Property agents call for curbs on subletting

By Irene Tham

The slew of new measures announced by the Government last Friday to curb speculative buying and selling of Housing Board flats does not address one issue - subletting - said property experts.

Under current rules, buyers of resale HDB flats can sublet the entire flat after three years if they did not take a government grant or HDB loan.


If they bought the flat with the grant and HDB loan, the minimum stay-in period is five years.

'If you want to stop prices from rising and people from speculating, control the rental market too,' said Mr Raymond Quah, president of Dennis Wee Properties.

The rental market indirectly influences the price of resale flats, said agents.

Home owners, realising that they can make money from rentals, are unlikely to sell their flats should they go on to buy private property.

This may lead to a dip in the supply of resale flats in the market, resulting in resale flat prices going up, said Mr Steven Tan, executive director of OrangeTee's residential division.

There are also other factors that influence resale flat prices. One is the reselling of flats as soon as the minimum occupation period is up - one year for those who bought a resale flat without government subsidies or loans.

That is why the Government unveiled new rules last Friday to curb speculative buying and selling of public housing.Sharpen your Edge with NTUC LearningHub(r)


Among these new rules is one that states that the minimum occupation period for resale flats with and without subsidy is now three years.

The current rules on subletting were laid down in 2007 - after earlier rule changes in 2005 and 2003 - to allow more people to earn cash from leasing out their property.

Before 2003, owners were not allowed to rent out their flats unless they were working abroad, for example.

That year, HDB relaxed the rule to allow home owners to rent out their flats after 10 years if they had paid up the loan, and 15 years if they had not. In 2005, this was cut to five and 10 years respectively.

'But the circumstances are different now - prices have spiked - and it is time to go back to the old rules,' said Mr Quah.

There had been spikes in HDB resale prices in the three months following every rental rule change, suggesting there may be a connection between resale prices and subletting.

For instance, in the second quarter of 2003 following the February 2003 HDB rental rule change, resale prices went up by 2.13 per cent from first-quarter prices, according to HDB's resale price index. This compared with only a 0.2 per cent increase in the same period a year ago.

More recently, after further easing of subletting rules in March 2007, the three months that followed saw resale prices jump 2.95 per cent. This compares with a 0.98 per cent increase during the same period in 2006.

Ms Jarina Shamsudeen, an agent with property firm PropNex, also felt the Government should revert to the old subletting rules to control property prices.

Based on anecdotal evidence, more Singaporeans approaching 35 years old are buying and subletting their flats for income. 'Permanent residents are doing that too,' she said.

Ms Jarina suggested that only Singaporeans posted overseas should be allowed to sublet their flats, and that private home owners should also be barred from subletting.

According to OrangeTee's Mr Tan, tweaking subletting rules is necessary because 'no matter how small the contributing factors are, they do add up'.

He was responding to a comment from National Development Minister Mah Bow Tan that only

3 per cent - or 20,460 flats - of eligible homes are sublet.

Mr Mah suggested that most flat owners are buying their flats for occupation and not rental.

'If private property owners can buy HDB flats or keep their existing flat to earn money from rentals, the supply of resale HDB flats will dip,' Mr Tan said. This will push up the prices of resale flats.

Illegal subletting may have indirectly contributed to rising HDB prices, said Knight Frank consultant Peter Ow.

It is known that some people lock up a room in the flat but lease out the entire unit, exploiting a loophole in the law.

'This is not an issue of policy but policing,' Mr Ow said.

Unless rules are enforced rigorously, having them will not deter people from doing things behind the backs of the authorities.

'Even if there are rules to control subletting, people will still break them. So the rules - tighter or not - would not have much of an impact,' said an ERA agent who did not want to be named.

But not all home owners who rent out their flats are speculators.

Retiree Christine Chan, 65, rents out two rooms in her five-room flat in Choa Chu Kang as this is her only source of income.

'I cannot find employment anymore due to my age, so I rely on the $1,000 I make from renting out two rooms for retirement,' she said.

'I am not looking to make a quick buck. I feel that if the Government were to tighten the rules, it should make some exceptions.'

This article was first published in The Straits Times.