A Home for Everyone - Affordably

The prices for HDB, seemed skewed due to prices distortion owing to increased demand from new PRs and citizens. There should be a strong correlation in terms of price movement and the number of PRs approved in the year 2008/2009. There is a record of over 50,000 approved PRs in 2008. The HDB prices has stubbornly stayed high despite the economic doldrums in 2008 to early 2009. PR, of course, are entitled to buy HDB but now, they are constrained to buy them from open market and in open market, as we all know, prices will tend to be bidded upwards when supply is stagnating and at best relatively flat growth.

This probably explains in large part, the spike in HDB prices and COV since they are able to up the ante with COV premium to secure the HDB compared to Singaporeans who may have to rely on their existing balance on their Ordinary Account to help pay down any downpayment. The COV part is the part that affect many Singaporeans. The COV part is tightly correlated to the underlying valuation provided for the HDB and this valuation will determine the differential between the ask price by seller and the COV premium the buyer will pay. Hence, if the valuation of HDB is unilaterally determined by the authority with no range bound flexibility and the bank will loan on the valuation indicated, then it is likely that every HDB purchase, with the inherent lower valuation, will end up with a COV component for every purchase transaction. Unlike for private property purchase, banks will usually loan on valuation supported by valuing companies and for so long as the bank is willing to support the application, loan is extended. This point to a glaring point in the valuation approach of private property and HDB and the loan extension approach by banks to private property and HDB.

The valuation approach to assessing value of the HDB should be re-looked at to ascertain why there is always a gap in the asking price and the valued asset and that for HDB, every transaction has to contain a COV component. Most Singaporeans are priced out of their HDB in the re-sale market because they cannot afford to pay the premium.

Singaporeans should be able to afford to buy a HDB as a primary accommodation and that this property should be owner-occupied. The aspiration of another group of Singaporeans, much better off, should be met in another way and not allowing HDB units to be treated as a commodity for normal market transactions of buying and selling since such acts will likely cause prices to move in tandem to market forces – usually upwards. HDB units should be left for Singaporeans and PRs and curbs should be put to deterred speculation on the HDB units and to discourage Singaporeans who own private property to own HDB and to rent out. It is quite apparent that even with the current HDB prices, the rental income earn a better yield than private property.

Hence, the authority should look into how valuation of HDB’s prices should realistically be assessed and determined and thereby seeing the relevance of COV as a component in HDB purchase. Second, the authority should look at how Singapore with private property should treat their HDB as stock can only be limited by the land we have to build more. If the resale market constitute a segment of Singaporeans who will own their HDB, and not owner occupied and at the same time owing a private property or various property investments, how can the authority remove HDB as a trade-able commodity in the investment mix.

HDB’s primary role should be to ensure every Singaporean is entitled to the HDB house and every consideration should be given to make sure that aspiration is met.