Record boost to supply should stabilise prices in about a year, he says
PRICES of HDB resale flats are high at present because of an 'imbalance' in supply and demand, which should be redressed by the record number of flats being released by the HDB this year.
The boost to supply should stabilise prices in about a year or so, said National Development Minister Mah Bow Tan yesterday, as he sought to address concerns over the cost of HDB resale flats, which has climbed steadily since 2008.
Speaking on the sidelines of a community event in Tampines, Mr Mah attributed the surge to strong economic growth and demand from first-time buyers, such as newly married couples, and owners looking to upgrade to bigger flats.
'I think at this point in time, there's still an imbalance,' he said. 'I hope that with HDB pushing out a record number of flats this year, this imbalance will be redressed over the medium term. I would expect that in another year or so, we should be able to stabilise everything.'
HDB launched almost 9,000 new build-to-order flats in the first half of the year, and will launch another 7,200 in the second half. The number is about 80 per cent more than for last year.
In addition, there are some 4,700 new flats under the design, build and sell scheme, in which HDB flats are built by private developers, and the executive condo (EC) housing scheme. In the pipeline are four more EC sites in Punggol, Pasir Ris, Bukit Panjang and Tampines, which should yield 1,900 units.
Resale prices for HDB flats rose for the eighth straight quarter between April and last month, surging 4.1 per cent from the previous quarter.
In the first half of this year, 17,598 resale applications were registered with HDB, compared to 16,630 for the same period last year and 14,121 in 2008.
The median cash over valuation (COV) - the cash amount paid upfront by a buyer over a flat's valuation by the HDB - also hit a record $30,000.
Mr Mah acknowledged this was 'equally a concern' as it made resale flats even less affordable, and urged first-time buyers to purchase their new home directly from the HDB instead.
He said: 'If you are a first-timer, then go for the build-to-order (BTO) market, where there is zero COV, where the prices are lower, where the flats are of newer design and so on.'
To newly married couples who say they cannot wait that long for a new flat, Mr Mah said the three-year waiting period was 'the norm for our standard, which is already higher than other cities'.
He added: 'If you want to, say, have a flat, zero waiting time, then obviously the price of the flats will be higher, and this is where the resale flat market comes in.
'That's why you have a disparity in price between resale flat and new flats. This cost difference reflects the time difference.'
Mr Mah said there were enough homes for first-time buyers and the increased number of flats being built would relieve the pressure on the resale market.
In the short-term, he said, it was not clear if prices would continue to rise.
'The economy for the first half was very strong, but all indications are that it may not be so smooth going in the second half; all indications are that there may be some slowdown. If that comes about, then obviously the demand for housing will also slow down,' he said.
PropNex chief executive Mohamed Ismail said the biggest group of people driving up the resale prices are owners of HDB flats who are motivated by the peak prices to sell.
'The majority of those who bought new four- and five-room HDB flats eight years ago, can probably make more than $100,000 cash profit now,' he said.
Newlyweds said getting a new flat from the HDB had its difficulties too.
Civil servant Jonathan Fong, 31, and wedding videographer Mylene Tong, 29, failed twice to get a new flat in the locations they wanted.
They eventually bought a three-room flat in Sin Ming Road in March for $237,000, with a COV of $29,000.
Source: Straits Times, 26 Jul 2010