Tuesday, March 30, 2010

Milking HDB flats 'a very bad trend'


Of the many people turning to their MPs for help when they run into trouble paying for their flats, none is a first-time owner living in the home he bought straight from the Housing Board.

Instead, they tend to be people who have bought and sold HDB flats more than once in a bid to make a quick buck.

Prime Minister Lee Hsien Loong highlighted this point at a dialogue yesterday, as he expressed grave concerns over a trend of people trying to sell off their HDB flats to make money, with little regard for where they are going to live next.

PM Lee is correct to say that many HDB flat owner had sold their direct-purchase flat for quick cash and then purchase another flat from the open-market and obtain the maximum loan amount possible.

The cash proceed from the sale were used for other purposes other than to redeem the loan of their newly purchase flat. I knew these first hand because I was a property agent from 1993 to 1999. The prices of property start to move up rapidly from March 1993 when HDB first introduce Market Valuation of the resale HDB flats. I have seen my former clients taking out the max loan on their newly purchase flat while spending the cash proceeds from the sale of their first flat on items such as car and holidays.

As a result, the cash proceeds were all spent in a very short time while they had a large mortgage loan to service for a very long time.

During those early years, HDB provide loan to everyone who bought HDB flats and the max loan tenure permissible is 25 years irregardless of the age of the applicant. In short, there were easy credits available. As a result, there was a property bubble. It was also during those years that the COE prices reached S$100,000.

It was only when the property bubble had ballooned too big that the goverment step in to introduce measures to cool the market.

In short, the problem is a old one. It had taken the goverment too long to understand the implication of allowing flat dwellers to cash-out from their flat without taking some necessary measures to ensure that the seller are able to fulfill their long term loan obligation when they purchase their next flat.
Posted by: Doraisamy at Sun Mar 28 21:10:00 SGT 2010

What's an irony, for house owners, they may be asset-rich, they have a 700K HDB flat, and yet each day they may still need worry on what food to put on table.

And as for house seekers, each day they may need worry how to service the 500K housing loan.

Thus in the first place, why we allow our HDB flat prices to sky rocket?

If monies from HDB sales indeed go into CPF fund, hopefully our Health Minister won't take the opportunity to 'enhance' our Health Coverage, and 'makan' a portion from it., and make our Healthcare more expensive.
Posted by: iamgoondu at Sun Mar 28 16:46:56 SGT 2010

[The comment by the ex-property agent is instructive. The problem is people follow trends and they get caught up in the moment and suddenly, a $700,000 flat or a $100,000 COE seems to make eminent sense.

The problem is how and why should the govt protect people from their own stupidity. If I sell my flat and buy another from HDB, and I want to use the cash proceeds from the sale of my flat to start my own business, who is the govt to get in my way? People should be free to make their own choices. Even if the choices are stupid ones.

Because sometimes, they are not stupid. They are taking a risk to make a better life for themselves.

It is not for the govt to protect people to the point where they are unable to take risks.

What people need is proper guidance and information. The 2.5% interest on CPF ordinary account is more than any fixed deposit and better returns than many investment. Best of all, it is risk-free. Factor that in and it's a no-brainer.]

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