Soaring rents pushing PRs to buy flats

Source : Straits Times - 5 Jul 2008

They account for 20% of resale-flat purchases, say agents

PERMANENT residents (PRs) are flocking to buy Housing Board resale flats as high rents start to make ownership a more attractive option.

Sales to PRs have rocketed in the past two years, say property agents, and the keen army of buyers is helping to keep prices buoyant in an otherwise-flat market.

Property agencies PropNex and ERA Realty told The Straits Times that in recent months, about 20 per cent of total HDB home sales were driven by PRs.

This is a four-fold increase from two years ago, when PRs bought just 5 per cent of the homes sold, said ERA’s assistant vice-president Eugene Lim.

Last year, PRs accounted for about 10 per cent of sales, said PropNex chief executive Mohamed Ismail.The sales figures are even more striking for smaller flats like three- or four-roomers, with PR buyers snapping up 45 to 50 per cent of the stock, added Mr Lim.

HSR Property Group reports similar figures. PRs bought about 18 per cent of HDB homes recently, said executive director Eric Cheng.

The three agencies command about 80 per cent of the HDB resale market.

Last year, 29,436 resale flats changed hands. If the volume holds for this year, it will mean about 6,000 flats could be snapped up by PRs.

With HDB rents rising so fast, buying now ‘makes more economic sense’ than renting, say analysts.

Rents for a four-room flat in an established estate ranged from $1,000 to $1,200 two years ago. Today, they are $1,800 to $2,000, said Mr Ismail.

The penny has dropped for Mr N.E. Shanmugam, who had been renting here for eight years.

He pays $1,200 for a three-room flat in Tampines and was initially looking for a bigger unit to move when his lease expired next month. But with rents shooting up, he faced a monthly outlay of $1,800 for a five-roomer.

‘It didn’t make sense. I’m better off buying my own home,’ said the 56-year-old project manager, who is married with a one-year-old son.

Mr Shanmugam has just bought a five-room flat in Sengkang valued at $380,000. His mortgage will be $1,500 - well under what his rent would have been.

Singapore’s burgeoning PR population - and their purchasing power - has been singled out as one of the factors driving HDB resale prices.

While private home prices inched only 0.4 per cent this quarter, HDB flat prices climbed 4.4 per cent, following a 3.7 per cent rise in the previous quarter.

Singapore’s PR population rose from 287,500 in 2000 to 386,800 in 2005, according to the Department of Statistics.

Property agencies say about 70 per cent of the PR buyers are from China and India with the rest from countries such as Malaysia and the Philippines.