Private home owners snapping up HDB flats

A 50-year-old businesswoman who already owned a semi-detached house, had bought a four-room HDB resale flat for $400,000, about $80,000 above the valuation two years ago.

It was intended for her two grown-up children to “gain some independence”, she said.

However, in November, she sold it at a profit of $100,000, which she used to finance another acquisition – an executive maisonette.

She claimed that she is not speculating in HDB properties.

However, there are rising concerns that private homeowners like her are taking HDB homes – either to lease them or flip them for gains – increasing prices in the process.

Prices of resale flats increased 3.9 percent in the last three months of 2009 and took the full-year jump to 8.2 percent, hitting a new record.

According to a HDB spokesperson, it is unlikely that rising prices of resale flats can be fuelled by any single factor, like purchases made by permanent residents or private homeowners.

The spokesperson said that prices are “influenced by a myriad of factors such as pace of economic growth and market sentiments”.

There is a growing interest among private homeowners in buying HDB flats, said some property agents.

However, they note that the small size of this group will not cause great impact on flat prices.

National Development Minister Mah Bow Tan said that HDB will conduct a review to determine if there are any rules that are “encouraging or allowing” people to speculate in HDB flats.

Private homeowners who are eyeing for HDB flats include those aged 40 to 50, and who have up to $200,000 worth of savings.

Richard Sim, an ERA agent, said he received over 10 queries from private homeowners in 2009.

“Most want to buy the flats for investment, as they can make money in terms of rental or profit if they sell them. Some do buy them to retire in as well.”

HDB has cautioned that those who lease their entire flats before fulfilling the minimum occupancy period and without approval can be penalized.

A total of 56 owners were asked to pay a fine of $1,000 to $21,000 from January 2008 to December 2009, with some even losing their flats.

Mr. Syed Abdullah Alhamid, Senior Division Director of ERA, said that whatever their buying motives are, private homeowners can push up prices as they are cash-rich.

“Some have two private homes and let go of one. With the money, they can pay a high price for the location of the flat they want. They will take you on,” he said.