Housing players spooked by talk of changes

Mar 12, 2013

By Rachel Chang And Daryl Chin


ALARM and uncertainty are permeating property agencies after National Development Minister Khaw Boon Wan floated three suggestions on how he might reboot the public housing system.

While some fear that the changes could cause redundancies in the industry, others worry that they might produce the opposite of the desired result.

On Sunday, Mr Khaw said reverting to the pre-1971 system of allowing flats to be sold back only to the Housing Board, with minimal capital gains, could be one way of bringing down the prices of new flats. He has pledged to reduce these by some 30 per cent.

If applied to all existing flats, this would effectively shut down the resale market, property analysts said.

"Okay, we can all close shop already," said ERA Realty key executive officer Eugene Tan, referring to the reactions from the 5,000 agents in his company.

But DWG senior manager Lee Sze Teck said reverting completely to the older system is "unlikely because of the repercussions".

Foremost is the redundancies that would be created from the real estate, finance and legal industries.

Home owner Henry Ng, however, believes this is the right route to take. "HDB flats should be a place for people to call home, not to make a quick investment," said Mr Ng, who works in the transport industry and owns a three-room flat.

If Mr Khaw leaves the current public housing market alone and applies this rule only to a new class of flats - 30 per cent cheaper, but not to be resold on the open market - some say it might worsen the income divide. "Public housing has become an asset class, and Singaporeans make money and upgrade because of the capital gains from their flats," said PropNex Realty chief executive Mohamad Ismail.

But if a type of non-appreciating flat is now introduced, such flat owners - likely to be lower- income Singaporeans - will be left out of the "Singapore Dream" of property appreciation, he said.

"My worry is that this puts the disadvantaged group at greater disadvantage in the future, while the rich become richer as the value of their flats rise."

Observers said clarity is needed on whether HDB intends to revert to its beginnings of providing homes just for people to live in, or maintain the option of having them as a form of investment, which they have evolved into. "It can't be that some HDB flats are for investment, and some just for people to live in. It is not fair," said C&H Properties key executive officer Albert Lu.

Mr Khaw's two other ideas - shortening flat leases from the current 99 years, and lengthening the minimum occupation period (MOP) so buyers must wait longer before they can sell their flats - also drew mixed reactions.

Extending the MOP, currently at five years, would stop people from treating flats as asset classes to sell for profit.

But in the short term, it might actually cause resale flat prices to spike as a longer MOP means fewer flats put up for sale, said Savills Singapore research head Alan Cheong. "Resale flats would be more limited, but the buyer demand would still be there as it is an independent market."

As for selling cheaper flats with shorter leases, this would mimic the situation in the private property market, where there are 99-year-leasehold developments and freehold ones, with the latter type of unit about 20 per cent more expensive.

"This is being seriously considered because it is the one measure that will not upset the market," said Chesterton Suntec International research head Colin Tan. "The flat is being sold for less, but you are also getting less for what you pay."

But it might just be kicking the can down the road, he said. "It may be administratively easier, but you won't actually be bringing prices down. You are just creating a new type of flat that will still rise in value with the rest of the market."