Thursday, March 14, 2013

Khaw shares ideas to lower prices of HDB flats

The Straits Times – March 11, 2013
One suggestion for debate: insist that owners must sell homes back to HDB

Two days after signalling a critical rethink of the role and nature of public housing, Minister for National Development Khaw Boon Wan yesterday threw up a few suggestions as to how exactly policy may change.

Shortening leases, extending the minimum occupation period or even reinstating a pre-1971 rule that owners can sell HDB flats only back to the Housing Board are all solutions up for discussion, which may help to lower the prices of new flats.

The minimum occupation period, introduced to reduce speculation, is the shortest period before the whole flat can be rented out or sold. It now stands at five years.

The last suggestion would mean an HDB flat owner could sell his flat not on the market, but only to the HDB, at the price he bought it at, with perhaps some interest, said Mr Khaw.

These are "reasonable suggestions" raised by MPs and the public which he will discuss with various groups, including the public.

He said this yesterday in relation to his Parliament pledge last Friday of making new flats cheaper by some 30 per cent, with those in non-mature estates to cost about four years of one's salary, down from 5.5 years now.

In Parliament, he also said it would be good to re-examine some old assumptions, including that of HDB flats being treated as appreciating assets.

At the heart of this transition is the impact of trade-offs between distinct groups, like home owners and home buyers, who may have differing views and needs.

"How do we make sensible trade-offs which are sustainable?" Mr Khaw asked yesterday.
"Most people actually do not have a housing problem. But a minority do, and they are serious housing problems," he said.

"So we need to tackle them, but in a way that is not at the expense of home owners."
A group that will feel the sting of dipping prices are those relying on rental income. Their tenants usually comprise people who cannot afford a new flat.

This is why the Government cannot keep building new flats, Mr Khaw said. "If I keep on meeting new demand, I am actually hurting the many home owners who now rent out their own properties. And there are many."

Some 40,000 entire HDB flats are being sublet; up to another 40,000 owners rent out rooms.
Rather, what he hopes to do is to engineer a "soft landing".

Mr Chris Koh, director of property agency Chris International, said an extension of the minimum occupation period may help reduce property speculation as it discourages those who are more interested in making money from flat sales and rental income. Instead, people who intend to stay for the long haul are more likely to buy the flats.

Chesterton Suntec International director of research and consultancy Colin Tan felt shorter leases are unlikely to work. In theory, shortening the leases from 99 years for most flats means they can be sold more cheaply. "There is likely to be only a one-time lowering of prices," he said. "The problem can come back as supply is not keeping up with demand."

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