Posted by luxuryasiahome on September 30, 2008
I REFER to last Saturday’s article, ‘$645K: HDB’s priciest flats go on sale’.
I was shocked that HDB has priced its new stock of flats in Tanjong Pagar at $545,000 to $645,000. I am not surprised the higher-end flats have relatively few takers due to steep pricing. As it is, HDB has priced its new flats according to surrounding resale market prices and built in a discount before launching them to the public.
I wonder if this is a fair comparison as the property market rides through the up-and-down cycle and if a new buyer buys now, he runs a high risk of buying at the high end of the market trend and may lose on his investment when the market goes down. This often happens to HDB resale or private property buyers who buy high in an uptrend market but lose heavily when the market goes south. It will be tragic if a buyer of a new HDB flat also goes through this financial heartache with his first ever housing unit.
There is generally not much premium earned on buying brand-new HDB flats now. One wonders if it is more prudent to buy a resale unit with the $30,000 rebate given as a sweetener, rather than buy a brand-new unit at such a high price.
Gone are the days when new HDB flats were much cheaper than in the current market. I bought my first new executive flat about 15 years ago at $143,000. I paid less than $500 a month for a mortgage loan. I later sold it a few times over when the property market was booming five years after I bought it. That was my first new HDB flat experience as I could buy only private or resale flats after that.
As the property market matures, I wonder if HDB has lost its mission to allow Singaporeans to own affordable housing with cheap loans. With new flats priced so high, home owners not only have to pay exorbitant loans but also worry that their flat valuation may drop if the market turns sour. Buying a new flat becomes more of a risky investment than providing a roof over one’s family.
HDB also needs to price its new flats better by considering factors other than surrounding resale valuation. To prevent home buyers immediately selling their flats after the five year lock-in period to make a profit, HDB can tie home owners to a longer lock-in period of eight to 10 years, enabling it to price flats cheaper. Many Singaporeans stay in their flats after more than 10 years, some for sentimental reasons, while others do not want to lock themselves into another big mortgage loan when they buy another property.
Gilbert Goh
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