New flat's ready but old one's still unsold

In a bind when new flat's ready but old one's still unsold

Some home buyers can't dispose of existing units, as required by HDB

By Janice Heng, The Straits Times, 4 Jul 2014

FOR Mr Balaji Lakshmanan, the four-year wait for his new Housing Board flat ended this week when he collected his keys. But another countdown began: to dispose of his existing flat, as required under HDB rules.

"I don't know if I can sell this house within six months," he said, referring to his three-room flat in Bukit Batok East.

He is part of an emerging group of home buyers caught between their newly ready Build-to-Order (BTO) flats and their old ones - which lack buyers in a sluggish market.

The 42-year-old manager has been trying to sell his old flat for half a year, with about 10 viewers but no offers so far.

It was valued at $340,000 in January - down from $380,000 the year before - and he is willing to accept $10,000 below that.

The wait itself will cost, given that he now has a new five-room BTO flat in Taman Jurong. "Now I have to pay for both."

Under HDB rules, he must dispose of the old flat within six months of getting his keys.

But fewer and fewer flats are changing hands. There were just 3,781 resale deals in the first three months of this year, a record low.

Some BTO buyers have turned to their Members of Parliament for help in getting deadline extensions from the HDB.

Sembawang GRC MP Ellen Lee has seen five or six cases this year. Some have come up against the six-month deadline. Others would like more time before collecting their keys. "People try to delay taking the (keys to their) BTO flats now, in case they cannot sell their old flats," she said.

Thus far, the HDB has been very helpful in granting extensions, often for three months at a time, she added.

Nee Soon GRC MP Lee Bee Wah started seeing such cases in the past two months.

For some, it is not just about the deadline, but needing the proceeds for their new flats, she said. "They have to have money in order to collect the keys."

On Monday evening, she wrote a Facebook post about such requests, wondering if these were a "sign of oversupply of flats".

A few years ago, both new and resale flats were seen to be in short supply, with tempers running high over tough BTO competition and soaring resale prices.

Since then, BTO supply has been boosted and the backlog cleared, while in the resale market, home loan curbs have cooled demand and lowered prices.

Said Ms Lee Bee Wah: "I would think that (the HDB) achieved the target of stabilising the price of property. That is a good outcome. But for those who want to sell their flats, they have to be more realistic now."

The falling market is a factor, Pasir Ris-Punggol GRC MP Gan Thiam Poh agreed. But he does not think the situation is that bad.

Of the two or three cases he has seen, one was affected by the HDB's ethnic quota and could sell only to someone of the same ethnicity. The unit was also on a low floor, so the case is not really representative, he said.

Nor does the problem seem widespread, even in usually less popular non-mature estates.

Some other MPs in Sembawang and Pasir Ris-Punggol GRCs have not seen such requests. But with over 28,000 BTO units to be completed this year and resale volumes still low, more buyers may find themselves struggling to sell in the coming months.

Said Sembawang GRC's Ms Lee: "Looking at reports on the resale market, it may get worse."

But for its part, the HDB said that if buyers need more time due to special circumstances, it will assess each request based on the merits of each case.

Reality check for buyers

PERHAPS the reality of investing in property is finally becoming evident. Those who have never experienced a full cycle of the property market could well be starting their first lesson ("In a bind when new flat's ready but old one's still unsold"; yesterday).

HDB flat buyers who are upgrading must learn that they cannot have their cake and eat it.

They may want to enjoy capital appreciation from owning larger units when the market is rising, but when they cannot sell their existing flats within the required period amid weakening demand, they ask for an extension - not because they cannot sell their units but because they are holding out for better prices.

That said, I do support giving extensions to buyers who are downgrading within the public housing market.

Owners may be moving to smaller flats as their households have shrunk, or perhaps they are getting older and are unable to maintain their existing flats. Some may be in financial difficulties and are unable to continue servicing their mortgage payments.

The authorities should approve their requests for extensions on a case-by-case basis.

For the rest, it is time to learn to stomach the ups and downs of the property cycle. Remember: What goes up must come down.

Derek Seet Chang Hui
ST Forum, 5 Jul 2014