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Saturday, September 24, 2011

WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES? Part 5

WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES?



Part Five

PROPERTY BUYER’s PROPOSAL



We do NOT agree with PM Lee’s statement that people are marrying later and hence allowing a high income ceiling helps them to own a house. Happy pictures or interviews (as shown in Straits Times) showing people being happy for this new policy change may be taken from a skewed sample.

Instead, we strongly recommend that PM Lee looks into why people are marrying later.

Many people we have spoken to mentioned the high cost of living (Not high standard of living) and high cost of HDB flats as major contributing factors for delays in getting married. Not only that, having to wait for 2 to 3 years for an over-priced BTO flat (in their opinion) further adds to hesitation of getting married.

How to Make HDB more affordable?



Rather than raise income ceiling for new HDB flats, the government could instead impose an income eligibility ceiling of say $12,000 (for Singaporeans) and $15,000 (for Foreigners with Singapore PR) on resale HDB.

This would immediate cut off demand from the high income earners from competing in HDB resale flat.

(Currently Resale HDB has no income ceiling - this means that the very high income earners can compete in the HDB resale market, driving up prices of resale HDB)

This would nudge PR into private properties and retain HDB resale flats for Singaporeans.



New HDB flat income ceiling should NOT be raised!!!



Although there is a price differential of 20 to 30% (According to PMO) between Resale and new HDB prices, raising Income ceiling on the new HDB flats will allow new HDB flats to rise in price, rather than for resale prices to come down.



At the same time, HDB must double up it’s speed on building cost effective HDB flats, not BTO and not DBSS. It is the Shortage of Supply that is driving up prices.

Do away with DBSS, as there is too much froth built into the price by these private developers and they will pay too much for government land (in expectation of future profits), involuntarily ending up as "tax collectors" for the Singapore Government. Since they may corner the market forming some form of a cartel, a monopoly or duopoly or tri-poly, they can effectively pass on the higher land cost to the new HDB property buyers.

Do away with BTO as supply is in the catch up phase. Price new HDB flats lower and impose more restrictions if required (to create fairness), to make it more affordable for newly weds.

When the gap of the HDB resale and New HDB prices closes, this will lead to a more orderly market. And we don't mean for HDB new prices to go up to HDB resale level to close the gap. We prefer for resale prices to come down so as to close the price gap between HDB resale and New HDB prices.

Once a balance is reached, HDB should NOT indulge in BOOM and BUST supply cycles of HDB ever again.

Because from 2006 to 2010, the supply has been badly managed. There is absolutely no excuse.

DO AWAY WITH CASH OVER VALUATION



Last but not least, REMOVE the Cash-Over-Valuation system. A Valuation that is not really a valuation makes a mockery of the valuation professionals. If you use the benchmark method, then surely the price increase should be reflected in the price and hence the valuation, and not in the "Cash over Valuation".

We see the Cash Over Valuation as a means to help HDB home owners upgrade to Private properties if they sell their HDB flats (this is a form of social engineering).

We have no objections to helping people upgrade from HDB to a more comfortable Condominium living (now that they can pay the downpayment) , the only question is,

Can their incomes afford it?

If they can, how many years of loan tenor do they need? Have they really checked through in a home loan calculator?

What will happen to these hapless buyers when they lose their jobs in a recession?

Part 4 WILL RAISING OF HDB INCOME CEILINGS TO AFFECT HOME PRICES?

WILL RAISING OF HDB INCOME CEILINGS TO AFFECT HOME PRICES?



Part four

WHAT IS THE IMPLICATION OF HDB CEILING INCREASE



By increasing the income ceiling from $8,000 monthly household income to $10,000, this will mean that more people will be competing to buy New HDB flats when the supply is still fairly constricted.

IMPORTANT NOTE:


At $8,000 income ceiling, the maximum loan quantum is estimated at $890,000. At $10,000 income ceiling, the maximum loan quantum that a Singapore bank will lend is estimated at $1,113,000. Home loan calculators can be found here.


This means that DBSS can price their flats $223,000 more potentially. ($1,113,000 - $890,000) = $223,000. Initially, those developers will make more money. And these developers would bid for land more aggressively, hence bidding up land prices. Expensive land prices end up as a form of “UPFRONT PERSONAL TAX” by the government on the new HDB property buyer.



The government’s stance has been that people are marrying later and hence will likely have more income when they get married. By consequence, increasing the income ceiling from $8000 to $10,000 will allow them to be eligible. This will cause them to compete with existing property buyers to add to the pool of new HDB flat buyers.


To revisit the Centrale 8 (in Tampines) furor, having more people eligible via higher income ceiling will allow DBSS developers to make more profit due to the higher number of demand that will find their pricing “Affordable”. Higher levels of income will allow the developer to price it based on home loan affordability and push it to the limit. (People will pay through their noses for their HDB flats and any changes in home loan interest rates will hurt them really hard)

When DBSS developers feel confident of making more money, then they will bid higher prices for the land, eventually it means that more money flows to either the HDB or through the statutory boards holding the land and eventually as revenues to the government.

NOTE: At the time of publishing, we still have not found out who are the agencies that are responsible for the land sale, is it Singapore land authority (SLA) or is it HDB.

When DBSS price rises, this will create headroom for BTO prices to rise. Eventually, this will mean more expensive HDB flats. This in turn means that there is a minimum price on the land, forming the base support level for all other types of housing further up on the food chain.

The root cause is, a mis-managed supply and demand situation by MND which we strongly belief the government of Singapore had all the data at hand to solve, but did not do a good job.

Eventual victims are: Singaporeans who are newly wedded or singles who just become eligible to buy HDBs.

Continue on Part 5 - Summary and Proposals for Singapore Government

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Continue on Part 5
http://propertybuyer.com.sg/articles/regulation/will-raising-of-hdb-income-ceilings-to-affect-home-prices-part-5/

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WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES? part 3

WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES?



Part three - 3

HDB MEDIAN RESALE PRICES



HDB New flat prices are not lodged through Caveats. Data is too granular. And our enquiry with HDB ended with directing us to a HDB Annual report, which gives us some rather granular data. These data are too coarse to be used for any meaningful study or property research.

[caption id="attachment_320" align="alignnone" width="610" caption="Hdb flat supply statistics"]HDB key supply statistics 2009 - 2010[/caption]

(HDB Key statistics 2010)

And since we cannot get data on that, we can only infer.

“Before the change, a couple's combined income had to be below $8,000 a month for them to qualify to buy a BTO flat from the HDB, which is typically 20 to 30 per cent cheaper than a resale flat.”

(PMO,
http://www.pmo.gov.sg/content/pmosite/mediacentre/inthenews/primeminister/2011/August/HDB_raises_income_ceiling_to_10000.html
)

According to Prime Minister’s office, new HDB BTO flats are typically 20 to 30% cheaper than a resale flat.

And HDB median resale flat prices can be found here
(HDB, http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatMedianResalePrices?OpenDocument#Latest)

RESALE FLAT INCOME CEILING



There is no income ceiling for buying a resale flat

(http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatPublicScheme?OpenDocument) unless you are applying for a housing grant or a HDB loan.

Without an income ceiling in eligibility in buying Resale HDB, together with more demand from an increasing number of Permanent Residents (PR) each year, this causes the first time Singaporean buyers to be priced out of HDBs due to resale prices rise.

Population (Singstat) in '000s.

Year Total Population Singaporeans + PR
2004 ----------- 4,166.7 ----------- 3,413.3
2005 ----------- 4,265.8 ----------- 3,467.8
2006 ----------- 4,401.4 ----------- 3,525.9
2007 ----------- 4,588.6 ----------- 3,583.1
2008 ----------- 4,839.4 ----------- 3,642.7
2009 ----------- 4,987.6 ----------- 3,733.9
2010 ----------- 5,076.7 ----------- 3,771.7
(Census)

However this means that their only recourse is new HDB flats. But New HDB flats have been constricted in supply and HDB prices go crazy.

Singapore citizen grows (native) grow at a rate of 0.8 to 1% a year, excluding new citizens. It is obvious that by lumping Permanent Resident together with Citizen, the "Singapore residents" grows much faster.

Contact Property Buyer Mortgage Consultants for Customized Property Buying Research (fee based) or Contact us for mortgage advice (Free).

Continue on part 4.
http://propertybuyer.com.sg/articles/hdb-flats-and-loans/will-raising-of-hdb-income-ceilings-affect-home-prices-part-4/

WILL RAISING OF HDB INCOME CEILINGS TO AFFECT HOME PRICES?

WILL RAISING OF HDB INCOME CEILINGS TO AFFECT HOME PRICES?

Part 2
http://propertybuyer.com.sg/articles/singapore-property-investor-buyer/will-raising-of-hdb-income-ceilings-affect-home-prices/

Executive Condominium Supply launched and in the pipeline

Executive Condominium is a class of condominiums that are restricted by HDB’s rules on minimum occupation for 5 years and will only fully become a private estate after 10 years. These condominiums tend to be pricey on a relative scale compared to other condominiums which does not have any restrictions. Most newly wedded couples will most likely not be able to afford these type of housing looking at median incomes.

[caption id="attachment_373" align="alignnone" width="701" caption="HDB Executive Condominium launched - adding to supply"]HDB Executive Condominium launched in Sep 2011[/caption]






[caption id="attachment_375" align="alignnone" width="548" caption="Singapore HDB confirms sites for EC"]Confirmed sites for Executive Condo[/caption]

http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyingNewFlatFlatsonOfferEC?




http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyingNewFlatFlatsonOfferEC?OpenDocument

http://www.facebook.com/pages/PropertyBuyercomsg/101354546624904

Continue to Part 3 - Raising of Income Ceiling to affect HDB home prices

WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES?

WILL RAISING OF HDB INCOME CEILINGS AFFECT HOME PRICES?

Part 2
http://propertybuyer.com.sg/articles/singapore-property-investor-buyer/will-raising-of-hdb-income-ceilings-affect-home-prices/

Executive Condominium Supply launched and in the pipeline

Executive Condominium is a class of condominiums that are restricted by HDB’s rules on minimum occupation for 5 years and will only fully become a private estate after 10 years. These condominiums tend to be pricey on a relative scale compared to other condominiums which does not have any restrictions. Most newly wedded couples will most likely not be able to afford these type of housing looking at median incomes.


HDB Executive Condominium launched - adding to supply

Singapore HDB confirms sites for EC



http://propertybuyer.com.sg/articles/hdb-flats-and-loans/will-raising-of-hdb-income-ceilings-affect-home-prices-part-3/

Try out the carefully selected Home loan calculator

With HDB new raised income ceiling affect home prices?

With HDB new raised income ceiling affect home prices?
with permission from www.PropertyBuyer.com.sg

Part – One A

“The ceiling will go up from the current $8,000 to $10,000 for HDB’s build-to-order (BTO) flats, and from $10,000 to $12,000 for executive condominiums, Prime Minister Lee Hsien Loong announced in his National Day Rally speech last night.”

“Before the change, a couple’s combined income had to be below $8,000 a month for them to qualify to buy a BTO flat from the HDB, which is typically 20 to 30 per cent cheaper than a resale flat.” (PMO)

(PMO, pmo.gov.sg/content/pmosite/mediacentre/inthenews/primeminister/2011/August/HDB_raises_income_ceiling_to_10000.html)

The income ceiling for New HDB flats will be raised to: -
Income Ceiling Type of Flat

$10,000
Studio Apartment 3-room (mature towns/estates),
3-room (Premium) 4-room or 5-room flat
$5,000
3-room Standard (non-mature towns/estates)
$2,000
2-room
(HDB, http://services2.hdb.gov.sg/webapp/BP13EligCheck/BP13SHome?strSystem=CHECK)

HDB Property Supply In The PIPELINE

As we discussed in our last article, despite all the HDB launches in 2010 and the “NOISE”, if we look at the statistics these announced supply are hardly enough to meet even Singapore’s local domestic needs, not to mention providing for the massive influx of foreigners and new Permanent Residents (PR). Ministry of National development got their numbers quite wrong. In that, they have under-supplied HDB flats to the tune of even up to 100,000 units (based on our estimates)

The fact that there is not a long queue at BTO registration (As claimed by some minister as indication of people not needing a home) itself does not mean that there is no latent demand, from the between 22,000 to 25,000 marriages each year. (http://propertybuyer.com.sg/articles/singapore-property-investor-buyer/why-singapore-property-prices-go-crazy/) This probably reflects the various complicated paper work and bureaucratic costs imposed as well as the people not being able to afford the supply.

HDB Property Supply In The PIPELINE

As we discussed in our last article, despite all the HDB launches in 2010 and the “NOISE”, if we look at the statistics these announced supply are hardly enough to meet even Singapore’s local domestic needs, not to mention providing for the massive influx of foreigners and new Permanent Residents (PR). Ministry of National development got their numbers quite wrong. In that, they have under-supplied HDB flats to the tune of even up to 100,000 units (based on our estimates)

The fact that there is not a long queue at BTO registration (As claimed by some minister as indication of people not needing a home) itself does not mean that there is no latent demand as there are between 22,000 to 25,000 marriages each year. (http://propertybuyer.com.sg/articles/singapore-property-investor-buyer/why-singapore-property-prices-go-crazy/) This probably reflects the various complicated paper work and bureaucratic costs imposed as well as the people not being able to afford the supply of such HDB BTO flats.

Supply From Balance HDB Flats

Supply of HDB flats are from current balanced stocks are also in short supply.

There are not much supply from Balance flats as well. “The flats offered in the Sale of Balance Flats exercise are mostly under construction or near completion. Because of strong interest for such flats, the chances of getting a flat in the Sale of Balance Flats exercise are slim. Property Buyers who are not invited to select a flat can consider applying for a new flat under the BTO system, which is where HDB’s main supply for flats comes from.”

(http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyingNewFlatSBF?OpenDocument)

There are hardly any supply of balance units, so the only way to go will be to buy from the HDB Build-to-order (BTO) market.

(http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyingNewFlatModeBTO?OpenDocument)

That means that the current shortage of HDB supply will stay at least until some of the proposed Build-to-order flats are completed. And more of such BTO sites will need to be launched, sold and completed. And the time frame for that will be 2 to 4 years considering that it takes on average 2 years to complete a HDB building project.

HDB Property Supply From BTO Launches

Let’s take a look at the supply of HDB flats from Build-to-order to be launched. There are only 5,500 units of HDB flats (Remember, we estimate that there is a demand of 22,000 to 25,000 of housing needs due to household formation, i.e. marriages)

Sunday, September 18, 2011

Sentosa Cove - Bungalows

Sentosa Cove has many bungalows. The bungalows are fancy, each with a unique character. The Sentosa home owners are proud home owners. At easily 10,000 to 15,000 feet in land, these bungalows cost easily 20 million singapore dollars at the minimum. Take a look at the surrounding environment of how rich people live.