Commentary: We need to tackle unrealistic S$2 million HDB flat listings
The recent listings of S$2 million HDB flats have sparked public curiosity and concern. NUS Business School's Sing Tien Foo weighs in on the controversy surrounding unrealistic listings and inflated asking prices.
Sing Tien Foo
19 May 2024
SINGAPORE: "A S$2 million HDB flat? Sure or not?"
The recent listings of two HDB flats at S$2 million each on PropertyGuru - a "jumbo flat" in Sengkang and a 5-room Design, Build and Sell Scheme (DBSS) flat in Toa Payoh - have sparked public curiosity and concern.
Considering that 80 per cent of Singapore residents live in HDB flats, the issue of affordability is a hot button topic.
The authorities were quick to debunk the Sengkang listing as "misleading" and the Toa Payoh listing as "unrealistic", warning that they will not condone behaviour "that seeks to disrupt the market or fan consumer sentiment".
THE OPACITY OF THE PROPERTY MARKET
Keeping public housing affordable is a key national priority, and the government has worked to restore stability in the property market after disruptions caused by the COVID-19 pandemic.
Prices of resale flats rose by 4.9 per cent in 2023, compared with the 10.4 per cent gain in 2022 and the 12.7 per cent growth in 2021.
In April, it was reported that a 5-room flat in Tiong Bahru changed hands at S$1.588 million, becoming the priciest HDB resale flat sold to date.
The Law of One Price economic theory holds well for stock and commodity markets, such that the same unit share is traded at the same price on the stock exchange. However, it does not work in the property market.
Each property is differentiated by a set of attributes, such as the unit size, facing, age, and interior condition, as well as location factors, such as proximity to schools, shopping malls, and MRT stations. Two similar properties, even if located in the same building, could attract different expected prices. This complexity renders the property market opaque, complicating the search process for buyers and sellers alike.
UNREALISTIC PROPERTY LISTINGS MISLEAD THE MARKET
Misleading property listings exacerbate the opacity of the market, distorting the perceived value of properties and fostering false expectations among buyers and sellers. As such, inflated prices and inaccurate representations can undermine trust in the real estate industry.
The Sengkang flat that was listed as a "jumbo" unit is misleading because there are no such flats available at the said block. The unit is actually two adjacent 5-room flats, and the owner does not have permission to sell it as a single unit. Even if the two units were to be considered together, the S$2 million asking price is more than S$800,000 above the combined value of the units.
Similarly, the owner of the flat at The Peak@Toa Payoh has yet to register their intent with HDB to sell the property. The asking price is also nearly half a million more than the highest transacted price in the area.
As buyers and sellers grapple with inflated prices and inaccurate representations, questions abound regarding the integrity and transparency of the real estate industry.
A SHAKE-UP FOR HDB RESALE LISTINGS
Traditionally, real estate agents relied on print media such as newspapers to market their properties. Prospective buyers painstakingly browsed through page after page of listings to find their ideal property match.
The emergence of online portals like PropertyGuru and 99.co transformed the landscape of property search. Yet, these portals predominantly cater to agents, and listing packages can cost up to S$20,000 for 12 months. They are also not easily accessible to individual sellers or buyers.
This may soon change if an alternative channel is available.
On Sunday (May 12), HDB announced a new resale flat listing (RFL) service for owners to list and sell their properties independently. This may sidestep conventional agent involvement and save on commission fees if owners can "do-it-yourself" (DIY) in selling their flats.
In the current commission structure, the seller of an HDB resale flat usually pays 2 per cent of the transacted price, while the buyer pays 1 per cent. A S$2 million property, for example, would cost the seller S$40,000 in agent commission. It bears thinking about what impact this savings might have on the broader resale flat market.
The RFL requires flat owners to obtain an intent to sell from HDB before they can list their flats on the portal. This will help eliminate dummy and duplicate listings.
It also contains a screening mechanism to alert sellers if their asking price exceeds the highest recent transacted price of comparable units by 10 per cent. This could potentially reduce the number of overpriced listings we see on property platforms now.
Currently in its soft launch phase, the RFL will likely attract more listings from sellers as it gains traction, enhancing the pool of properties for potential buyers.
Will it be able to bring more transparency and efficiency into Singapore's housing market? How will it impact property agents looking to reach out to prospective buyers?
While it's premature to predict the full extent of these effects, the RFL system will reduce friction and could also herald a more competitive landscape, nudging existing portals to up their game.
Even if not all the owners choose to do "DIY" in selling their HDB flats, the RFL services could drive down the costs of engaging agents because of the digitalisation and streamlining of the transaction process.
Sing Tien Foo is the Provost's Chair Professor at the Department of Real Estate, NUS Business School, National University of Singapore. The views are those of the author and do not represent those of NUS and its affiliates.
https://www.channelnewsasia.com/comm...-payoh-4343496
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