Sky-rocketing resale flat prices reflect genuine pent-up demand

Ms. Chua Mui Hoong, a former ISD officer and now senior writer at the Straits Times, has written an article in the newspaper highlighting some reasons behind the sky-rocketing prices of HDB flats.

“The way I see it, rising resale flat prices reflect genuine pent-up demand spurred by high levels of immigration. They do not seem to be driven by speculative frenzy. Those priced out of the market may find it emotionally satisfying to finger PRs or speculators as scapegoats than to acknowledge that the market is moving faster than one’s income and savings can keep up with," she wrote.

She cannot be more correct in saying: PRs should not bear all the blame as they too need a roof over their heads, although they are partly responsible for the hike-up in prices.

Some Singaporeans believe that the fault lies on the government for permitting a large number of foreigners to come into the country within a short span of time, without building a sufficient number of new flats to accommodate them, thereby contributing to the situation that they are facing today.

Some young couples are being priced out of the HDB market and either have to stay with their parents or rent their own places, hardly an ideal condition for them to start their own family.

As new flats take a few years to be constructed, HDB needs to plan ahead of time and construct adequate number of flats to meet future demands and avoid being “caught offguard” by launching flats only now, which does not help the shortage in the housing market at all.

There were almost 100,000 immigrants including PRs and new citizens in 2008 alone, but only 3,183 new flats were built over the same year, according to figures released by the Ministry of Home Affairs.

The prices of HDB flats have increased two-fold in the past five years or so, reflecting a property bubble and not “asset appreciation”. The HDB flats are valued much more than their actual worth because of a lack of supply in the market.

Under the laws of economics, prices will not go up indefinitely. At one point or another, prices will have to come down because it is not possible for wages to catch up with it and when it comes crashing down. Singaporeans who have paid a hefty amount for the flats will now be plunged into financial distress, as banks continuously urge them to replenish their mortgage loans.

Some Singaporeans are being encouraged to ask for answers on issues such as the exact breakdown costs of each HDB unit and the limited number of flats being built despite the anticipated growth of the population in the next few years.