Monday, July 25, 2011

The 3 to 5 Year Wait

It's the kind of statement that gives you a stronger jolt than the morning dose of caffeine. National Development Minister Khaw Boon Wan says that resale prices can only stabilise in 3 to 5 years, and that happens only when the supply of new Build-To-Order flats are completed. Why so long? Rome wasn't built in a day, but the Marina Bay Sands casino sure went up in a hurry.

Transport Minister Lui Tuck Yew said that Government funded entities have little incentive to keep costs down. The corollary of that has to be Government funded executives have little incentive to reduce completion times. After all, another year in the job is another million in the bank - you were expecting maybe Gerard Ee will recommend more than an 18% cut in their pay?

Khaw advised told those who have a flat, and aim to upgrade, to please hold on, while he gets his act together. "Why come in when prices are so high? You will regret it, " he said (the repent word seems to be falling out of favour within his political circle). Curiously, it was mentioned in a TV program last night on the same subject that 20% of resale flat buyers are private property owners downgrading to humbler dwellings with a block number in their postal address. But banks have not increased lending rates, neither have they revised mortgage payments to make up for private property values heading south. Likely, these may have either lost their shirts at MBS, or made a wrong call at flipping properties. Whatever the true picture is, the resale public housing flat is still a speculative good. So why not introduce a moratorium on HDB flats as tradeable commodities? It will have to be a gutsy move, but the guys in charge have always boasted they do not veer from tough decisions instead of pandering to the popular ones.

Khaw has admitted that rising resale prices are also attributable to an imbalance in supply and demand - stark evidence of years of bad governance in national housing development - and launched two housing projects to address the myopia of his predecessor, "The more I push out, I am sure there is some influence." So what's holding up the minister to go the whole hog?


  1. Since when was there a problem with public housing or the property market in general? The previous ND minister, that dud MBT, was still repeating this the last GE, which was barely 100 days ago.

  2. The statistics given out so far are too simplistic for a person/group to identify the problems/solutions that lead to today's high prices. Statistics over the last 10 years and in useful formats eg % of PR's who bought/years of PR. %of PRs selling/years of PR. % of citizen buyers/no of home owned at time of latest purchase. These and other pointed questions can be framed for a computer response to identify groups of buyers/sellers and make for practical/different adjustments for different groups of buyers/sellers to impede drastic escalation of prices for those that want a home ( not asset enchancement ).

    With current simple would just be as vague as the usefulness of such simple statistics.

  3. Lim Kim San's HDB got flats up within a yr. The previous builder s'pore Improvement Trust tk 2-3 yrs, juz like today's HDB. SIGH

  4. The weekend BT report about HDB (and so MND) reviewing the "COV system" drove my blook pressure up more than a few notches. It reflects a very poor understanding of the market. Instead of saying that the COV practice is wrong and should be done away with, they should first understand why there is such a practice in the first instance.


    1. Perhaps the market is telling the valuers that the valuation is wong? COV is higher in more central/popular areas compared to less central areas. COV compensates for the low official valuation. Could it be that valuers are forced into a tight range so that there is lesser disparity betweeen the different HDB towns to avoid creation of slums?

    2. Demand is much higher than available supply (resale) in central areas thus bidding up prices. Everyone in a central location would/should be clinging on to their precious HDB property given the chains they put on you when you buy that replacement HDB property (another five long years and the requirement to sell any private properties)

    What is the effect of "doing away" with the COV system? Does HDB expect everyone to transact at the so called market valuation (valuers') price? What if there is a competition between two or more prospective buyers? Flip a coin? This will drive buyers underground in paying an additional premium to win the competition.

  5. Something is not right here. In the private sector, developers can complete condominiums with many different designs and facilities like swimming pools, basement parking, clubhouse, gym, spas, saunas, tennis/squash courts, elaborate landscaping, etc in 24-30 months. HDB flat which have far fewer complicated designs and without the facilities of private condominiums take 3-4 years to complete? Does Mr Khaw think we are gullible? Either the project team is sleeping or he is being hoodwinked by the people in HDB.
    In the private sector building contracts have deadlines beyond which liquidated damages apply. Does HDB contracts have the same condition?

  6. Obviously the govt had to means to do it but just that he had to tread carefully otherwise he would have stepped on to many toes. Some old and powerful ones don't like it, you see.

    Too fast a move, it will have proven beyond doubt that our PAP govt had really given us a bad dose of ministership in MBT even though they claim he is value for money, from the govt's point of view, of course.

    But why 5 years ? So that PM don't have to say sorry again before the next GE ?

  7. Agreed that our valuers for HDB flats are just not doing their job professionaly if a COV is necessary for every HDB resale flat.

    It simply means their valuation is based on a willing buyer, unwilling seller basis. Looks like the valuers are under some kind of pressure to do it so that they can remain under approved list of HDB registered valuers, no ?

  8. Is there a need for valuation?
    Who the hell is a valuer?
    One should know how much to pay
    for an item one wants to buy mah!

  9. A valuation certificate is the CYA paper that financial institutions use to justify their loans. In this case, HDB, for a majority of the population. Since they are the banker, and also developer, land owner, landlord, regulator, marketeer, property manager...