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Thread: Reit to deal with HDB demand-supply challenges?

  1. #1
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    Default Reit to deal with HDB demand-supply challenges?

    Reit to deal with HDB demand-supply challenges?

    ONE day, your neighbour in your public housing estate may be renting his flat from or co-owning it with a real estate investment trust (Reit).

    A group of academics from the Singapore Management University (SMU) and a noted property consultant are making the case for a Reit comprising Housing and Development Board (HDB) residential and commercial units.

    SMU professor David Lee is one of the authors of the paper that moots this idea, among others to deal with excess demand in the housing market.

    "It's just a starting point of a discussion . . . to stimulate some out-of-the-box thinking," he said yesterday. The other authors of the paper are SMU professors Phang Sock Yong and Phoon Kok Fai, SMU researcher Karol Wee, as well as Alan Cheong, head of research at Savills Singapore.

    The paper noted that the strong demand for public housing, which already has a low vacancy rate, has pushed up HDB rental yields. This coincides with a rising population and an increasing proportion of foreigners who tend to be tenants.

    Building more is the answer, but this has to be balanced against creating too much supply which may crash the market. A marginal oversupply is optimal, the authors believe, and having an HDB-focused Reit can tackle some of these challenges simultaneously.

    Here's how the scenario may play out. First, a number of units to be built by HDB will be sold to the Reit, which will put them up for rental. This can help to create a bigger pool of rental units, reducing pressure in that market.

    "A very simple example, everytime you build a new block, 10 per cent is for rental, so instead of building nine blocks, now you build 10 blocks," Prof Lee said.

    There can also be an option for the Reit to be a co-owner in the units, which makes home ownership cheaper as well.

    Being able to tap capital markets means that HDB bears a smaller financial burden than if it were to supply the extra flats on its own, making public financing issues less of a worry.

    The homes injected into the Reit can be sold to Singaporean CPF members, with HDB or banks as financiers and a subsidiary of HDB as the Reit's manager. The tax-exempt rental income earned by the Reit is returned to investors in the form of distributions.

    There are no residential Reits in Singapore at the moment because yields for private homes have been low, the authors said.

    Having this Reit can provide investment alternatives for Singaporeans. Prof Lee said that investors enjoy the upside of the property market without having to buy a physical home which can be illiquid.

    Examples of beneficiaries are buyers constrained by funds who will not need to settle for shoebox units and CPF members who can draw down on their savings for investments beyond real estate.

    The Reit can also provide higher yields than rental income due to the tax-free dividends, which can help to cool interest in property as a hedge against inflation.

    Rental increases at the Reit's properties can be managed through regulation and not fully subject to market forces, the authors suggested, to ensure that social objectives are not at the expense of bottom lines.

    Prof Lee acknowledged that the "devil is in the details" at this stage, and the team plans further studies to shed more light on the implementation of such a housing Reit.

    But there is no such thing as a free lunch, and he urged caution should the idea come to pass eventually.

    "It is not totally risk free," he said.

    It may sound radical, but the concept of using Reits to provide affordable housing has been adopted in other countries. The first social housing Reit was set up in Britain last year, while the US's second such Reit was formed in April.

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    The first social housing Reit was set up in Britain last year, while the US's second such Reit was formed in April.

    Of all the places he use US and Britain.


    Do they know 22 billion can build how many HDB.

    The Housing and Development Board ("HDB") has issued S$1.2 billion, 5-year Fixed Rate Notes (the “Notes”) under its S$22 billion Multicurrency Medium Term Note ("MTN") Programme.

    The Notes have a coupon of 1.23% per annum payable semi-annually in arrear. The Notes were issued on 30 January 2013 and will mature on 30 January 2018.

    http://www.hdb.gov.sg/fi10/fi10296p....9?OpenDocument

    http://www.reuters.com/article/2013/...0AS4UL20130123

    Coupon A coupon is the stated interest rate for a bond. Most bonds have a fixed coupon that does not change during the life of the bond. Most bonds have two coupon payments per year. For example, a bond with a 5.0% coupon will pay $25 twice per year, for total interest of $50 which is 5.0% of the face value of the bond (almost all bonds have a face value of $1,000).
    Last edited by Arcachon; 09-08-13 at 22:24.

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    This idea of building excess flats and injecting them into Reits will only work for countries where a large part of local population are willing tenants by choice.

    Whereas in Singapore, most Singaporean aspire to own their place. 90% of Singaporean households own their residence. Only a very percentage of Singaporean families rent long-term, and mostly because due to financial hardship or social issues (divorce, bankruptcy, etc)

    These families need genuine cheap (or even free) social housing, not yield-driven accommodation from Reits.

    The ones who will benefit most are the foreign talent who usually rents. With the perpetual surplus of 10% flats, they will be very pleased to have a wider choice of flats to choose from. The HDB landlords in this forum will be in for tough competition!

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    Reits will push up the hdb rental. Look what happen to rental of shops in malls. Up up and away. Huat ahhhh.

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    Quote Originally Posted by k00L
    This idea of building excess flats and injecting them into Reits will only work for countries where a large part of local population are willing tenants by choice.

    Whereas in Singapore, most Singaporean aspire to own their place. 90% of Singaporean households own their residence. Only a very percentage of Singaporean families rent long-term, and mostly because due to financial hardship or social issues (divorce, bankruptcy, etc)

    These families need genuine cheap (or even free) social housing, not yield-driven accommodation from Reits.

    The ones who will benefit most are the foreign talent who usually rents. With the perpetual surplus of 10% flats, they will be very pleased to have a wider choice of flats to choose from. The HDB landlords in this forum will be in for tough competition!

    Doubt it will fly. The founding ideology is for everyone to own. Renting is for those who are in dificulity owning.
    “Nothing in the world is more dangerous than sincere ignorance and conscientious stupidity.”
    ― Martin Luther King, Jr.

    OUT WITH THE SHIT TRASH

    https://www.facebook.com/shutdowntrs

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    Other than sticker lady's works everything sg has or wants to do is not original.
    click: 🏢shoeboxmickeymousehouse 🏢

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    interesting proposal.
    but..but...hdb is losing money for each flat they built.
    so the more flats they built, the more money it lose.

    how are they going to price it the reit?

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    If HDB residential units are injected into a reit, then there should not be any restrictions to rental. That means anyone should be able to rent the units, whether rich or poor, owner of private property or none.
    And also people should be allowed to rent more than one unit.
    It is only when restrictions are removed that the reit can profit.

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    Quote Originally Posted by star
    Reits will push up the hdb rental. Look what happen to rental of shops in malls. Up up and away. Huat ahhhh.
    Shopping mall reits buy up current existing malls - they didnt build new ones and inject into reits - so the supply is not increasing and existing supply is controlled by them. Hence rentals are going up.

    Whereas the HDB Reit proposal is to get government to always oversupply HDB flats by 10%, and Reits will soak up these excess supply and rent it out. In this scenario, it is more likely hdb rental will be pushed down.

    Usually Reits managers add value by asset enhancement (furnishing, renovation), marketing, competitive pricing, hence the reits HDB flats will fetch a better price than a fellow singapore landlord flat.

  10. #10
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    Quote Originally Posted by hopeful
    interesting proposal.
    but..but...hdb is losing money for each flat they built.
    so the more flats they built, the more money it lose.

    how are they going to price it the reit?
    HDB is probably going to transfer the flat to Reits at market price, and will not lose any mony.
    E.g. a MM 2-room flat is selling around 100k for first-time buyer, HDB will probably sell it to reit at 150k.

    With 50% leverage ratio structure + management/maintainance fees, net rental income (say 1000/mth) less expenses for one flat is around 600/mth

    Equity stake of 75k during reit ipo earns $7.2/year, not a bad yield at 9%.

    Now will the condo MM renters be enticed by 1k/mth hdb MM units? Maybe.
    Will the young singapore couple rent it before marriage? Not sure as currently, most stay with parents until BTO is ready.
    Will a poor singapore family in poverty rent it at 1k/mth? Unlikely.
    Will it create a class of perpetual singaporean renters? Maybe, but government has to think these renters roots are not going to grow deep in Singapore without a stake in Singapore.

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