The HDB Resale Price Index (RPI) is at a record high and this is expected to be a hot topic in the coming general elections.
Public housing prices in Singapore have hit another record high with many Singaporeans now wondering if they can afford a roof over their heads.
Data from the Housing Development Board (HDB) shows that the Resale Price Index (RPI) increased by 4.1 percent to reach 161.3 points in the second quarter.
This means HDB resale prices are now at their highest point since the HDB began tracking data on the RPI since the first quarter of 1994.
Singapore based property firm, PropNex, said the rise in prices was driven mainly by the median Cash-Over-Valuation (COV) levels which rose by a whopping 20 percent to reach $30,000 in the second quarter.
This was a $5,000 jump from the median COV of $25,000 in the first quarter.
PropNex said the higher COV prices were due to the European debt crisis, prompting buyers to stay away from private homes in the first quarter and instead hunt for HDB flats.
“This economic uncertainty and the rising prices of private property have led to the steadily declining number of private residential units sold in the last two months of the second quarter coupled with a resulting demand for public housing,” says PropNex CEO Mohamed Ismail.
In addition, sellers who benefited from high COV when they sold their flat, have helped to push COVs even higher.
COV is the premium that sellers ask for, on top of the property’s valuation.
Cause of rising prices
The increase in HDB flat prices is due to their limited supply versus increased demand from both Singaporeans and foreigners.
According to statistics from the HDB, in 2008, it built only 3,183 new flats when the government welcomed over 90,000 permanent residents (PRs) and 20,000 new citizens in the same year.
Since last year, however, the HDB has been trying to keep up with market demand by launching Build-To-Order (BTO) flats on a monthly basis.
Typically, buyers have an option to buy from the primary market under the BTO scheme which is priced about 20 percent lower than resale flats.
However, they will have to wait three to four years before the flats are completed, causing many to look into the resale market instead.
Different races affected differently
With the RPI now hitting a record high, property agents say they are seeing genuine cases of hardship among young couples, especially low income Malays.
“I spoke to an HDB officer who advised me to tell my client to rent from the open market. My client is a couple earning $2,500. The rent itself costs $1,200. My client is waiting for their BTO flat which will be ready by 2014 to 2015. By then they probably would have kids already,” says Qurratu Ain, a property agent who specialises in the Malay market.
Typically, one can rent direct from the HDB as long as the family’s combined income does not exceed $1,500.
However, one will have to rent from the open market, which is more expensive, should the combined income exceed $2,000.
Luqman Hakim Abdul Khir and his wife, for instance, are renting due to the high COVs and after being priced out of the balloting system twice under the Sales of Balance Flat (SBF) scheme.
The couple who has a son and another baby on the way, now lives in a one-room rental flat in Bishan which costs them $111 a month.
They were eligible to rent direct from the HDB.
According to Abdul Khir, the HDB told them they can rent for up to two years, after which their rent will increase.
Just recently, they were informed by the HDB that they were eligible to buy a three-room BTO flat in Punggol but will have to cough up $1,000 cash upfront for the option fee.
“I think I may have to get a loan to exercise the option as I cannot afford to pay that amount upfront,” says Abdul Khir.
Another couple is Sarah Abdolah, a phlebotomist, and her husband.
“We decided to rent because our CPF was not enough to buy a BTO flat,” says Abdolah.
Abdolah was eligible to apply directly to the HDB for a rental flat.
In 2002, the couple moved to a three-room rental flat for $250 a month.
Her husband subsequently owed HDB 12 months of rent and they had two choices, either vacate or downgrade.
She chose the latter by moving to a two-room flat in 2004.
By 2010, she had already cleared all her outstanding bills and went as far as checking with the HDB branch in Yishun thrice to confirm that there was no more outstanding amount.
Abdolah said the HDB officer cleared her case and this paved the way for her to buy a flat under the Home Loan Eligibility (HLE) scheme.
However, she was rejected by the HDB when she tried to apply for the HLE and was told that there is still an outstanding amount of $4,000.
The matter is still ongoing as both the HDB and her family is disputing each other’s version.
“The HDB officers talked down to us and even made a note that my husband is aggressive. But he is reacting that way because the HDB refuses to understand our predicament. We even offered to pay for the outstanding amount, although we are sure we have cleared everything. The HDB officers refused with our offer of $50 a month and said the minimum payment was $200 to $300. If I had paid from the start of the case till now with $50, I would have paid in full already,” says Abdolah.
Abdolah says although she can afford to pay in full now, she wants HDB to re-look into the case.
“I just want to buy my own home. Until this case is resolved, I cannot buy a flat,” says Abdolah.
Meanwhile, Chinese couples who tend to be more financially savvy have a different set of problems - they cannot apply for an HDB loan as their combined income is more than $8,000.
They also cannot afford the high COV, causing them to rent from the open market.
Property experts say the government needs to do more to help young couples as the current housing prices could lead to an already declining birth rate.
“The government encourages marriages and procreation but without the socio-economic support. Society will somehow not function very well. Our government must either provide more short-term rental which is affordable, especially for the lower income bracket. Otherwise, youngsters will have to defer their marriage plan until their CPF or cash is enough to buy a flat. By then, they will have to delay having kids,” says Roza Sure Bagus, founder of Sure Bagus (Asia) Pte Ltd.
The issue on public housing affordability has very much become a political issue that could dominate the next general elections.
Some netizens are saying National Development Minister Mah Bow Tan has not been doing enough to keep HDB flats affordable.
Meanwhile, opposition parties are reportedly banking on the rising unhappiness on the ground to contest for Tampiness GRC where Minister Mah is the MP.
This led Singapore’s founding father Minister Mentor Lee Kuan Yew to publicly rebuke Singaporeans as “daft” and warned them that they could see their property values depreciate should they vote for the opposition.