Monday 6 May 2013

Property buyers should consider future interest rate hikes: Khaw

By Saifulbahri Ismail, Channel NewsAsia, 4 May 2013

National Development Minister Khaw Boon Wan has urged those who might be looking to buy property to take into account future spikes in interest rates.

Speaking during a dialogue with young Singaporeans, he also cautioned buyers not to over-commit.

He explained that the current low interest rates for home loans will not last forever, and the eventual rate may be many percentage points higher than it is today.

Some 150 youths from Sembawang spent Saturday afternoon discussing their hopes and aspirations for Singapore with their MP Mr Khaw.

They also engaged the Minister in an hour-long dialogue, as part of the Our Singapore Conversation.

Even though housing may not be an immediate concern for them, the issue did not escape attention.

Mr Khaw assured the youths that housing will be made available and kept affordable.

He also offered advice for property buyers.

Mr Khaw said: "They assume two things. Property prices will keep going (up). Two, interest rates will keep on remaining low. Both are wrong and therefore one day, both will collapse on them. So, if you are over-committed, let's say you can only afford a 3-room flat, (but) you decide to buy five room flat. Yes, based on today's interest rates you can afford a five-room flat. But, when interest rates go up as it will, you will no longer be able to afford a five-room flat and what will happen, your bank will start calling you up to please top up or sell your flat and that's when trouble starts."

In addition, Mr Khaw said the high property prices will not last in the long run.

At the same time, he acknowledged he cannot be certain when and how much prices will come down.

He added: "Only when you can get enough buyers who can afford, will prices stay up, if not they will come down. Today because of low interest rates, this bubble is being pushed up and sustained longer than it should have. So, it will collapse in a matter of time and therefore do not think that prices will keep on going up."

Mr Khaw also stressed the importance of re-igniting the kampong spirit in public housing estates, and hinted at what the design of HDB flats will be in the future.

He said more common spaces, or so-called "watering holes" will be created for residents to meet naturally.

He said: "We are emphasising this point on how to create more and more common spaces, where people meet, what we call watering holes. We must try and create more and more watering holes to allow people to just naturally interact. I think it's a very bad HDB layout design if you just go straight from work, reach Sembawang, go straight up to apartment or flat, and then leave your apartment, go straight out to the bus stop and off you go. A good design will naturally create things for you (so that) to reach from A to B you must go through places which are natural watering holes that people naturally meet together."

These watering holes can be spaces where residents do gardening, or engage in sports activities.

No drastic price drop for HDB flats: Khaw
He acknowledges that flats are an asset for many homeowners
By Charissa Yong, The Straits Times, 6 May 2013

ADDRESSING fears that homeowners may lose their retirement nest eggs should prices of flats plunge, National Development Minister Khaw Boon Wan said yesterday that he wants to lower the prices of flats by just "a few per cent" over the next few years.

Mr Khaw did not specify if he was referring to new or resale flats, but he acknowledged that any price drop should not be too drastic.

"For many people, it's an asset... if their house suddenly devalues by say 30 per cent, their dream of downgrading and still having some money in the bank (for retirement) will suddenly vanish," he told participants at an Our Singapore Conversation (OSC) dialogue on housing.

Speaking in Mandarin, he reiterated that the prices of public flats will not rise forever.

"If housing prices keep rising, it won't be good. If we can maintain them or even lower them by a few per cent, for example 5 per cent, that's good. When I came into MND (Ministry of National Development) two years ago, that was my target," he said.

The debate over whether public flats should be homes foremost or assets first has been raging since March, when Mr Khaw broached the subject in Parliament.

He added then that he wanted to bring down the prices of new flats in non-mature estates by about 30 per cent.

At the OSC session at Singapore Press Holdings' News Centre, organised by Lianhe Zaobao, much of the dialogue focused on this topic.

Many of the 40 participants rejected the idea of selling back new flats only to the Housing Board, as this would limit the profit homeowners can make, as opposed to selling their flats on the open market.

Mr Khaw also clarified his recent comments that "something is wrong somewhere" with the executive condominium (EC) scheme. He said his bugbear is that EC owners still receive government subsidies despite making huge profits.

In principle, he does not oppose the idea of EC owners making a tidy sum when they sell their units.

Turning to first-time buyers, he emphasised that every newly- wed couple would be able to afford public housing. This is because the HDB is able to set the prices of new flats ever since they were "de-linked" from the prices of resale flats.

But Mr Khaw acknowledged that engineering a similar price drop for resale flats, especially a gentle one, may not be so easy.

"Resale flat (prices) are different because they're decided by the market," he said.

"If you want to sell a flat for $700,000 or $800,000, how can we stop you? No way."

SLP International executive director Nicholas Mak, who attended the OSC session, speculated that one way to dampen resale prices could be to lower the prices of Build-To-Order flats in the same estate.

But this would be a "zero-sum game", as homeowners who previously bought flats at higher prices would not be happy.


For many people, it's an asset... if their house suddenly devalues by say 30 per cent, their dream of downgrading and still having some money in the bank (for retirement) will suddenly vanish.

- National Development Minister Khaw Boon Wan

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