More private residents buying HDB resale flats
http://www.straitstimes.com/PrimeNew...ry_490024.html
Feb 13, 2010
More private residents buying HDB resale flats
Group still in minority, but data from property firms show rising trend
By Jessica Cheam
PROPERTY agents say they are seeing more private property dwellers buying Housing and Development Board (HDB) resale flats.
This group remains in the minority of HDB flat buyers in the open market, but their number has been rising, according to three property agencies.
Data obtained by The Straits Times show that the proportion of resale HDB flat buyers with private home addresses ranged between 8 per cent and 19 per cent of transactions last year.
Such data is not widely available, but from the figures that ST managed to obtain, this proportion seems to be on the rise.
Of the three big agencies who command the majority share of HDB resale market transactions - ERA Asia Pacific, PropNex and HSR Property Group - the first two said they did not record transactions by address type.
HSR, which has about 8,000 agents, said that the proportion of flat buyers with private home addresses rose from 5 per cent in 2008 to 8 per cent last year.
C&H Realty, a smaller outfit with more than 1,000 agents, reported that these buyers comprised 6 per cent of transactions from July to September last year. But this has grown to 12 per cent for the period from October to last month.
The firm keeps sales records only from the last six months at any given time.
At ECG Property Group, which started operations in November last year under former HSR executive director Eric Cheng, the proportion of buyers with private home addresses has risen from 19 per cent in December to 27 per cent last month. The agency has about 900 agents.
Agency bosses said that there are different reasons why this group of buyers wants a slice of the HDB market.
Some buy to downgrade or cash out of their private property, while others may be moving into an HDB flat after their private homes were sold en bloc.
Then, there are those who buy HDB flats for investment.
Latest HDB statistics for the three months ended Dec 31 showed resale flat prices scaling a new peak, rising 8.2 per cent for the whole of last year.
HSR executive director Jeffrey Hong pointed out that HDB flats give investors a much better yield than private properties as they are cheaper and rents are strong in good locations.
'The cost of an HDB flat and the bank interest payable is lower than for private homes. And there's also the possibility of capital appreciation because such owners can sell within a year,' he said.
HDB rules stipulate that anyone who buys an HDB flat from the resale market can re-sell it after they have lived in the flat for a year, provided they did not receive any Government grants or HDB loans.
The minimum holding period for a resale flat used to be 2.5 years, but the Board relaxed the rule in 2003 in a bid to inject flexibility into the market after industry players called for regulations to be relaxed to unlock monetary values for home owners.
This decision has come under scrutiny lately as HDB resale flat prices rose 40 per cent in the last three years.
Disgruntled buyers priced out of the market have blamed high flat prices on the entry of permanent residents and private property speculators.
They claim these speculators snap up flats on the resale market and then rent them out illegally or sell them legally after the stipulated one-year period.
National Development Minister Mah Bow Tan addressed this last month by announcing a review of HDB rules to ensure that property speculators are not abusing current rules and driving up flat prices.
It will check if any rules are 'encouraging or allowing' people to speculate on HDB flats, and its findings will be released later, said Mr Mah.
Property analysts said yesterday that HDB could clear the air on this issue by revealing to the public exactly what percentage of HDB resale flat buyers are private property owners.
But they also cautioned that buyers who have private property addresses are not necessarily the owners, but could be tenants or relatives of the property owner.
Property agent Winston Yap, 50, who has brokered resale flat deals for private property owners said his experience is that about two out of 10 resale flat buyers buy for investment purposes.
This group of buyers is attracted to high-end HDB flats in centrally located mature estates, such as Queenstown and Holland Village, which command high rents.
'Their mindset is that they can secure very high rental income, and these buyers do not mind forking out high amounts of cash upfront to secure premium flats,' he said. This cash paid upfront to a seller above the flat's valuation is also known as Cash-over-Valuation, or COV.
In Holland Village, for example, he recently sold a three-room flat $50,000 above its valuation to a private property owner. 'The usual upgraders and downgraders can't afford this, because the cash portion is too huge, but these type of buyers still remain the minority,' he said.
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