HDB to slow supply of flats from next year

[specuvestor]

Policy makers should primarily be concerned about deep cyclical structural issues. There's bound to be short term imbalances, though that does not excuse them for not taking a more comprehensive and holistic approach

The root problem is policy makers think growing the population is the key to maintaining our prosperity. Agree with OPMI on another thread that HDB should be for Singapore citizens only to reduce the pressure on HDB prices.

[valueinvestor]

If the floodgate remains open for 6.9 to 8m, supplies still cannot meet demand. Wayang wayang.

[nsengkia]

I have a slightly different perspective.

The problem was not only the volume of BTO flats built but also the pricing of the BTO flats. The latter was linked to that of existing resale flats because "LOWERING land cost as a way to reduce new Housing Board flat prices is tantamount to raiding Singapore's reserves, warned National Development Minister Mah Bow Tan" (see http://sgforums.com/forums/3545/topics/427960).

Under the new HDB management, the land cost continued to be set by the Chief Valuer but the "subsidy" (actually there is a difference because of "subsidy" transfer from current expenditure to "land cost" reserves but most people see it as from left to right pocket but strictly speaking it is not) has been increased so that "we stabilised BTO prices by de-linking them from the resale market. This is done by increasing subsidy and keeping BTO prices steady even as resale prices go up. We are committed to continuing it until the market stabilises." (see http://www.mnd.gov.sg/budgetdebate2013/speech_kbw.htm).

The positively reinforcing feedback loop is therefore broken.

And, as a corollary, new BTO flat buyers should note that resale HDB prices CANNOT rise in locales where BTO flats can still be built (e.g. Punggol) unless and until the Government allows it.

[pianist]

uncle nsengkia, was trying hard to understand what u wrote...but dun quite understand
do u mean bto prices is now artificially suppressed for a while only?

[opmi]

I have a slightly different perspective.

The problem was not only the volume of BTO flats built but also the pricing of the BTO flats. The latter was linked to that of existing resale flats because "LOWERING land cost as a way to reduce new Housing Board flat prices is tantamount to raiding Singapore's reserves, warned National Development Minister Mah Bow Tan" (see http://sgforums.com/forums/3545/topics/427960).

Under the new HDB management, the land cost continued to be set by the Chief Valuer but the "subsidy" (actually there is a difference because of "subsidy" transfer from current expenditure to "land cost" reserves but most people see it as from left to right pocket but strictly speaking it is not) has been increased so that "we stabilised BTO prices by de-linking them from the resale market. This is done by increasing subsidy and keeping BTO prices steady even as resale prices go up. We are committed to continuing it until the market stabilises." (see http://www.mnd.gov.sg/budgetdebate2013/speech_kbw.htm).

The positively reinforcing feedback loop is therefore broken.

And, as a corollary, new BTO flat buyers should note that resale HDB prices CANNOT rise in locales where BTO flats can still be built (e.g. Punggol) unless and until the Government allows it.

Thats from the warped SINGAPORE INC model where every Singaporean is seen as a worker bee (like Teamy..hahaha). Where P&L is used to judged performance at Stat Boards.

[opmi]

uncle nsengkia, was trying hard to understand what u wrote...but dun quite understand
do u mean bto prices is now artificially suppressed for a while only?

Khaw got OK from the party bosses to stop using imputed land prices (at market price) from the new BTO pricing. For now.

[brattzz]

uncle nsengkia, was trying hard to understand what u wrote...but dun quite understand
do u mean bto prices is now artificially suppressed for a while only?

Khaw got OK from the party bosses to stop using imputed land prices (at market price) from the new BTO pricing. For now.

Yes sir, until 2016 of cos...

[pianist]

uncle nsengkia, was trying hard to understand what u wrote...but dun quite understand
do u mean bto prices is now artificially suppressed for a while only?

Khaw got OK from the party bosses to stop using imputed land prices (at market price) from the new BTO pricing. For now.

Yes sir, until 2016 of cos...

most of the BTO sites are mostly situated on the edges of the island..somewhere not so desirable?

[nsengkia]

uncle nsengkia, was trying hard to understand what u wrote...but dun quite understand
do u mean bto prices is now artificially suppressed for a while only?

Khaw got OK from the party bosses to stop using imputed land prices (at market price) from the new BTO pricing. For now.

Khaw has de-linked BTO prices from the resale market. In the past, the rapid rise in property was due to positive feedback loop between resale flats and BTO prices.

When resale flat prices went up, people who could have afforded to wait might have considered BTO but Mah Bow Tan up BTO prices based on imputed land cost pegged to resale flat transactions. So potential BTO buyers decide that might as well jump in and get it immediately from the resale market.

That resulted in resale and BTO flat prices mutually ratchet each other upwards and allowed HDB owners to jump onto the private property bandwagon by upgrading (the price gap between HDB resale and private property narrowed substantially) so the whole property market ratcheted upwards.

Sort of like an escalator that effortlessly carries you to financial freedom but if, and only if, you are already, or can get, on it (what the previous PM called "asset enhancement").

But for those who were not on it, then it only became more difficult to get on the magical escalator since starting wages in Singapore stagnanted due to globalisation and technology.

Now Khaw intends to keep BTO affordable so the escalator has stopped.

Even worse, I personally believe that it may actually start going into reverse. HDB upgraders who buy EC HAVE to sell their existing HDB flats within 6 months of the TOP of the EC. They cannot sell now as they need a place to stay while the EC is being built. And when they are ready to sell, so will a lot of other people.

If the Government does not reverse the minimum 3 year PR rule then I am afraid HDB resale prices will crash when the EC pipeline comes on stream and the whole escalator goes into reverse.

[cfa]

Fully agree, More EC project nearing completion , more HDB units will be on sales. Many EC are due to have their TOP in 3/4 years time.