Property Market Sentiments

[brattzz]

It's kinda strange for this move by sg gov,
as it's definitely a win-win for all parties (buyer, seller, gov!) to sell used HDBs at million dollars!

Singapore has 1.09 millions units of HDB flats (2021), going by sheer volume, it's not possible sell all of them at million dollars each! Sg gov should not interfere with this resale markets, instead, increase focus on supply of new BTOs, and build them faster!

Sg definitely has enough land to build another 1 million units of HDB flats, sell at sky-high prices and make billions & billions for temasek/GIC to invest, invest, invest!

What's wrong with making more money? :O

Huat har!

[weijian]

It's kinda strange for this move by sg gov,
as it's definitely a win-win for all parties (buyer, seller, gov!) to sell used HDBs at million dollars!

Singapore has 1.09 millions units of HDB flats (2021), going by sheer volume, it's not possible sell all of them at million dollars each! Sg gov should not interfere with this resale markets, instead, increase focus on supply of new BTOs, and build them faster!

Sg definitely has enough land to build another 1 million units of HDB flats, sell at sky-high prices and make billions & billions for temasek/GIC to invest, invest, invest!

What's wrong with making more money? :O

Huat har!

There is absolutely no issue with making more money if you are on the right side of the trade. But when you are not, it is a big issue. Trace back the brief discussion of this thread in mid August and everyone's view point are anchored on their own situation. There is really no absolute right or wrong.

[CY09]

There is a trade off between housing prices and retirement adequacy. Both are policy aims the government has to achieve.

Most of us need a house during our lifetime. If resale prices are too high and BTO is not avalaible, what results is many older couples and singles are forced to purchase an expensive resale take 20-25 year loans and only able to save for retirement from approx age 55. This affects retirement adequacy (managed by CPF Board/MOM). In a way, the rising housing prices and rising CPF minimum sum will force people to work till the day they die or live a very frugal life until their death despite having worked for 40-50 years.

You are right in saying ramp up BTO supply balances out the problem. I do agree with you if more BTOs are built, the housing prices will taper off and new home owners demand can be satsified. However, my gut feeling is that the government does not want to be exposed to the political risk of the second order of effects it brings in

There are two factors which affects the resale market- i) having new owners buy off existing owners who are upgrading to private or those who are forced to sell off their deceased parent's flat due to HDB's rules of one owner one HDB flat and ii) rental demand mainly from foreign workers or a small pool of Singaporeans/PR who prefer renting.

For i) if everyone is able to get a BTO, resale purchases will be low and less Singaporeans will be able to move up to own a private condo. This affects social mobility and aspirations. The end state will be that many locals will live in public housing while the apartments complexes and private land are owned by a pool of rich foreigners. HDB resale prices will fall because there is little demand but large supply. Secondly, the inability to monetise their flats easily runs the risk of going against PAP's mantra that your house is an appreciating asset. If no one buys your flat, the theoritcal value is that itis depreciating annually due to lease decay.

Conversely, the other way is to import enough foreigners such that all locals own 2 properties - one a private condo to live in and a HDB unit which you can rent to foreigners as income. This is an utopia which I do not know how it can be managed. It is likely you will need 4-6 foreigners to live in each flat and there are 1.1million + HDB flats

[Big Toe]

I still think the key issue here is the availability, affordability and eligibility of BTO Flats for first time and maybe 2nd time buyers. And also making living spaces livable and not over crowding or shrinking the size of flats. This is to give all generations especially the younger ones the assurance that they will and can afford to live in relative comfort with a norminal salary and not be priced out of a basic need. Associating the availability of retirement funds and value of HDB flat is complex and while it can be a source, I dont think it is a good idea to be dependent on it.

Whatever happens to the private and secondary resale market is important but not as important as planning for a basic need of BTO flat. Measures are more or less in place to ensure developers are able to hand over the properties(unlike what is happening now in china) and buyers have sufficent cash flow for their upmarket or resale purchases to ensure stability. I am in the opinion that not much more needs to be done. if government over-reaches, it goes against the principals of a relatively free and open market.

Side track a bit, china is interesting case study, all you read is doom and gloom, but it is not quite as bad as what you read.
Sure the problems seems huge but prices did not spiral downward as quickly compared to many developed countries when real estate is in a downturn. Also the buyers are held accountable for payments for uncompleted projects , which is deemed unfair by many countries but for the more authoritarian china, seems more acceptable. In summary, it is bad...but not as bad as one would think, at least not yet... ...The collaspe of the china housing bubble have a desirable effect of ensuring that the population buys for their own needs and not speculate.This would put an end to the notion that buying as many properties as possible is the way to riches.

[CY09]

Hi Big Toe,

Agree with you that ensuring avaliability and affordability of BTO flats is ideal. I am not sure why the government has not considered ramping up BTO supply to say 30,000 units per year to manage the situation. The most pressing issue is the rising number of singles among the cohorts as evident in the latest BTO results, their ratio is 10:1 and those applying are earning below $7,000 per month. Applicable too to first time married couples.

My presumption again is that the government does not want to handle the second order effects of deflating a HDB resale market that badly

https://services2.hdb.gov.sg/webapp/BP13...System=BTO

[Big Toe]

Yes. The singles issue is a pressing problem. This group is just as "Singaporean" as Married couples but they are left hanging when it comes to BTO flats. The short answer to why this is so is that the Government "encourages" marriage and to churn out next generation of Singaporeans to at least try to slow down our aging population. Valid arguement to give piority to families.

To solve I think singles should also be given priority after a "X number of times" or "X number of years" of trying for a BTO in a non matured estate. That is only fair in my view.

As for deflating HDB values, if memory serves me correct, the current BTO system was in fact born out of over building HDB and deflating HDB values for both BTO and Resale. I vividly remember the value of BTOs dropping due to an over supply(Unthinkable now). But it did not have any unwarranted bad effects on the finances of the population, it did however put a dent in government/town council finances to up keep empty flats. And having too many empty flats can be depressing for a country as a whole.

[Big Toe]

Also to touch a bit on investment properties. The best cooling measures are already in motion. Rising interest rates.
Tbills Now 2 yr US is >4% SG 6 months 3.32%
Compare this yield to what you would get from a residential property.
Why bother go through the hassle and risk when we can have more or less the same returns, risk free.

Property gains are amplified due to leverage the same is true during a downturn. And a downturn is looking more likely now. Like it or not in general asset prices(stocks/properties) overall will fall with rising interest rate and QT. Rates have been too low for too long. Too much liquidity around.

Our many rounds property tightening measures is EXACTLY the same time when interest rates are at 0 or very low. Property prices also appreciated considerably during this period. The recent hype on new launches is probably due to pent up demand and an extremely low supply this year. My best guess is it wont last with more supply coming next year, rapidly rising interest rates and QT. Then again I could be wrong, market can defy logic over a prolonged period.

[Ben]

A 15 months wait-out period for private residential property owner and former owners of private residential properties to buy a non-subsidised HDB resale flat, will this result in an increase in private residential property due to higher demand? Thereby further fueling the increase in prices for private residential properties? Will this solve one problem by creating another?

[CY09]

One angle we might not be looking at is margin calls. Let me explain using a scenario with real transactions stats for the Jurong area

Couple buys a 4 room resale at $550,000 (real numbers and this figure is for the mid range). Being prudent they drew down their CPF and cash savings to take a $400,000 20 yr bank loan at 1.85% lock in for 2 years (1% above SORA then, which later becomes floating of 1% above SORA) from SBD and pay cash for renovation and furnishing. Their LTV is 72.7%, perfectly fine for the bank as it does not bust the 75% LTV.

2 years on, Powell strikes and a hypothetical Minister B overbuilds BTO.

Resale price plunges to only a premium of $50,000 more than BTO (the BTO in that area is going at an average of $250,000). This means their home valuation is now $300,000. The prudent couple have paid down their loan to about $350,000. SBD reviews the housing loan and realises they breach the 75% LTV and requires a cash top up of $125,000. Secondly the floating home rate is now 4% as SORA has moved upwards due to Powell.

A larger repayment and a need for cash top up is very painful. If they are not able to pay, they run the risk of foreclosure, otherwise they would have to trim their expenses severly to fork out cash call and larger repayments. The anger they will feel towards the government and Minister B will be great. The reduction in consumer consumption will always reduce economic growth with the possibility of lowering housing prices even more.

[Big Toe]

1. The chance of a margin call occurring is low, especially if one has been promptly paying the loan. And it will only happen during a rapid and sustained drop in property prices.

2. Resale prices rise and fall. This should be made obvious. How much protection should be given for resale is debatable. The responsibility should fall on the owners. They more we seek our government to shield us from market reality, the tighter the legistation and regulation. Think about CPF, minimum sum, etc Do we really want that? Some of us do, I certainly dont.

3. Over building BTO is an extremely unlikely scenario. HDB have learnt their lessons from the past about over building.
The fact that it is BTO "build to order" means they will build it only if there is demand. And even under normal circumstances it will still take a few years. Resale will always have a significant premium over BTO. (Much like Lala move charges a lot more than Ninja Van because they are instantaneous, I cannot imagine a time where their cost can be vaguely comparable)