SINGAPORE: The Housing and Development Board (HDB) has been
ramping up the number of flats it has launched in the last few
years but National Development Minister Khaw Boon Wan said this
number could slow down after 2015 to prevent a glut in the
market.
Mr Khaw was speaking to the media on Monday after witnessing the
handover of a completed Build-To-Order block in Woodlands from the
contractor to HDB.
25,000 BTO flats were launched in 2011 and another 27,000 were
launched last year.
While this has helped satisfy the backlog of demand from first
and second time home buyers, Mr Khaw stressed this cannot
continue.
This year alone, HDB plans to launch at least 25,000 new flats
but Mr Khaw said this continued ramped up supply is not sustainable
in the long run.
Mr Khaw said he is not worried about a "small glut" forming in
the public sector as he wants to help more groups, like singles. He
said he hopes to build up an inventory such that flats are ready if
there is demand.
While he doesn't foresee a glut happening in the next two years,
Mr Khaw cautioned the market need to go back to a steady state.
He said: "Don't expect this 25,000 units per year or the
construction ramped up programme to continue forever. It can't be.
It is not sustainable, bearing in mind that new family formation is
only at 15,000 a year. As we clear the back log, we should be able
to move back to the steady state.
"The steady state does not necessarily mean 15,000 units
construction per year. Some may prefer to buy resale flats so that
they can move in immediately. More importantly, they can select
which flats to buy and which areas to buy because their parents
might not be in the non-mature estates or their parents might not
want to move into non-mature estates so we should always keep those
options open."
Mr Khaw also said he is confident that HDB will be able to
deliver on the flats it has promised.
This is despite the tightening of foreign manpower into
Singapore. Mr Khaw pointed out the use of pre-fabricated components
in HDB projects has helped to address this constraint.
Mr Khaw said HDB is on track to deliver the 13,600 units planned
for completion this year and he added the effect of the ramped up
supply is beginning to be felt this year while the full effect will
be felt over the next two years.
About 6,000 HDB residential units have already been completed as
of end May.
Mr Khaw said: "The steady state is a sustainable property
market. I think property prices will probably always float upwards
unless the economy crashes. We hope not to have prolonged
recession. So long as economy is growing steadily, wages will go up
steadily, and therefore property prices will also go up
steadily.
“But there will be times when the asset appreciates much faster
than wage increases, like in the last five years, so that is not
sustainable. That was a period for happy sellers and very unhappy
buyers but we are slowly tilting and hopefully we will reach a
happier state, a fairer state between buyer and seller sometime
soon."
However, Mr Khaw said what he is concerned about is a glut
occurring in the private market.
He noted that a large proportion of private property is taken up
by investors who are hoping to rent out their units.
He cautioned that if there is a glut in the market, rental
yields could drop very quickly.
This will also cause serious financial trouble for those who
have taken up a private loan, especially when global liquidity
begins to ease.
Mr Khaw added this is why the Urban Redevelopment Authority's
land sales have only been on a six-monthly basis.
"We have to be very nimble, and fairly skilful and also a little
bit lucky. So far we have been lucky, but don't count on that for
too long," stressed Mr Khaw.
On the ongoing 'Our Singapore Conversation' on housing, Mr Khaw
said there have been plenty of suggestions but he addressed some
participants' calls to scrap the Cash-Over-Valuation (COV)
component for HDB resale flats.
He pointed out the transaction is an agreement between buyer and
seller and said if home buyers are keen to pay above valuation,
there is little he can to do to prevent it.
"Sometimes, you may love the place so much that (you are)
prepared to pay higher – that is how COV crops up. How do I prevent
it from happening? If you insist on doing so, (either by)
under the counter or giving an 'angpow' (red packet) three days
later in a wet market somewhere, how am I going to catch you? So it
doesn't work to say let’s ban COV."
Mr Khaw added one thing participants agreed on and are proud of
is Singapore's home ownership numbers.
He said in particular, he has been paying attention to the
discussion on seniors, as more begin to retire and start to look at
how they can get extra pocket money from their homes whether
from renting out a room or right sizing their home to a studio
apartment.
Mr Khaw stressed that preserving the value of property has
practical implications for retirees but capital appreciation has to
be reasonable, and not like the last few years.
Mr Khaw added he is working on making BTO flats more
affordable.
He hopes to bring down the cost from five years of a couple's
annual income to four years but he said home buyers will need to
have the right expectations.
"If you engineer the softening of prices, and everybody shifted
their expectation where previously they'd buy a three-room and now
they'd buy a five-room, then you're chasing tails and the problem
will never be solved," said Mr Khaw.
