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thursday special report

HUDC flats: Still in demand

Collective sale potential is a big draw, but experts warn of some drawbacks

Published on Jan 12, 2012

By Daryl Chin


AGAINST a backdrop of cooling measures and caution in the property market, flats in HUDC estates continue to draw interest from buyers who value their expansive size and potential for a collective sale windfall.

Resale prices have risen steadily and could soar higher if an estate is privatised, said experts.

A fresh record was set for a 1,668 sq ft unit last month at an HUDC estate in Shunfu. It sold for $1.22 million or $730 per sq ft (psf). The previous record in the estate, which is undergoing privatisation, was set two years ago at $1.1 million.

A check with HDB showed that nine units in Shunfu changed hands last year, with none sold for less than $1 million.

Said property agent Sherry Tang: 'The high prices are boosted by the opening of the Marymount Circle Line station and impending privatisation.'

PropNex chief executive Mohamed Ismail said privatisation can boost prices by as much as 20 per cent since owners no longer have to abide by rules, such as those on subletting.

For a privatised HUDC unit, Chancery Court holds the bragging rights, with a 2,270 sq ft unit sold in December 2010 at about $2.3 million or $1,013 psf.

A payout of more than $1 million is what residents in an HUDC estate in Potong Pasir Avenue 1 could be looking at too, now that the estate is moving closer to privatisation. Property agents say current asking prices already hover around the million-dollar mark.

The estate began its plans for privatisation in July 2010, but the momentum picked up after Mr Sitoh Yih Pin won the single-seat ward in last May's General Election, ending 27 years of the ward being in opposition territory under Mr Chiam See Tong.

The People's Action Party MP held meetings with the owners and, earlier this week, noted that about 85 per cent of the residents had pledged to support a privatisation process - above the 75 per cent minimum set by the Government.

'Generally, prices for all HUDC units have been going up. It's a niche market that has gained popularity ever since the en bloc fever kicked in,' said Ms Tang, referring to the Farrer Court estate that was sold for $1.34 billion in 2007. Each of the owners at the 618-unit estate pocketed about $2.1 million on average.

According to ERA key executive officer Eugene Lim, the median psf price for HUDC flats in the 1980s was $93. It now ranges from $520 to $950 psf.

There are 18 HUDC, or Housing and Urban Development Company, estates in areas such as Pine Grove, Hougang, Jurong East, Tampines and Bishan.

They were introduced in the 1970s to cater to middle-income households priced out of private property. HUDC was phased out in 1987 when more housing choices were introduced.

Demand for HUDC units persists because of their generally good locations, proximity to amenities, limited stock and collective sale potential.

'It's a good deal if buyers are looking to stay. Prices per square foot are reasonable, but the trade-off is that the estate is older and has fewer facilities,' said SLP International research head Nicholas Mak.

Other plus points, said ERA's Mr Lim, are ample carpark spaces and large-sized units.

But buying a unit, at least for now, carries some risks, especially for those who hope to flip it for a quick buck or land a collective sale windfall.

The spate of government policies to cool the property market has affected buying sentiment for some HUDC properties.

Would-be buyers, who in some cases have to stump out more than $1 million for an HUDC unit, are becoming wary of an expected economic downturn. Those with an existing property loan now have to fork out 40 per cent of the cost as down payment, against only 15 per cent previously,

Another drawback, said PropNex's Mr Mohamed, is that buyers are not entitled to HDB's concessionary loans. 'Hence, they may be more costly compared to direct HDB flats.'

Mr Mak said that though resale prices of HUDC units have risen, the number of transactions has faltered, largely due to the cooling measures.

The number of transactions for privatised HUDC units, for example, was 171 in 2010 but only 63 last year.

'What hits the buyer hardest, for those looking to flip or go for an en bloc sale, is the higher seller stamp duty that kicked in at the start of last year,' he noted.

Since January last year, the stamp duty a seller has to pay if he sells a property within a year is 16 per cent, up from 3 per cent in the past.

And while the prospect of collective sales may seem inviting and continue to keep prices up, there are big hurdles to cross.

So far, residents in only five estates - Amberville, Waterfront View, Minton Rise, Gillman Heights and Farrer Court - have cashed out from a collective sale.

Pine Grove, which made news for its $1.7 billion reserve price, failed to garner any successful bid last year.

Another curve ball, this time for developers, comes in the form of an additional buyer stamp duty (ABSD) implemented last month.

Mr Mak noted that a developer now needs to complete a project and sell all the units within five years from the date of land acquisition, or else pay the ABSD of 10 per cent with interest based on the full purchase price of the land.

'This means larger estates will have more difficulty finding buyers,' he said.

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