flat.

Mr Mah reiterated that as the Government did not have a particular view on the new/resale ratio, there was no need to introduce incentives.

'The most important point is whether we have enough flats overall for first-timers to purchase, whether new or resale... I don't think we want to skew the decision either way; we will let the market take care of it.'

While build-to-order flats were priced lower due to subsidies, they required a longer waiting time and were mostly in non-mature estates, which might not suit some buyers, he said.

The minister also addressed MP Ho Geok Choo's (West Coast GRC) suggestion that the valuation process be reviewed to address high COVs.

Mr Mah said: 'The resale flat prices must be set by the market and the COV is part and parcel of the resale flat price.'

He added that there was nothing unusual about having a COV in the HDB resale market. 'Just last year, we had COVs which were either zero or negative, which reflected the market situation at that time. I dare say that as the market cools down and as supply catches up with demand, the COV prices will start to moderate as well.'

Source: Straits Times, 27 Apr 2010