Tuesday, January 8, 2013

Why should taxpayers subsidise $2m exec condo?

The New Paper
Tuesday, Jan 08, 2013

SINGAPORE - The "presidential" penthouse went for $2.05 million.

Since then, comments have flowed fast and furious. They come in the form of, among others, furious forum letters, angry netizens and irate chatter at coffee shops.

The crux of the matter is that the 4,349sq ft penthouse is an executive condominium (EC) - a public-private housing hybrid whose buyers enjoy government subsidies.

And it is the latest in a series of EC launches that come with million-dollar price tags and fancy trappings like outdoor terraces and jacuzzis.

We ask four property experts to weigh in on the debate. Their consensus? The Government should intervene in the EC market.

Revamp the system. Limit the size and number of EC units. And drop subtle hints to developers - using "soft power", so to speak - by rejecting the more outlandish plans, such as building mega-penthouses.

But the most interesting suggestion thrown up by the experts comes from Mr Alan Cheong, head of research at Savills Singapore: Monitor the incomes of applicants' parents to ensure rich parents are not exploiting the system.

Says Mr Cheong: "The Government should require applicants to state how much their parents earn, and introduce new rules to ensure that help is given to those who need it.

"It should not be the case that a tycoon's son can qualify for subsidised government housing."

The split-level "presidential" penthouse was bought by a couple, whose father said he would pay the bulk of it.

There is some indication that Government intervention may be forthcoming.

Minister for National Development Khaw Boon Wan recently blogged that EC developers should observe the intent and spirit of the EC housing scheme when marketing their projects.

Mr Ku Swee Yong, chief executive of International Property Advisor, suggests a complete overhaul of the EC scheme might be in order.

The scheme, he says, was introduced in 1995 and was to address what was then considered the middle-class squeeze - people who earned too much to qualify for HDB flats, but too little for private housing.

Average wages have risen "tremendously" since then, he says.

Other experts suggest putting a limit on the size of EC units, or having a minimum number of units for each project.

Says Mr Mohamed Ismail, chief executive of PropNex Realty: "Having a minimum number of units makes it hard for developers to build mega-penthouses."

Adds Mr Chris Koh, director of property consultancy Chris International: "Limiting the unit's size can help to lower its absolute price."

Mr Cheong also says the Government is likely to use "soft" pressure tactics, such as rejecting plans to build similar mega-penthouses in the future.

One thing is for sure. Nobody expects another $2 million EC unit soon.

Says Mr Mohamed: "This will stay in our record books for a long time.

"It's clear that such large units are not the right way to go.

"After all, if someone can afford to pay $2 million, why do taxpayers have to subsidise his home purchase?"

Mr Koh agrees: "ECs are to provide shelter for the sandwiched class, and households earning $12,000 will find it challenging to pay $2m for a unit.

"I'm not surprised that the buyers (of the $2 million unit) have parental support.

All this brouhaha of the $2 million EC unit comes against a backdrop of activity on the property market.

Even though the end of the year is traditionally a quiet one, last month saw developers launching many projects to ride on the interest in ECs and condos.

From Dec 27 to 31, this reporter spotted advertisements for 24 condo and EC developments in the The Straits Times.

And on Saturday, at least two new projects were "launched" for sale in The Straits Times.

Expect more launches this year, says Mr Mohamed.

He notes that there were many successful land bids last year, and the Government intends to release more land in the first half of this year.

But this is not to say an oversupply is around the corner, cautions Mr Koh.

"Many ads doesn't mean there's an oversupply. After all, the take-up rate at new launches is still very good."

Adds Mr Cheong: "Even if there is excess supply, the Government will allow demand to grow to meet this supply."

Neither are prices expected to drop, the experts say, as property remains an attractive form of investment.

Mr Koh, for example, expects interest rates to remain very low.

"People will still be able to pay their monthly mortgages without difficulty, so I think prices will hold."

Mr Cheong says: "From my experience, property prices only fall during wars, economic downturns, or crises like Sars."

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
Email: marshe_inc@yahoo.com.sg
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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