KHAW CONFIRMS VALUE OF HDB FLATS WILL BE ZERO AT END OF 99-YEAR LEASE

[Temperament]

Heart Love Compassion

"*I will take zero comm if you'er not satisfy with my services "
Unquote:-
Wah!
Such powerful self declaration!
But what is the meaning of *?
Care to elaborate?
Some of us may agree to your *.

T, my dear friend.

* is to emphasize that as my customer, you will decide.

with tons of respect and gratitude to you...

Love Compassion


A Life not Reflected is a Life not Worth Living.

* is to emphasize that as my customer, you will decide.

Wah! you remind me when we were touring TAIWAN last year, almost all hawkers or stall holders for tourists will keep on offering you samples after samples of food (some quite expensive like almond and cashew nuts) for you to taste and telling you it's O.K. if you don't buy after tasting the samples after samples. Can you don't buy after tasting one too many samples? Of course there are always "chow kar" or "cheap skate".
But to apply to real estate business?
Hmmm..
One "chow kar" may set you back your month's earning.
It's certainly is a hard world if you really practise this sale psychology.

[DP28]

IMHO the genius is Khaw managed to kill the psychology just as he killed the first timer tikam by imposing a 1 year period before they can tikam again

When buyer does NOT know what is the valaution, he will be extra careful becuase he does not know what valuation will the bank be lending at. if he bot at X price and valuation comes at X-$50k....

Smart move... the sequence is as intended

While I think KBW did a lot of right things at MND, this last measure is one where they think they can have their cake and eat it too.

In a private market, it is true that people buy and sell w/o doing a valuation - but they do with reference to a set of previously transacted prices (including comparables) that reflected the full value of the targeted property (less downpayment/cash component) that could be financed by the bank. The bank's credit department, the valuers all look at the same set of prices to make the end valuation that determines the loan quantum etc. Within a certain percentage error, and knowledge of the direction, the end valuation is often predictable.

I believe the vast majority of people who turns up at the resale private market don't buy without an idea of their financial capacity (yes i know some will overstretch but that is different from saying they don't know at all) - put that two together and you won't have too many cases of someone who signed an OTP without knowing exactly his ability to pay.

However for the public housing market HDB insists on controlling the level of final valuations - which is known to be lagging the market at all times - and nobody knows exactly how this soup is made and what ingredients it is made from. So why create a situation where you intentionally deprive information that could be entirely arbitrary? And furthermore it is the one piece of information that they have conditioned the market to accept in the name of bringing an end to all the illegal cash back schemes etc in the 2000s?

As far as administrative measures go, there are good and bad ones. And usually there are unintended consequences - some we don't see today.

Think about it in this way. When COV was transacting at 50-100k price above valuation, people are complaining its unaffordable yet some cave in. When COV comes to zero, people still complaint price is too high. IMO, HDB owns set of valuation is high, but they cannot admit to this. Thus, they reverse it to let market dictate the valuation before publishing. In this way, if prices drop it has nothing to be blame on HDB fault.. KBW is genius in my opinion.

[yeokiwi]

I believe the vast majority of people who turns up at the resale private market don't buy without an idea of their financial capacity (yes i know some will overstretch but that is different from saying they don't know at all) - put that two together and you won't have too many cases of someone who signed an OTP without knowing exactly his ability to pay.

Not really. Most are cautious over the downpayment which is directly proportional to the buying price of the flat. Essentially, most are not worried about the long term repayment of the bank loan but they are sensitive to the amount of cash/downpayment that they need to fork out for the flats.
So, in this case, paying too much over the average valuation of the recent transactions will back fire on their cash allocation.

[thefarside]

Think about it in this way. When COV was transacting at 50-100k price above valuation, people are complaining its unaffordable yet some cave in. When COV comes to zero, people still complaint price is too high. IMO, HDB owns set of valuation is high, but they cannot admit to this. Thus, they reverse it to let market dictate the valuation before publishing. In this way, if prices drop it has nothing to be blame on HDB fault.. KBW is genius in my opinion.

At the risk of sounding like a motherhood statement-maker, I will say that

1) no one is coerced to buy a flat at 100k above valuation. It is a willing buyer-willing seller transaction.

2) the market-clearing prices (i.e. the resale prices posted on HDB website, not the valuations) represent where affordability and demand meets the supply. Those prices, until 6 months ago, were way above the valuation levels. Now, for about half of the districts, and mostly non-mature ones, they are below valuation. For those who don't remember, those COVs, or CUVs in some cases, were very stable for quite a few years until the incompetent management of immigration and housing supply spawned a cocktail of reactionary administrative measures to "patch up" things until they (the lagging government) can catch up.

3) a vast majority of people I have relations with to have said that the property(ies) they are after (landed, condo, HDB) are expensive. Nobody has said things are cheap. Nobody in Singapore ever says things are cheap, unless they go to Malaysia then everyone in the hypermart would know who the Singaporeans are

4) government cannot (and should not) attempt to save all the idiots from themselves. Cash allocation to many people is whether they can afford installments. Not everyone can be a guru, and I think that is a good thing. Otherwise, who can be THE real gurus?

5) I can accept this change if HDB were to let go of their control of the valuation process, and let the bank / valuer work out the valuations for themselves, just like private market. If the buyer wants to take HDB loan, then they can jolly well submit themselves to whatever machinations that HDB has for flat valuations

6) I have a vested interest in this because I will be a seller too someday. I can't understand why I am not allowed to take out a valuation on my own property if I so wish. This kind of nannying beggars belief, considering there are so many other things that they are already doing to manage the housing market.

[Temperament]

Think about it in this way. When COV was transacting at 50-100k price above valuation, people are complaining its unaffordable yet some cave in. When COV comes to zero, people still complaint price is too high. IMO, HDB owns set of valuation is high, but they cannot admit to this. Thus, they reverse it to let market dictate the valuation before publishing. In this way, if prices drop it has nothing to be blame on HDB fault.. KBW is genius in my opinion.

At the risk of sounding like a motherhood statement-maker, I will say that

1) no one is coerced to buy a flat at 100k above valuation. It is a willing buyer-willing seller transaction.

2) the market-clearing prices (i.e. the resale prices posted on HDB website, not the valuations) represent where affordability and demand meets the supply. Those prices, until 6 months ago, were way above the valuation levels. Now, for about half of the districts, and mostly non-mature ones, they are below valuation. For those who don't remember, those COVs, or CUVs in some cases, were very stable for quite a few years until the incompetent management of immigration and housing supply spawned a cocktail of reactionary administrative measures to "patch up" things until they (the lagging government) can catch up.

3) a vast majority of people I have relations with to have said that the property(ies) they are after (landed, condo, HDB) are expensive. Nobody has said things are cheap. Nobody in Singapore ever says things are cheap, unless they go to Malaysia then everyone in the hypermart would know who the Singaporeans are

4) government cannot (and should not) attempt to save all the idiots from themselves. Cash allocation to many people is whether they can afford installments. Not everyone can be a guru, and I think that is a good thing. Otherwise, who can be THE real gurus?

5) I can accept this change if HDB were to let go of their control of the valuation process, and let the bank / valuer work out the valuations for themselves, just like private market. If the buyer wants to take HDB loan, then they can jolly well submit themselves to whatever machinations that HDB has for flat valuations

6) I have a vested interest in this because I will be a seller too someday. I can't understand why I am not allowed to take out a valuation on my own property if I so wish. This kind of nannying beggars belief, considering there are so many other things that they are already doing to manage the housing market.

Just reminded me of "Animal Farm"
Sheep! Sheep! Sheep! Are we?

[specuvestor]

Firstly let me clarify that I am not saying Khaw is a genius but it is an expression that his measure is "genius" because nobody thought about it or expected it, and elegantly crafted. This is creative policy making at its best IMHO (NB: and Khaw is FT just as David Conner; if our FT policies can attract FT like these I would have no gripes but the anecdotal evidence of high profiles FT doesn't show the result)

2ndly we have been taught from econs 101 that transparency is the best for market dynamics. But in reality we know that is not true. Even listed companies don't disclose everything for strategic and confidentiality reasons, which makes a lot of sense. In some instances it is actually better to have certain opaqueness. I am not discouraging transparency but as usual 中庸之道, there is a time and place for everything under the sun.

3rdly we have this notion of willing buyer and willing seller at arms length. But this is assuming they are rational. And again in real life we know that is not the case. And this new policy will instil a structural downward shift in asset expectation simply because buyers need to second guess the bank loan quantum which is tied to valuation (obviously it also doesn't affect people who can fully paid up but that's besides the point). Many irrational decision process is based on upfront payment, hence the $1 deposit for cars scheme and Courts in the past, regardless the capacity to repay. The mad rush in these bubbles have all the symptoms of Catching up with Joneses phenomenon regardless of one's capacity. Nobody actually believe property is cheap has no relations to the madness of crowd, from South Sea Bubble to Dot com to GFC and to Blumont. Everybody believes they will be out before the music stops

In this structural move, the psyche will be changed more to the Prisoners' Dilemma which you are trying to second guess the other buyers not willing to pay as high, and your own predicament if you actually get the deal. And the main issue for the predicament is NOT going to be the monthly mortgage payment. People in general are myopic, disciplines and lessons of life helps those who are willing to become longer term focused.

In short I think it is a very smart move because it tugs at the psychology of the market rather than just a simple monetary consideration.

[egghead]

I read and reread the news several times

"...so from 5 pm on Monday, a price must first be agreed upon and the Option to Purchase (OTP) granted, before buyers can request a valuation from the HDB. HDB will no longer give valuations to sellers, although existing OTPs and valuations will still be honoured until their expiry."

I don't see anywhere saying that it is illegal for HDB sellers to get a valuation from a private valuer before issuing the OTP. Am I missing something?

[Temperament]

i had sold 2 HDB flats which i bought from HDB directly. The 1st one i could't remember about valuation. i think it was not practised then. The 2nd HDB i sold, i had 2 valuation reports . And you know what happened at the time? The 2nd valuation for every seller was always lower then the 1st valuation. Valuation REPORT WAS VALID ONLY FOR 6 MONTHS ONLY OR how long?
i knew because after i sold my 2nd HDB i bought my Resale HDB from the seller who had the 2nd valuation report about to expire. He was quite "desperate" to sell then. But i still have to pay COV of about 8 to 9 K.
It seems as far as valuation report is concerned, the 2nd, 3rd is always getting lesser and lesser not more. So the moral is if you really need to sell, sell it with the 1st valuation report if possible.

[egghead]

It seems as far as valuation report is concerned, the 2nd, 3rd is always getting lesser and lesser not more. So the moral is if you really need to sell, sell it with the 1st valuation report if possible.

Is this generally true or would this be true only during a softening market?

[Temperament]

i think it's generally true in every type of market in relative terms, because HDB flats are 99 years LH.