When will the HDB bubble burst?

In a recent speech addressed to residents in Tanjong Pagar, Minister Mentor Lee Kuan Yew implied that the housing market in Singapore is dependent on foreigners.

“To continue to grow and prosper while slowing the intake of foreign workers, the same number of Singaporean workers must produce more. Otherwise, there will be a deflating economy, and knock-on effects on jobs and asset values. Instead of many job opportunities and rising asset values, including prices for resale HDB flats, the reverse will happen… fewer jobs, lower salaries, lower asset prices… pay will fall and so will the number of jobs and promotion,” he said.

HDB flat prices have increased in recent years, due in part to rising demand spurred by immigration and a limited supply of new flats.

In 2008, approximately 3,100 flats were built when there were 20,000 new citizens and over 70,000 PRs in the same year alone.

In Q4 2009, when the country was mired in recession, the Cash-Over-Valuation (COVs) doubled and prices of resale flats rose by 8.2 percent.

Build-to-Order (BTO) flats, which were launched recently, were oversubscribed by over 10 times, reflecting the impact of the housing shortage crisis.

Based on figures obtained from HDB infoweb, average resale flat prices have doubled in the past four years.

While prices have reached high levels, with some flats selling for close to a million dollars, the wages of ordinary Singaporeans have fallen behind the increase in housing prices.

With fewer investment opportunities, lower economic growth and declining wages looming ahead, some Singaporeans wonder when the bubble in the public housing market will burst.