Frustrated buyers have pointed their fingers at permanent residents and private property speculators for pushing up HDB resale flat prices to record levels.
They claim the speculators snap up resale flats and then rent them out illegally or sell them quickly but legally after the stipulated one-year period.
A week ago, National Development Minister Mah Bow Tan said the Government is looking into ’something’ regarding measures for the HDB market.
Property experts reckoned the Government could extend the minimum occupation period for those who bought their flats with bank loans as well as make checks to ensure owners are not flouting the rules.
Under HDB rules, those who buy resale flats without housing grants can sell their flats after 21/2 years if they take a loan from HDB, or one year if they take a bank loan.
They can rent out the entire flat only if they have lived in it for at least three years.
Buyers who take up housing grants for their purchases can sell only after a minimum occupation period of five years.
‘Speculation is not an issue right now. But it may become an issue if buyers are sure that prices will continue to rise for the next year,’ said the managing director of C&H Realty, Mr Albert Lu.
ERA Asia-Pacific associate director Eugene Lim said the Government has already started to rein in the sizzling HDB resale market with the lowering of the loan-to-value limit (LTV) for housing loans taken from banks.
This means buyers can borrow less than before – at up to 80 per cent of the property’s valuation instead of 90 per cent previously.
This will likely affect deals for the high-value resale flats involving cash-over-valuation (COV) of anywhere from $50,000 to $90,000, as buyers will now have to fork out more down payment, in addition to the cash, said Mr Lim.
COV is the amount over and above the flat’s valuation that is payable only in cash.
There are not many other things the Government can look at, as it will not want to affect genuine demand, property experts said.
While the lower LTV limit will have an impact, it won’t be big, said Mr Chris Koh, director of Dennis Wee Properties.
‘It is the 5 per cent cash down payment and the COV that the buyers find challenging to come up with,’ he said.
An industry observer suggested that the Government may raise the first-time applicant’s housing grant to buy resale flats.
The Government can also extend the minimum occupation period for those who bought resale flats with bank loans to as long as 21/2 years, though this may not go down well with the banks as this may increase their risk exposure, property pundits said.
‘The banks may not agree to extending the period, but this area needs to be looked into so that people will not look at flats as a quick one-year turnaround investment,’ said Mr Koh.
Mr Lu suggested that the Government ban private property owners from buying resale flats if their sole intention is to rent them out.
HDB flats are in demand as the well-located ones can easily command a rental yield of 7 per cent to 8 per cent.
HDB, he said, can conduct regular checks to see that the private property owners are living in their flats instead of renting them out during the minimum three-year occupation period.
‘This, however, does not solve the problem of private property owners renting out their HDB flats legally after the minimum three-year occupation period,’ Mr Lu said.
HDB owners can buy private property but they must continue to live in their flats.
However, those who have obtained prior approval from HDB to sublet their flats can live in the private property.
Some property experts suggest going back to the days when flats could not be easily rented out.
‘One possible measure is to revert to the old system of allowing HDB flats to be rented out only if the owner has valid reasons such as being posted overseas to work,’ said Mr Lu.
Mr Koh added that HDB flats should not be seen as a short-term investment as this changes the whole concept of government housing.
~ Extend minimum occupation period for those who buy HDB flats with a bank loan
~ Check to ensure that owners are not flouting occupation rules
~ Raise first-time applicant’s housing grant to buy resale flats
~ Ban private property owners from buying resale flats to use as rental property
~ Revert to old system where HDB flats may be rented out only for valid reasons
Source: Sunday Times, 28 Feb 2010