Appreciate HDB flats as more than assets

Buyers looking to profit from homes should not forget that these are endowments or gifts
By Rennie Whang, The Sunday Times, 22 Nov 2015

I admit it: Sometimes, I wish I had been born a little earlier so I could be a lucky buyer of a Build To Order (BTO) flat at the Pinnacle@Duxton.

If so, I could be one of the people who benefited from the $1 million deals that have been struck at the iconic 50-storey project this year.

HDB flats may be for living in but, with such deals to be had, who can not think of them as investments as well?

It is such thinking that may have spurred applicants to show up in droves for the latest Housing Board launch, which includes BTO flats in Bidadari for the first time. These flats, with amenities such as a 10ha park and man-made lake in the estate, are coveted for their central location in Toa Payoh town.

However, an analysis by PropNex suggests the price appreciation for flats in non-mature estates, such as Punggol and Sengkang, may now be on a par with or even surpass that for homes in central estates such as the mature Toa Payoh.

Initial prices for mature estates are already at a higher level, which makes it difficult for prices to shoot up - it would affect affordability at a time when measures, such as the mortgage servicing ratio, have curtailed purchasing power, PropNex chief executive Mohd Ismail noted.

PropNex found that the estimated capital gain for a four-roomer in Sengkang was 35.8 per cent while it was 29.3 per cent in Punggol (see table). In comparison, the estimated capital gain for a four-roomer in Toa Payoh was 20.4 per cent.

An important factor in this, though, is how resale prices are expected to trend.

Excluding the last two years, when resale prices moderated as a result of cooling measures, they have shot up - about 74.4 per cent from the first quarter of 2005 to the third quarter of this year.

HDB resale prices have stabilised somewhat at the moment, with quarterly drops becoming smaller. Experts say this is due to the availability of transaction information, which means people are striking deals based on recently transacted prices.

Median resale prices for four- roomers in Toa Payoh rose about 87.5 per cent from 2005 to about $525,000 this year, while those in Bishan, a nearby estate also comparable to Bidadari, rose 89.3 per cent to about $530,000 over the same period.

Resale prices rose a little more slowly in the non-mature estates. Four-room flat resale prices in Sengkang rose 75.3 per cent to about $412,000 this year while those in Punggol rose 61.5 per cent to about $420,000 over the same period.

This suggests that while one would have been lucky to buy into mature estates in the past, the same capital gains may not take place considering sale prices now.

At the same time, historical performance must always be taken with a pinch of salt.

Century 21 chief executive Ku Swee Yong noted that the jump in resale prices across the board unfolded amid a lull from about 2002 to 2007, when few new HDB projects were added.

But now, Bidadari comes as more than 100,000 HDB flats are being completed from the start of this year till early 2018, with overall housing stock jumping 11 per cent to 1.43 million units over the same period.

Bidadari resale flats will have to compete with other new projects near the city centre, such as SkyVille and SkyTerrace in Dawson and Tiong Bahru View.

And along with added BTO supply, Mr Ku expects more flats to be put on the resale market as baby boomers age. They may wish to right-size or move in with their children to free up cash.

Still, if the market weakens, it is likely that values will hold better for flats in mature estates as demand for those in non-mature estates could dwindle.

So, should one buy into the Bidadari hype? It is really a matter of one's reading of the market - and it is hard to project beyond a few years, as much of the market is controlled by government policy on flat supply and population growth, for example.

It is best then to recognise that the heart of the HDB programme is not to help people make a quick buck, on taxpayers' money to boot.

Yes, Prime Minister Lee Hsien Loong said in 2012 that the housing asset is an endowment. "This is for you for life and to help you have a stake in Singapore and to make sure that you start off with chips which can bring you to an equal starting point," he had said.

But the equalising he meant was that a person can then focus on building up other areas of his life: "You spend a reasonable proportion (on housing) and you can pursue your career, you can bring up your family and you can have a satisfying life."

Greed and stunning HDB projects in good locations may have warped the equation, and we may be tempted to envy those who "lucked out" in the ballot. But let us not forget, wherever we end up, that these are endowments or gifts , already heavily subsidised by the Government, with the potential for more grants thrown in.

Thanks to the HDB scheme, we can own our homes and focus on improving our lives, and the lives of those around us.