Reining in the runaway housing market

High prices were a hot-button issue 3 years ago, but recent measures have eased public unhappiness for now
By Janice Heng, The Straits Times, 10 May 2014

IN 2011, the economy was hot - and so was the seat of the National Development Minister.

"Inflation has also hit my ministry," Mr Mah Bow Tan quipped in that year's Budget debate.

Members of Parliament had filed 55 "cuts", 55 chances to question him. This was the highest fielded for any one ministry that year, and the highest for the ministry in five years.

When he later rose to thank the Speaker, as Leader of the House, Mr Mah spoke jokingly of "death by a thousand cuts".

As it turned out, that was his final Budget debate as minister. Then came the watershed general election in which the People's Action Party (PAP) suffered its lowest winning margin since Independence amid hot-button issues such as housing unaffordability.

Not long after, Mr Mah stepped down as minister, to be replaced by Mr Khaw Boon Wan.

His successor, however, seems to be faring better. Mr Khaw noted in Parliament that he "suffered" 40 cuts last year - but just 27 this year, with prices starting to cool off.

Mr Khaw said his ministry's efforts were clearly producing results: "I was going to say that even my eyebags have shrunk."

Three years ago, runaway public and private housing prices were one of the biggest concerns of Singaporeans during elections.

With the next general election due by early 2017 at the latest, could housing woes be a hot-button issue yet again? Or are Mr Khaw's sleepless nights over?

Cooling the market...

IN 2011, two pressure fronts created the perfect storm of housing woes: a shortage of new HDB flats and soaring resale prices.

Perhaps haunted by the oversupply of flats in the late 1990s, the Housing Board adopted the Build-To-Order (BTO) system in 2002. Blocks were built only if enough units were booked.

And under 10,000 flats were launched each year, till 2010.

But by then, a backlog of demand had built up instead.

The resale market offered no relief to new buyers. From end-2006 till end-2010, resale prices rose by 66 per cent. Flats in mature estates could cost half a million dollars. Private property was further out of reach.

Young couples feared they would not be able to set up a home together. Parents worried about their children's housing prospects. For the upwardly mobile set, upgrading to private property became a distant dream.

Things came to a head in the May 2011 General Election.

Mr Mah's team in Tampines GRC received 57.2 per cent of the vote, more than 10 percentage points short of their 2006 score.

As he said later that month: "After the elections, when the results came out, it was probably a clear signal that I should step down sooner rather than later in the term."

He retired from Cabinet, and Mr Khaw, who had held the health portfolio since 2004, volunteered to take over. The new housing minister moved quickly to address both the shortage of new flats and the hot property market.

The HDB had already raised the BTO supply, but he went further. From 2011 till last year, more than 77,000 units were launched.

The flood seemed to pay off. Last year, there were an average of 2.9 applicants for each BTO flat, down from 5.3 in 2010.

In the resale market, Mr Khaw again built upon what had come before: Mr Mah's four rounds of cooling measures since 2009.

He introduced further curbs, such as tighter home loan rules. And he cut demand by requiring new permanent residents to wait three years before they could get a resale flat.

Now, both the HDB resale and private markets are turning. The resale price index fell last year in full-year terms, for the first time in eight years.

The private property index also headed south in the last quarter of the year - for the first time in almost two years.

...and cooling tempers?

THE numbers, at least, suggest that the problems of 2011 are on the mend. But has voter sentiment also improved?

Experts, politicians and property agents agree that much of the initial heat is off, especially regarding BTO flats.

"The housing issue is not the hot potato that it was previously," says political watcher Siew Kum Hong. "(Mr Khaw) has done a good job of defusing this issue."

For Holland-Bukit Timah GRC MP Liang Eng Hwa, there is at least one indicator that feelings have cooled: "Meet-the-People Session cases have gone down in the area of housing."

He used to receive many upset BTO applicants - both young families and second-time buyers - who had no luck in the ballot.

Now, the complaints he gets are only regarding the less frequent Sale of Balance Flats exercises, which are popular as the flats can be moved into much sooner.

Says Mountbatten MP Lim Biow Chuan: "In the past, they used to say 'I applied so many times for a BTO (unit) and I still can't get it.' I don't hear this at all anymore."

Research assistant Andrew Yee, 26, considers himself "one of the lucky ones", as he nabbed a five-room balance flat in Sengkang on his first try in 2012.

In the couple of years before, his friends had tried for BTO flats half a dozen times but did not even get a chance to select a unit.

"They have since managed to get a flat in the end, but they had to go through a lot," he says. "I think it's easier for people looking for flats now."

In a survey commissioned by The Straits Times, 41 per cent of respondents thought it had become easier to get a first home since 2011, compared with 24 per cent who disagreed.

Tellingly, those aged 25 to 34 - the age group in which many first-time buyers fall - thought things had improved the most. Of these, 40 per cent agreed that it had become easier, while an additional 7 per cent strongly agreed.

Of all the policy areas, housing had the most people deeming it the Government's biggest achievement since 2011: 26 per cent.

Yet opinion remains divided, with 18 per cent thinking that housing was the Government's worst failure instead. Only transport fared worse.

This includes 8 per cent of respondents who bemoaned high property prices in particular.

Workers' Party Non-Constituency MP Gerald Giam agrees that "the immediate backlog of pent-up demand from years of under-supply of housing has eased".

But when it comes to prices, issues remain, he says. "The high prices of flats - even BTO flats - remain a concern for many.While BTO flat prices have not risen so sharply in the past year, they are coming from a very high base."

The same goes for resale prices, which dipped 0.6 per cent last year but remain high, notes SIM Global Education senior economics lecturer Tan Khay Boon.

"The magnitude of the drop in housing prices is insignificant as compared to the magnitude of the price hike over these past few years." Upgrading thus remains "a difficult wish to fulfil".

Still, those actually in the market seem satisfied, at least according to property agents.

"Of course, buyers are happier now," says Horizon Real Estates agent Lena Low.

For a start, few now face the immediate blow of high cash premiums, or cash over valuation (COV). "We've seen the public housing COV dropping to zero, to negative, when just two years back, COVs islandwide were close to $40,000 or above," notes PropNex Realty chief executive officer Mohamed Ismail Gafoor.

Buyers have welcomed the Government's cooling moves, agrees Visa Property agent Jack Tam.

Of course, sellers are a different matter, he adds. Some who booked a new unit years ago would have expected a higher price for their old property today.

But as Ms Low notes, echoing Dr Tan's point about how much prices have already risen: "They still make a profit. They are not making a loss."

Those upset about cooler prices are likely to be a minority.

In the Straits Times' poll, 72 per cent were in favour of price moderation. Only 8 per cent feared their properties would depreciate, and another 6 per cent that the market would crash.

Experts expect what they call a "soft landing", with prices falling by only about 5 to 8 per cent for the full year.

New election, new issues

BY THE next general election, will the beast of housing woes be tamed?

Mr Khaw, at least, seems comfortable enough with the progress made on the 2011 housing issues to turn his attention to other groups.

"Now that we have cleared the backlog for newlyweds, we have begun to focus on helping the vulnerable groups, especially divorcees with children," he said in the Budget debate in March.

Yet this itself points to another consideration: that housing woes might arise from other quarters.

Mr Giam lists divorcees, single parents, and couples who sold their flats to pay debts as among those whose problems have not yet been fully addressed.

Political watchers Mr Siew and National University of Singapore professor Reuben Wong also note that anything could happen in the property market.

Yet the key point is that if tempers do rise again, it will not be over the issues of 2011.

"If there is housing unhappiness in 2016, it will be for different reasons," says Mr Siew.

"And it's going to be a much smaller proportion of the people who are unhappy" - those in the private market who might see their current properties depreciate if prices there collapse.

Prof Wong agrees, but identifies a different group.

"The ones who were really struggling to get on the property ladder, I think they have been taken care of."

The potential sources of unhappiness are "those who aren't quite desperate but aren't having their aspirations met" - that is, those aiming for private property.

As former Nominated MP Zulkifli Baharudin puts it: "We cannot say that we have solved the problem. We must be responsive to rising expectations, but also manage them."

While housing is unlikely to be a hot-button issue in the next general election, it remains a latent one, says Singapore Management University associate professor Eugene Tan.

"There will always be concerns whether the next generation will be able to afford their homes and also upgrade."

The problems of 2011 have cooled off, but Singaporeans' upgrading aspirations will keep the housing question simmering.

The trick for the ruling party before the next GE will be to keep it from boiling over again.

Lucky couple get flat within three months

Commodities manager Suzane Lim, 29, and property officer Ben Yeo, 27, are the lucky ones. Unlike friends who struggled to get flats pre-2011 amid tight supply, the couple are among the 28,000 to get keys to their new HDB homes this year. Rachel Au-Yong followed the pair, who are getting married today, on their housing journey of fears, hopes and an auspicious pineapple.
The Straits Times, 10 May 2014

- September 2012: First-timers' fear

Six months.

That was all the time Suzane and Ben needed as a couple before they headed down to the HDB Hub in Toa Payoh, ready to be partners for life.

But while they are sure about each other, they are not as confident of securing a flat.

"Aiyah, just try, lah," they tell each other. Some friends have recently booked Build-To-Order flats. But just as many have given up after repeated tries.

The couple have their eye on balance flats - units close to their completion date - in Yishun. He likes the fact that it is near his parents' home. She wants a flat - soon.

The shorter wait to get the keys to a balance flat appeals to her, as she would be 30 in three years and wants to settle down soon. But are they getting their hopes up? Wasn't it only just a few years ago when there were astronomical rates of 10 applications per flat?

"If this was a few years before, it might have been easier to strike 4-D," says Ben.

By the end of the application period, there are about 500 households for 207 apartments. The odds are in their favour.

But they still want to hedge their bets. Two months later, while still waiting to hear from the Housing Board, Suzane and Ben make another trip to the HDB Hub. They apply for a Build-To-Order flat, also in Yishun.


- December 2012: Beginners' luck

On the letter with the HDB masthead is the number 207.

Suzane runs to Ben. "It's a sign," she says. There are 207 apartments available, and they are #207. A flat is guaranteed.

At the HDB Hub once more, the couple pore over floor plans while their parents consult feng shui masters. Astrological calculations decree that a third-floor, west-facing flat would be the couple's first home.

Sure, it is on a low floor and self-confessed clean freak Suzane is worried that she would be spending more time than necessary mopping floors.

But it is what the elders want, she says. Besides, it must have been fate since they got the flat in the first place.

A month later, another package comes in the mail: The HDB would like to invite Suzane and Ben for another selection exercise for the Build-To-Order round.

They stick with their balance flat, and pay the 5 per cent deposit for the $263,000 unit. The cherry on top? It is cheaper than their budget of $320,000.

The couple have to treat their friends to a meal: They are the luckiest of the lot.

- March 2014: Key collection

From a zipped folder containing eight coloured keys, Ben pulls out the pink one.

With a hand on his fiancee's back, he guides her to the door. Suzane turns the key and pushes open the door to their new home.

Tileless floors and white walls. A flat waiting to be a home.

But first it has to be blessed. Crowding round a pineapple, a symbol of wealth and luck, in the middle of the living room are the couple, his parents and a long-time friend, her mother, sister, brother-in-law, niece and a geomancer. It's a scene which may play out in many more flats this year, as 28,741 new home owners receive their keys.

After the rites, some in the crowded flat reveal their inner interior designer. "Fatty," Suzane's mother says to Ben. "I don't think you should do walk-in wardrobe - you won't have space."

Even the geomancer throws in some advice. Rolling a coin on the bathroom floor, he admires the handiwork of the tile-layers. "Very straight nowadays," he says. "No need to redo."

But he thinks the couple ought to install an automatic door recoil, "so you don't see the sink so often. Your eight characters say you should try to avoid seeing water elements".


- March 2014: Meet the designer

In a showroom in Ubi, Suzane and Ben look at the two-dimensional canvas that is their floor plan. Jim is the third interior designer they have met in two weeks, and so far, he is their favourite.

Jim pulls out rulers in response to their practical questions: How much swinging room will our refrigerator door have? What would the room height be if we install a false ceiling? How much legroom do we have if we don't want a mounted console box?

Then they work through the specifics. Jim offers his firm's package: $16,890 for an HDB four-roomer with standard fittings. But Ben wants a quartz kitchen top - the cheaper laminates wear out faster - and Suzane wants the bedrooms, not just the living room, to be tiled. Jim says he will need a few hours to come up with a new quote.

Later, Suzane admits she is torn between hiring an interior designer and a contractor. The former is trained to provide nicer designs, of course, but "we're young, no one expects us to have something themed".

"It just needs to be bright and practical," she says. "And have a mahjong room," Ben quips.

Their budget is $22,000 and if they could save on this, why not?

It is not the first time Jim has come across such a couple. That is why, despite the unprecedented influx of public homes, business has been tough.

"Too many interior designers (IDs) around, too many couples shopping but not committing," he says. "People now get ideas from their IDs and the Internet, then turn to the contractors to do work."

Still, business could pick up. Another 26,492 flats come onstream next year - and a staggering 42,318 in 2016.


- April 2014: Going out on tiles

By April, the couple have opted to hire Suzane's contractor-uncle. "We wanted something simple anyway," she says. "I don't need too much interior design."

Not that it has stopped her from getting a headache. In between organising a wedding ceremony and renovating a house, they have their hands full.

They survey a long row of tiles in the second shop they're visiting in Balestier that day. There are all kinds: whites, blacks, colours. Speckled, marbled, striped.

Suzane's uncle has turned them away from black to white tiles. "Black tiles reflect," she says. Pointing to her shimmery outline in a slab of obsidian on the wall, she adds: "You see? I don't want to upskirt my friends."

She picks out five samples, which the couple will later lay out on a bare concrete floor. Ben confides: "Actually, I can't tell the difference. White is white."

He can relax; after all, the hardest part of the housing journey is over. They have their home.

Applications surge after housing grant is extended
By Janice Heng, The Sunday Times, 11 May 2014

Applications for a housing grant originally meant for low-income earners have surged after it was extended to middle-income households last August.

Almost twice as many flat buyers took up the Special CPF Housing Grant in the first three months of this year than in all of last year, the Housing Board (HDB) said.

The grant was given to 2,320 households from January till March, compared to 1,245 in 2013.

And another 1,800 applications are being processed.

As at end-March, $61.82 million had been disbursed under this grant scheme, which was introduced in 2011.

It was initially meant for low-income households earning up to $2,250 a month. Based on their income, they could get up to $20,000 if they were buying new two- or three-room standard flats in non-mature estates.

But last August, the grant was made available to those with a household income of up to $6,500.

With a much wider pool of eligible buyers, the strong response is unsurprising, said experts.

Furthermore, the grant was also extended to cover four-room flats, and premium flats of that size or smaller. This would have widened the pool further, as the majority of Build-to-Order (BTO) applicants are after four-roomers, said Chris International director Chris Koh.

And then there are the single buyers, who have been allowed to purchase new flats from the HDB since last July's BTO. They are also able to apply for this grant. The income cap for this group is $3,250 as they are buying the flat on their own, and they can get up to $10,000, half the usual amount.

Widening its reach made sense, said Century21 chief executive officer Ku Swee Yong.

"To begin with, the original cap at $2,250 was a bit low."

Lukewarm response might have been why the grant was made available to more people and more flat types, he added.

From March 2011 till the end of 2012, just 1,010 households received the grant.

Added Mr Ku: "It is also one way to attract buyers to purchase new flats in non-mature estates."