Prices of HDB flats at record high in Q4 2009

The following was reported in the Straits Times online, Jan 4, 2010 (By Jessica Cheam)

HDB prices hit new high

"PRICES of Housing Board resale flats continued its relentless climb, rising 3.8 per cent in the fourth quarter of last year to hit a fresh record.

 The Resale Price Index (RPI) hit 150.7 in the fourth quarter, up from 145.2 in the third quarter, according to flash estimate released by the HDB on Monday.

 This means HDB resale flat prices rose about 8 per cent for 2009. Analysts say this is due to the nascent economic recovery and strong demand for resale flats."

Opinion

The HDB said it will continue to launch more build-to-order flats in 2010 "if there is sustained demand for new flats". "It will ensure that there is an adequate supply of flats to meet prevailing housing needs", it said.

The Board said in a statement on Jan 5 that 12,000 new build-to-order (BTO) flats will be offered this year if there is sustained demand.

Its move comes amid growing concerns on the supply of HDB flats, which analysts say is not keeping up with current high levels of demand.

But the real issue is whether the current demand is sustainable in the long run at the high prices (BTO) flats are being released into the market. Even if demand is temporarily sustainable due to young couples rushing in to buy a unit for marriage despite the heavy financial burden, will it be sustainable in the longer run, since prices of new units are tagged to re-sale prices in the open market and not necessarily its real costs, not forgetting prices had gone up by 8% last year.

Hence, not only current prices of HDB resale flats are high, future prices of HDB flats will continue to escalate and aggravate the existing "asset bubble". Will HDB flats remain "affordable" in the longer run?

Not only must the existing pricing formula for new flats be reviewed but the "market subsidy" principle should also be re-examined to ensure affordable pricing relevant to costs and income elastcity; rather than leaving it to a free float and wild market forces where high HDB flat prices is politically justified by economic growth and unrealistic "asset enhancement" policies.

Nevertheless, general affordability was otherwise assured by MM Lee during his recent visit to The Pinnacle at Duxton Plain, the newly-completed crown jewel of Singapore's public housing in his Tanjong Pagar constituency, which the Minister Mentor said is symbolic of the spectacular transformation of our country.

Other Reference

Dec 14, 2009 Straits Times online

Flat prices still affordable
MM: Cost grows with economy, but Govt will help first-home buyers
By Zakir Hussain , POLITICAL CORRESPONDENT