HDB approach reflects true subsidy

HDB approach reflects true subsidy


WE refer to Mr See Leong Kit’s comments on the pricing of HDB flats in his letter ‘HDB contributing to price spiral’, (BT, June 20).


HDB adopts a market-based pricing approach so as to reflect the true subsidy that buyers are enjoying. Under this approach, HDB determines the market value of the flat, based on its location, the finishes and other attributes. Then, it sells the flat at a discount to the market value.


HDB buyers understand this, and appreciate that new HDB flats are priced lower than resale flats. Similarly, when they want to sell their flats in the open market, they are allowed to do so at the prevailing market value, not at their cost of purchase of the flat.


We also wish to highlight that under this approach, the current sharp escalation in construction costs does not directly affect the selling price of HDB flats.


Currently, a new 4-room flat can cost close to $300,000 to develop, taking into account land, building and other costs. This is significantly higher than the subsidised price of a 4-room flat sold by HDB at about $200,000-$260,000.


Kee Lay Cheng (Ms),

Deputy Director,

Marketing & Projects for Director,

Estate Administration & Property,

Housing & Development Board


Source: Business Times

What determines market value of property

What determines market value of property


I REFER to Mr Patrick Tan’s letter, ‘Valuation the culprit in artificially inflating HDB flat prices’ (June 17).


The market value of a property is the estimated amount for which it should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing where both parties acted knowledgably, prudently and without compulsion. It is not a situation of a willing buyer and an unwilling seller where the terms of purchase are favourable to the buyer. Nor is it a situation of an unwilling buyer and a willing seller where the terms of sale are favourable to the seller.


The transacted prices of comparable properties are generally the best evidence of the market value for standard properties like HDB flats. In the case of HDB flats, cash top-up is part of the price of the property sold and the transaction price is therefore a legitimate piece of evidence to rely on when valuing a property. The valuer’s job is to interpret the market, not make the market. The market is the final arbiter of what is an appropriate valuation. It is neutral as to affordability issues. The market itself will eventually adjust downwards if buyers deem the cash top-up excessive and refrain from transacting.


Valuers have to examine the micro and macro factors of the particular segment of the real estate market, together with the economy sentiment. Such factors will include demand and supply of the various micro residential markets, and legislation and policies pertaining to the particular real estate segment.


Factors affecting the private and the HDB residential market may be slightly different, and thus the property market cycle of each real estate segment is never identical.


This also accounts for the difference in values of a property in different timeframes and different values for similar properties in different locations.


Janet Han (Ms)


Singapore Institute of Surveyors and Valuers


Source: Straits Times

Do away with HDB cash upfront payment

Do away with HDB cash upfront payment


I HOPE the HDB will review its policy on 5 per cent cash upfront payment for those taking bank loans.


In the current market, HDB flat sellers ask for cash above valuation, on average at least $20,000 to $30,000. A buyer who takes a bank loan has to fork out another lump sum to meet the HDB’s 5 per cent rule, which for a four- or five-room flat could mean $15,000 to $20,000. Throw in renovation cost of about $15,000 to $20,000 (and this is a low estimate) and we are talking about at least $60,000 in cash outlay.


The HDB says the 5 per cent policy was introduced ‘to encourage prudence’. But how does making people pay 5 per cent in cash ensure they will buy within their means? The measure of affordability should surely take into account CPF balance, regular job and so on.


My wife and I have enough in our combined CPF to pay for the flat in full if need be, yet we have to spend our savings to pay for part of it. If the principle is to ensure prudence, it is contradictory if I have to pay cash from my savings when there is a large sum in my CPF.


If the policy is meant to help curb profiteering, it penalises the majority who move for genuine reasons. People move home for various reasons.


In any case, I am perplexed why there is a difference between buyers taking bank loans and buyers taking HDB loans. Those who take bank loans are already at a disadvantage since HDB loans are below market rates. Why should one be further penalised for not qualifying for an HDB loan?


Yeo Yu Jin


Source: Straits Times

Property values updated to match market rates

Property values updated to match market rates


I REFER to last Wednesday’s letter, ‘Property tax raised twice in a year’ by Mr Tan Wenfa.


Property tax is based on the annual value of a property, which is the estimated market rental of the property if it were to be let out. Annual values of properties need to be updated whenever they have become out of line with prevailing market rentals. Generally, the Inland Revenue Authority of Singapore reviews the annual values of properties every year.


The annual value of Mr Tan’s property was previously updated in September last year. Last month, the annual value had to be revised to reflect the prevailing market rentals for similar properties. The need to update the annual value of Mr Tan’s property is due to the increase in rentals for similar properties in the same estate between last year and this year.


We thank Mr Tan for the opportunity to clarify.


Deanna Choo (Ms)

Director, Corporate Communications Branch

Inland Revenue Authority of Singapore


Source: Straits Times

HDB contibuting to price spiral

HDB contibuting to price spiral


I REFER to the article ‘HDB pricing policy limits impact of rising costs’ (BT, June 11).


As a 60-year-old Singaporean, I empathise with the growing despair of young couples when it comes to such a basic aspiration as home ownership. Private property is mostly beyond their reach. Even for HDB flats, they are caught between waiting as long as six years for new flats or paying exorbitant prices for resale flats.


In the 1970s, a graduate’s starting pay was around $1,000 per month. Then, in HDB Marine Parade Estate, prices of 3-room, 4-room and 5-room new flats were $17,000, $20,000 and $35,000 respectively. By 1990, the average price of 5-room new flats was $70,000. Such prices then reflected a ‘cost-based’ pricing approach.


Now, graduate starting pay is three times higher than in the 1970s, but prices of new similar HDB flats have gone up 10-30 times.


These massive price hikes are largely due to the HDB switching over to a ‘market-based’ pricing approach, following the 1994 property bull run.


In 2007, the HDB finally confirmed that ‘the prices of new HDB flats are based on the market prices of resale HDB flats, and not their costs of construction’ . In 2000, the total break-even cost for a 5-room new flat was an estimated $120,000.


But, under the market- based pricing approach, the HDB first looks at the prevailing market price of, say, $260,000 of a 5-room resale flat. It will then pick a slightly lower figure of, say, $200,000 as the selling price for the 5-room new flat (despite its $120,000 break-even cost).


HDB will then say the new flat buyer is getting a so-called ‘market subsidy’ of $60,000, arising from the difference between the resale flat market price and new flat selling price. There is thus no actual ‘cash subsidy’ given at all.


This market-based pricing approach had resulted in new flat prices and resale flat prices chasing each other in an upward spiral, affecting buyers of both new and resale flats. It has also led to current prices of 4-room new flats varying so much from $200,000 (Sengkang) to $400,000 (Telok Blangah) and a whopping $590,000 (Boon Keng).


HDB is supposed to be a low-cost public housing developer. Why then is it not passing on to flat buyers the economy-of-scale cost savings in its huge developments by pricing its new flats on a cost-based break-even basis?


See Leong Kit



Source: Business Times

Expat schools being offered vacant sites

Expat schools being offered vacant sites


I REFER to Mr Frankie Mao’s letter, ‘Let expat schools expand into vacant properties’ (June 11), which suggested that expatriate schools be allowed to use vacant school buildings as a temporary measure.


We thank Mr Mao for his suggestion and would like to clarify that this is already being done.


Several international schools have leased former school and institutional buildings from the State. Some examples include the SP Jain Centre of Management (former Institute of Dental Health building), Canadian International School (former Tanjong Katong Girls’ School) and the Global Indian International School (former Mei Chin Secondary School).


As for the former Westlake Secondary School at Braddell Hill mentioned by Mr Mao, the site has been left vacant as there are plans for its redevelopment.


Singapore Land Authority will continue to work with government agencies to offer sites for education-related uses to cater to the growing demand.


Susan Koh (Ms)

Senior Manager (Corporate Communications)

Singapore Land Authority


Source: Straits Times

Can landlords hike rents by 300%?

Can landlords hike rents by 300%?


MY FAMILY has been living in rented houses in the Bukit Timah area for more than nine years now and we have just been told by our landlord that our rent is to double at the end of our lease this August.


During the past nine years, we have not seen such a huge rent increase. Ours is not an isolated case as we know many other families in many areas across Singapore facing similar or worse situations – some as much as a 300 per cent increase in rent.


How is it that landlords are allowed to do this? A doubling of rent places an unreasonable strain on a household’s disposable income, disrupts families and their local ecosystems and only fills the pockets of property owners over-capitalising on current rental vacancy shortages.


Understandably, one would expect some increase in rental costs in these conditions, but a 100 to 300 per cent hike is outrageous.


Can the Singapore Land Authority or Case tell us what our rights are and how we can take counter-measures against such landlords without uprooting our families and moving somewhere else? Surely we’re all under enough strain already with rising petrol, energy and food costs without skyrocketing rents.


William Norman Bremner


Source: Straits Times

Property tax raised twice in a year

Property tax raised twice in a year


IN SEPTEMBER last year, the Inland Revenue Authority of Singapore (Iras) revised the annual value of our property and barely half a year later, it has once again revalued it upwards.


Is it fair for the Government to increase property tax twice within a year, especially when many people are struggling to make ends meet in the face of rising cost of living?


The pain is all the more unbearable for people who are retired and living on their savings.


This latest upward revision of the annual value of our property is all the more incomprehensible when recent press reports revealed that some newly launched developments are seeing a slide in prices.


Tan Wenfa


Source: Straits Times

Valuation the culprit in artificially inflating HDB flat prices

Valuation the culprit in artificially inflating HDB flat prices


OVER the past 18 to 24 months, HDB resale property prices have shot through the roof and many lower-income families have been priced out of the market. Although this is partly driven by the shortage of HDB flats and increased demand, what is not apparent to many people is the manner in which valuations have artificially fuelled inflation.


Take the three-room flat, for example. This is the smallest HDB flat and is targeted at the lower-income group.


Between March and May, prices of a three-room flat in Yishun, in the same block and with the same floor area, have shot up by between $18,000 and $30,000. The price of a similar three-room flat in Ang Mo Kio ranges from $184,000 to $300,000 in the same period. Similar trends are observed in almost every estate and in almost every flat type.


I accept that several factors may account for the differential in the value of a property, but is it realistic to expect the valuation of the same type of flat in the same block to have risen by 10 to 50 per cent over a short three-month period? Even if the interior renovation of a unit is particularly good, could it account for such a difference? And why does the trend keep increasing? A check with several properties in the weekend classifieds shows that the valuation of similar properties in these locations has gone up by at least another $10,000 since the last transacted prices last month. What can justify the drastic increases?


A three-room flat in a choice location, such as Bishan and Ang Mo Kio, now costs more than $300,000. A two-bedroom private apartment in an older development costs only slightly more – a clear sign that HDB flats are over-priced and out of reach for some lower-income families.


It seems that, in valuing a property, the valuer takes the last transacted price as a benchmark. Since the last transacted price includes the cash top-up sellers usually demand from buyers, the value of the property is artificially inflated.


Past experience in Singapore and Britain shows that when property prices are artificially inflated by valuation, sooner or later, prices will crash and many people will suffer.


The HDB should bar inclusion of the cash top-up in valuations.


Patrick Tan


Source: Straits Times

Subletting illegally not right way to help

Subletting illegally not right way to help


I REFER to the letter by Ms Subha Rajaiya, ‘Don’t penalise desperate ones who sublet illegally’ (June 7).


HDB rental flats are heavily subsidised and meant as a last resort for low-income and needy families without other housing option. Illegal subletting of these flats is an abuse of government subsidies meant to help such households.


One rental flat that is illegally sublet means one less unit to house a needy family. Therefore, HDB takes a serious view on illegal subletting of its rental flats. We have stepped up enforcement since last year. Where there is clear evidence of abuse, we will not hesitate to recover the rental flat and re-allocate the unit to a family in genuine need.


We agree with Ms Rajaiya that government agencies and the community need to continue to work together to help the low income among us. But allowing a few to abuse and profiteer from rental flats allocated to them cannot be part of the solution.


Mike Chan

Deputy Director (Rental Housing)

For Director (Housing Administration)

Housing & Development Board


Source: Straits Times