http://www.temasekreview.com/2009/10...-flats-scheme/
October 7, 2009 by
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From our Correspondent
In less than a week since the Sale of Balanced Flats is launched by HDB,
12,700 applications have been filed for only 2,132 available flats – about six times oversubscribed!
Analysts say applications could hit 20,000 when the process closes next Wednesday, making 10 bids for every available flat.
The scheme was announced hastily by National Development Minister Mah Bow Tan last week to quell public resentment and disgruntlement over rising prices of HDB flats.
Previously,
HDB has constantly maintained that HDB flats remain affordable to the masses and
there is adequate supply of flats to meet the demand
It is blatantly obvious from the above figures that the current supply of flats is insufficient to meet demands even at such high prices which smacks of poor planning and foresight on the part of the authorities.
In an earlier report by ERA, it was revealed that 40 per cent of the buyers are permanent residents. Did HDB take into account the artificial increase in Singapore’s population in the last few years?
The balanced flats are actually “leftover” flats from previous ballotting and flats repossessed by HDB for a variety of reasons such as default in mortage loans.
As such, some of them are built more than 10 years ago and yet they command a price which is comparable to flats in the resale market.
For example, the 29 available units of three-room flats cost between $244,000 and $ 262,000 and Queenstown between $302,000 and $308,00.
These old flats probably cost much less than BTO flats to build years ago and HDB had already sold some of them in the first round to buyers.
The ruling party has often trumpeted its achievements of enabling Singaporeans to own their homes.
More than 85 per cent of the population live in public housing built by the government agency HDB. However, these are 99-year old leasehold flats whose sale and resale are subjected to a variety of conditions such as a minimum 5 year occupation period.
Government leaders and HDB officials have insisted that the rising prices of flats helps to “create wealth” for Singaporeans.
This prevailing misconception has been debunked by a research done by two NUS professors NUS professors Abeysinghe and Gu Jiaying showed clearly that “higher property prices, instead of creating a wealth effect, exert a significant and negative “price effect” on consumption expenditures leading to a fall in the average propensity to consume.” (read article
here)
As house prices go up, the increase in the value of housing assets is accompanied by a concurrent rise in the financial liabilities of households, in the form of higher downpayments for purchase of residential properties and burgeoning housing loans.
The record high prices of both new and resale HDB flats have also brought to the key question whether they are sustainable in the long run and if a property bubble is in formation.
As the prices of new flats are pegged to that of resale flats, their prices can be manipulated easily by limiting the supply of flats and ramping up the demand through immigration.
Though there are calls from some quarters for HDB to release the full figures for the land and construction costs to justify its prices for the new flats, the statistics are unknown to this very day.
A crude estimate made by Finance Consultant Mr Leong Sze Hian of the profits made by HDB has been circulating around cyberspace:
“Since there will be 864 HDB flats, the average cost per flat, inclusive of communal amenities, site works and contingency works, is about $120,602 ($104.2 million divided by 864 flats).
With the latest HDB new 4-room flats at Punggol (Punggol Residences BTO) selling at an average price of $293,000 (price range of $264,000 to $322,000 divided by 2), does it mean that the HDB stands to make a profit of about $172,398 per flat, or a profit margin of about 143 per cent?”
[Source:
Hardwarezone]
As expected, HDB has refused to answer to these speculations about their “profit margin” so far. Their carefully crafted replies through the state media are almost always the same: “HDB flats are affordable because first-time flat buyers use 17 to 29 per cent of household income for their loans, below the international benchmark of 30 per cent.”
This simplistic answer fails to address the key concern of Singaporeans: will they have enough savings to cater for their retirement needs after paying for their housing loans at the end of the 30-year tenure?