New Flats' Prices Increase By 30%

[Brainstorm 0]

Well, merchants' basic motivation is to earn profits and answer to their shareholders/investors; it is understandable.

But what irks me is while the HDB/govt is telling us that they are not out to make a profit and doing things for 'our own good', at the same time, they increase prices for the existing stock of flats.

Alas, I am nothing more than an armchair critic; not up to it for any political position lahh...

Don't get me wrong, I also don't agreed for the price adjustment upward. But looking at the super big and new HDB Office building, the reno and prime location in Toa Payoh.... their cost / upkeeping / maintainance fee will already be a killer.... any price increase in the building material will definitely pass on to people like us, which is going to happen very soon....

[yoongf 11]

About 10 yrs ago, the govt revised the policy regarding the pricing of public housing. This revision has been fully implemented for a few yrs already, so it's time that everyone change their mindset too.

In the past, the subsidies were built into the pricing upfront. And ppl took advantage of it to upgrade every 5 yrs. HDB had a hard time determine who really needed subsidies and forecast the demand for flats.

Now, the pricing is based on market forces, and any "affordable housing" subsidies and grants are through a seperate means testing exercise, such as concessionary loans, income cap, no. of bites of the cherry. Pricing of assets based on current market valuation is simple standard accounting practice.

In a free market economy, new products always command a premium to old product. In the past, due to subsidies built in upfront, new HDB flats appeared to be cheaper than resale, but this has since been corrected.

This current method of market valuation means.. property prices have no limit, and existing home owners will benefit from asset enhancement. At the same time, genuine first time home seekers will still be able to get flats at affordable levels. The ones who are likely to complain will be those who were denied the chance to constantly upgrade.

[zirhk3355 1]

I am confused... !!

In a free market economy, new products always command a premium to old product. In the past, due to subsidies built in upfront, new HDB flats appeared to be cheaper than resale, but this has since been corrected.

If the above is true, then the following para seemed to be contradicting it...?

This current method of market valuation means.. property prices have no limit, and existing home owners will benefit from asset enhancement. At the same time, genuine first time home seekers will still be able to get flats at affordable levels. The ones who are likely to complain will be those who were denied the chance to constantly upgrade.

If new products always command a premium to old product, how could existing home owners benefit? And if genuine first time home seekers are to be able to get flats at affordable levels, do you mean to say they should start with resale flats, ie old products, first?

Much agree with your explanations, if given that HDB is a free market; however my stand is that should not have been the case in the first place, because it defeats the primary purpose of public housing in catering to the needy and first time home seekers.

In short, public housing cannot be a free market; it should be the basic social safety net for the people and those who really needs it are the needy and first time home seekers. And indeed, it seemed to be only in Uniquely Singapore that more than 80% of us stay in HDB flats, so-called "public housing".

[waileong 0]

Public housing is not a "free" market-- at least, not when bought directly from HDB, since there are conditions for buyers to satisfy (family nucleus, etc).

However, that does not mean that the govt must sell at a way below market price. The laws of economics still apply, prices are still set by demand and supply, if they price too low, demand will be too much and in fact can adversely affect the resale market. If they price too high, then people would rather buy resale.

The only question is how low the price must be below comparable resale flats, taking into account the restrictions of direct purchase from HDB. This price difference is what our govt conveniently calls a "subsidy" when in fact anyone trained in marketing would consider this a price adjustment to compensate the buyer for the restrictions.

Imagine if someone said I will sell you this house at $50k discount only if you are Singaporean, married, and you cannot sell this house to anyone else for 5 years after purchase and you must obey all the 101 rules that in the thick stack of T's & C's. Obviously, the $50k is to compensate you for all these inconveniences-- only politicians would call this $50k a "subsidy". Especially if the selling price is always $50k below the current market price, in other words, if the market move up, you will have to pay more even though the flat was already built 5 years ago.

Edited February 25, 2008 by waileong

[raincole 0]

It does make sense to pay more in the current market. HDB flats are still cheaper than resale and the best part is there is no COV to pay upfront. Buying new HDB flat is no longer profitable but to have a roof to live.

[joyousonline 0]

hdb flats are supposed to be for the public made affordable to those with combined 8k income and below...

if the prices are too high, then it is not much difference with pte property or condos...in the first place, the block is built at one go with a fixed price..how much markup are there in the first place for determining a flat's price? when u say subsidies are built into new houses, how do we know what has been factored in? for resales, 1st timer, i can see the 40k grant when we buy near parents..wat about new houses?

for resale market, i can understand that it depends on the market, demand n supply..and of course valuation too..but for public housing, how do u gauge? no info is being released..hdb just set the price according to what basis?

some of my frens rather buy condo than hdb flats since the price is so similar...some of my frens postpone their weddings as they cannot find affordable housing..everything is so expensive in SG...how to tahan?

[applefreak 1]

the only bone i have to pick is the subsidy part

HDB kept saying it's subsidised but in actual fact it's only discounted price loh

in several forum letters they admitted to the non-subsidised part but in their press releases they still use the term

[yoongf 11]

I am confused...

If the above is true, then the following para seemed to be contradicting it...?

If new products always command a premium to old product, how could existing home owners benefit? And if genuine first time home seekers are to be able to get flats at affordable levels, do you mean to say they should start with resale flats, ie old products, first?

All the "affordability assistance" for those who really need the assistance is from the various schemes in place. It is not pegged to the valuation of the HDB flats.

New flats are priced according to market valuation of existing flats. There is a time lag between when the new flats are available compared to resale which is immediately available. This is a $$ value to this time lag.

If new flats are always priced low, then resale flats will never get a chance to appreciate.

Put it this way.. in the ideal situation, shd there be more ppl living in public housing or private housing? I would like to think that more shd be in private housing. And the only way to shift the statistics is to gradually reduce the gap between public and private prices.

[vicenzo70 0]

Atcually i empathize the younger couples who just bought HDB at such an exorbitant price. That means a couple have to continue to work & upgrade (skill & pay) for the next 20 years or so just to pay off the flat.

Rumor has it, its the Govt's long term plan to ensure no one get's to migrate & have to slog the best part of their productive lives here to feed the flat.

Cheers

[zirhk3355 1]

Put it this way.. in the ideal situation, shd there be more ppl living in public housing or private housing? I would like to think that more shd be in private housing. And the only way to shift the statistics is to gradually reduce the gap between public and private prices.

I think so too!

But beg to differ on the how we should 'shift the statistics' - we should only mean to bring down the prices for private developments, but not increase the prices of public housing. In fact, the gap should be WIDEN, not reduced.

If we increase prices of public housing and force people into buying private, it may work for awhile but we are leaving behind the needy people and forcing them into difficulties; there would be nowhere else for them to go! First time home seekers would also find it impossible start a family without incurring huge debts.

However, if we were to reduce HDB flats to truly affordable public housing, steer away from fanciful half-million-dollar flats, build small units with only basic fittings and impose restrictions on resale prices, then those who are more affluent would naturally turn to private developments. To further help the situation, as I said above, more land banks should be released to bring down the prices of private development.

Anything happen, eg retrenched, family member develop terminal (expensive) dieases, etc, they can come back to basic public housing. In short, our people have a CHOICE.

[TYM 0]

This current method of market valuation means.. property prices have no limit (then public housing how to be affordable to the poor), and existing home owners will benefit from asset enhancement (sell high, buy higher, unless downgrade or change location. Only profit on paper). At the same time, genuine first time home seekers will still be able to get flats at affordable levels (look around and how many first time home owners are struggling to pay for their flats, and over 30 years!). The ones who are likely to complain will be those who were denied the chance to constantly upgrade. (seems like the bulk of the complains are from 1st time home owners, young couples who are getting married.)

I think so too!

But beg to differ on the how we should 'shift the statistics' - we should only mean to bring down the prices for private developments, but not increase the prices of public housing. In fact, the gap should be WIDEN, not reduced.

If we increase prices of public housing and force people into buying private, it may work for awhile but we are leaving behind the needy people and forcing them into difficulties; there would be nowhere else for them to go! First time home seekers would also find it impossible start a family without incurring huge debts.

However, if we were to reduce HDB flats to truly affordable public housing, steer away from fanciful half-million-dollar flats, build small units with only basic fittings and impose restrictions on resale prices, then those who are more affluent would naturally turn to private developments. To further help the situation, as I said above, more land banks should be released to bring down the prices of private development.

Anything happen, eg retrenched, family member develop terminal (expensive) dieases, etc, they can come back to basic public housing. In short, our people have a CHOICE.

If only our policy makers are not high flyers scholars living in their ivory towers, perhaps they will spare a thought for the people.

[zirhk3355 1]

A conspiracy theory of mine :

The reason why HDB refused to maintain its objective of public housing and start to build fanciful flats *COULD BE* because our govt wants CONTROL. Just look at the current situation, 80% in HDB flats; one simple wave of the magic wand (policy change) and everyone kana. All the power in their hands! No need to ponder over various policies and come up with complicated 'thrusts' or whatsoever.

*PERHAPS ALSO*, they do not want to let go of this lucrative market of housing to private developers (look at Ng Teng Fong and you will know how big this market is...); they still want to have a share of the real estate pie even though the people becomes more affluent and start to grow out of basic public housing. So they try to play the catch-up game to cater to our needs; which is why today we have our boon keng $700k+ flats with 'condo-like' facilities.

Edited February 25, 2008 by zirhk3355

[yoongf 11]

PRICES are driven by market forces. A seller can set high prices, but if there are no takers, then.. no deal. No one force buyers to accept the high price. It is optimistic/speculative buyers who drive the prices up.

Affordability schemes takes care of those who need assistance.

Prices and affordability are now seen as 2 seperate issues. Nokia phones may be priced retail at $700, but if SingTel gives out $600 vouchers, the phones are affordable.

[zirhk3355 1]

Well as a businessman answering to our shareholders/investors, we could say that, because our responsibility is to earn money.

But as a civil servant, we no longer have such responsibilities. Prices are set not to earn money, but to cover costs and control the market. If prices should be increased, then it should only be when there are too much demand, for eg.

But what are we seeing today? Hyped-up fanciful HDB flats being promoted akin some kind of luxury condos, complete with full page ads, private developers, marketing agencies, et al. The media pumped up its publicity, telling everyone how popular the place is, how high demand is, etc. Ministers come in to tell us how wonderful it is to stay in a place like that.

In essence, such behaviour is akin a profitable establishment trying to make use of the market forces to push up the prices. I do not deny caveat emptor, the govt did not force the people to buy the flats at gunpoint, but is that the right behaviour of a so-called "non-profitable" civil service?

Think about this: The magic stone conman also did not force our old folks to buy from him; why did we arrest him and make him a criminal??

[TYM 0]

Well as a businessman answering to our shareholders/investors, we could say that, because our responsibility is to earn money.

But as a civil servant, we no longer have such responsibilities. Prices are set not to earn money, but to cover costs and control the market. If prices should be increased, then it should only be when there are too much demand, for eg.

But what are we seeing today? Hyped-up fanciful HDB flats being promoted akin some kind of luxury condos, complete with full page ads, private developers, marketing agencies, et al. The media pumped up its publicity, telling everyone how popular the place is, how high demand is, etc. Ministers come in to tell us how wonderful it is to stay in a place like that.

In essence, such behaviour is akin a profitable establishment trying to make use of the market forces to push up the prices. I do not deny caveat emptor, the govt did not force the people to buy the flats at gunpoint, but is that the right behaviour of a so-called "non-profitable" civil service?

Think about this: The magic stone conman also did not force our old folks to buy from him; why did we arrest him and make him a criminal??

Add in this CPF cap thing, and BANG! Its a double whammy.

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