3 years before you can sell resale flats

BUYERS of non-subsidised HDB resale flats must now occupy their flats for at least three years before they can sell, under new rules unveiled yesterday.

This is up from 2-1/2 years for buyers with HDB loans and one year for buyers with bank loans or no loan.

The move, effective yesterday, is seen as a government effort to curb speculative buying and selling of public housing.

Home hunters have expressed dismay in recent months that speculators may be pushing up HDB resale flat prices.

Property consultants said the move is set to nip speculation in the bud but is not likely to result in lower flat prices.

The move comes after an HDB study found that a growing number of flat owners were selling flats within three years.

In late January, National Development Minister Mah Bow Tan flagged a review by HDB of its rules, with a view to stamping out possible speculation.

In Parliament yesterday, Mr Mah said said more flat owners had been selling flats as soon as the minimum period was up, although the numbers were not large.

He added: ‘However, if the trend continues, buyers who genuinely need housing could be crowded out.’

He was responding to MP Ang Mong Seng’s request for a review of the one-year minimum period applying to those with bank loans or no loan.

‘HDB flats are provided primarily for owner-occupation and not speculative profit or rental return,’ said Mr Mah.

HDB said in a statement that the change meant demand would more accurately reflect interest from buyers who wish to occupy flats.

Different rules apply to subsidised buyers who receive HDB grants.

Home hunter Sofian Buang, 33, a loading officer, said: ‘My biggest concern is getting a roof for my family, now that I have a daughter. I am looking for a resale flat to settle in, not to sell or to rent out.’

ERA Asia-Pacific associate director Eugene Lim said the change would remove buyers who wanted to flip HDB flats after a year. ‘With a smaller group chasing after HDB resale flats, price increases will slow down,’ he said.

Demand for resale flats outweighs supply so prices will still rise, but perhaps at a slower pace, said C&H Realty managing director Albert Lu.

Mr Steven Tan, executive director of OrangeTee’s residential division, said the change would cut speculation but that the Government should look at private property owners buying HDB flats to rent out right away.

If demand is growing and fewer people choose to sell because they want to lease their flats out, prices will rise, he said.

Mr Mah said that of the 682,000 flats that are eligible for subletting, only 3 per cent are sublet, suggesting that most flat owners are buying their flats for occupation, and not rental.

Amid concerns of runaway HDB prices, other MPs yesterday raised questions, including a possible ban on some buyers.

‘There is a populist suggestion that we should ban private property owners from buying HDB flats,’ said Mr Mah. But if the Government did so, what about HDB owners buying private property, he said.

Most resale flat buyers are citizens who do not own any private property, he said, adding that there was no evidence that specific buyer groups, like PRs and private property owners, were driving up prices.

He said buyers who did not want to pay very high prices could walk away.

Some other key changes unveiled yesterday include allowing upgraders and those who downsize to apply for a second concessionary HDB loan. This could push up resale activity for smaller flats in the resale market, said PropNex chief executive Mohamed Ismail.

The HDB study found that last year, 9 per cent or nearly one in 10 resale flats sold had been owned for under three years. Between 2005 and 2007, the figure was just 6 per cent of sales.

Source: Straits Times, 6 Mar 2010

THE Lease Buyback Scheme will be expanded to include an additional 3,800 households of elderly folk.

It will now include people who have owned four-room or bigger flats. Previously, the scheme was restricted to those who own three-room or smaller units.

The HDB said in a statement yesterday that although these homeowners would have received substantial proceeds from the sale of their earlier flats, some could still be in need of help. They include those who may have downsized many years ago.

The second group added into the scheme are households with an outstanding mortgage exceeding $5,000 but who would be able to buy an immediate annuity under CPF Life for at least $60,000 with the HDB payout. Previously, the household had to have less than $5,000 outstanding on a home loan.

The changes, which were outlined in Parliament yesterday, kick in on April 1.

They will make 3,800 more elderly households living in three-room or smaller flats eligible for the scheme, said HDB.

This will bring the total number of eligible households to 34,800 – which is 82 per cent of elderly households in three-room and smaller flats.

The Lease Buyback Scheme started in March last year and helps the elderly sell their HDB flats to the Government for cash. HDB buys back the tail-end of a flat lease at market valuation, leaving a 30-year lease for the household.

For example, if a flat has 70 years left on the lease, HDB buys 40 years of the lease from the owner at market rate with the cash going into a CPF Life annuity in the owner’s name. He receives a monthly income stream for life.

To be eligible, a home owner must be 62 or over, own a three-room or smaller flat, have enjoyed only one housing subsidy and must have lived in the flat for at least five years. The household must also not have owned or currently own a private home and must not have a monthly household income exceeding $3,000.

Ang Mo Kio GRC MP Lee Bee Wah hopes to see the scheme extended to elderly households currently living in four-room flats.

Source: Straits Times, 6 Mar 2010

SECOND concessionary loans from the Housing Development Board (HDB) – once reserved for the most part for upgraders – will be far more widely available from today.

Homebuyers will also be made to dip into their own pockets first before reaching for a loan, with HDB reducing the amount of the second concessionary loans it grants.

Under changes announced yesterday, buyers who move down to smaller flats or to the same type of flat will find it much easier to get the loan.

In the past, second concessionary loans were granted to downgraders only on a case-by-case basis.

The more liberal policy announced by National Development Minister Mah Bow Tan yesterday will help Singaporeans right-size to a home they can sustain over the long-term, to encourage financial prudence.

Mr Mah added that restricting the loan for upgrading might drive households to upgrade even if it were not a prudent move.

‘With greater economic volatility, the flexibility to right-size will be more important… But I hope residents will take that second loan carefully and cautiously,’ he said.

HDB buyers who have sold private properties will remain ineligible for a second concessionary loan.

Many Members of Parliament have been calling for this change for some years.

The HDB said that the change will benefit families which need to right-size to smaller flats but which lack sufficient proceeds from the sale of their existing flats.

It will also be less generous with the way second concessionary loan amounts are awarded.

The loan will be reduced by a homebuyer’s full CPF balance and part of the cash proceeds from the sale of the first flat in an effort to further ensure financial prudence.

But the household can retain at least half of the cash proceeds, or $25,000 in cash, whichever is greater.

The right-sizing of loan amounts will ensure that flat buyers do not take a larger than necessary concessionary loan, reducing the likelihood of subsequent mortgage arrears, the HDB said.

‘(These changes) will help homebuyers manage their finances for their flat purchase upstream, and avoid financial difficulties downstream,’ Mr Mah added.

PropNex chief executive Mohamed Ismail said the changes would allow homeowners to unlock the capital appreciation of their homes over the past three years and to reorganise their finances.

Source: Straits Times, 6 Mar 2010

SINGAPORE’S policymakers have imposed limits on the number of public flats in each block and neighbourhood that can be sold to permanent residents (PRs) to prevent enclaves of foreigners developing in the heartlands.

The new quotas announced yesterday will be set at 5 per cent of flats for Housing Board (HDB) neighbourhoods and 8 per cent for blocks.

Malaysian PRs are excluded from the curbs because of their close historical and cultural ties to Singapore.

The Government has also sharpened the differentiation in housing benefits enjoyed by citizens and PRs.

Under existing rules, all Singaporean couples and couples where a citizen is married to a PR can buy new flats at subsidised prices or apply for housing grants for resale flats.

With immediate effect, a citizen-PR couple will have to pay a $10,000 premium for new flats launched by the HDB.

Citizenship incentive

They will also get $10,000 less in housing grants if they buy a resale home.

But the amount will be restored if the PR family member becomes a citizen or the couple has a child who is a citizen.

National Development Minister Mah Bow Tan, who unveiled the measures yesterday, told Parliament that the changes were to ‘provide an incentive for PRs to take up citizenship… and also reinforce the principle that Singaporeans are our priority’.

Several MPs also raised concerns yesterday about the presence of foreigners in HDB estates.

West Coast GRC MP Cedric Foo noted that property agents have already observed trends that show PRs from Myanmar favouring Jurong West while Filipino PRs are buying at Bukit Panjang.

Mr Mah said the new quota policy will contribute to integrating locals and migrants: ‘Even though PR enclaves are not a problem today, we should put precautionary measures in place early. Otherwise, it might be difficult to unravel problems later.’

PRs comprise about 14 per cent of the population living in HDB flats, according to 2009 figures.

PR families own only 5 per cent of HDB flats; however, there are western and northern towns where this proportion is slightly higher than the 5 per cent average, said Mr Mah.

The HDB said yesterday that 13 out of 162 neighbourhoods islandwide, in towns such as Choa Chu Kang, Bukit Batok, Jurong West and Sengkang, are likely to be affected by the new quota.

The new limits for PRs will apply in addition to the existing Ethnic Integration Policy (EIP), which sets ratios for ethnic groups to ensure a balanced mix in housing estates.

In line with demographic shifts, Mr Mah said the HDB will raise the limit for the category of ‘Indian and Others’ under the EIP from the current 10 and 13 per cent for neighbourhood and blocks, to 12 and 15 per cent respectively.

The Government’s move comes amid rising anxiety among local residents about the impact that PRs have on the public housing market and social environment.

This was reflected in comments made by MPs yesterday in the Budget debate.

Mr Mah explained that ‘there is no evidence that specific buyer groups, like PRs and private property owners, are driving up prices’.

As a proportion of buyers, the number of such buyers remains small, he said.

Mr Colin Tan, director of property consultancy Chesterton International, said that PRs have a slight impact but are not the real reason why HDB resale flat prices are rising.

‘This is due to shortage in supply amid higher-than-expected demand,’ he said.

The impact of the new quota could see demand for HDB flats spread more evenly throughout estates and so moderate price rises, he added.

Residents told The Straits Times that they had mixed reactions to the move.

Mr Khoo Sze Wee, 25, of Jurong West said ‘the PR’s loss in ability to get housing will definitely be our gain. But they shouldn’t be entirely denied housing opportunities’.

PR Lim Bee Lian, 49, felt the new move would restrict housing choices: ‘PRs who have the ability to buy their own flats should be allowed to buy.’

Source: Straits Times, 6 Mar 2010

THE Housing & Development Board (HDB) yesterday unveiled policy changes designed to hurt speculators and make it more expensive for non-Singaporeans to buy government-subsidised flats.

The Board also agreed to make a much campaigned-for change: it will now allow buyers to take a second concessionary loan from HDB even if they downsize to a smaller flat or move to a flat of the same size. Previously, only upgraders qualified for a second concessionary loan.

Announcing these and other measures in Parliament yesterday, National Development Minister Mah Bow Tan noted that public housing is an especially hot issue this year.

‘Someone asked me recently if I was feeling the heat and I don’t think he was talking about the weather,’ Mr Mah quipped, beginning his reply after a slew of questions from Members of Parliament (MPs).

Many MPs were concerned that some buyers were using HDB flats to speculate in the property market and driving up prices in the process. HDB resale prices hit a new high in Q4 2009, with prices climbing 3.9 per cent from the previous quarter. The median cash-over-valuation (COV) for all resale transactions doubled to $24,000 in Q4 from $12,000 in Q3.

Data from HDB shows that the proportion of flat owners who sell their units within three years of purchase rose to 8.9 per cent for the first 10 months of last year. And in 2008, 7.9 per cent of buyers sold their units within three years. In comparison, less than 7 per cent of buyers sold their flats within three years from 2005 to 2007.

To reduce the number of people using HDB flats to speculate in the property market, the time that buyers are required to stay in their flats before reselling them (minimum occupation period or MOP) will be increased to three years for all flats bought in the resale market. Currently, the MOP is 2.5 years for buyers who choose to take up an HDB concessionary loan and just one year for buyers who either take a commercial bank loan or do not take any loan.

‘I want to emphasise that HDB flats are provided primarily for owner-occupation and not speculative profit or rental return,’ said Mr Mah.

The decision to remove the upgrading condition for the second concessionary loan, in comparison, is to encourage greater financial prudence and flexibility among homeowners. Feedback from MPs said that by providing the second concessionary loan only to upgraders, some might inadvertently be driven to upgrade even though it may not be prudent to do so.

‘Since we are now seeing a situation of greater economic volatility, the flexibility to right-size will become more important,’ said Mr Mah.

But the new policy comes with strings attached. Currently, cash sales proceeds from the sale of a flat need not be used for the purchase of the next one. But with the change, sellers can only keep the greater of $25,000 or half of the cash proceeds. The remaining cash and CPF balance has to be used to finance the purchase of the next flat if they take up a HDB concessionary loan.

The lifting of the upgrading condition is expected to benefit about 1,000 households a year. Currently, HDB grants about 4,000 second concessionary loans each year, mostly to households upgrading to bigger flats.

Social impacts

HDB also said that 3,800 more elderly lessees will now benefit from its lease buyback scheme which has been revised. The scheme allows the elderly to monetise their flats by selling the tail end of the flat’s lease back to HDB.

Other measures are calculated to have social impacts. To encourage permanent residents (PRs) to take up citizenship, HDB will withhold $10,000 of the subsidies for a household made up of one citizen and one PR when they buy a HDB flat. Once the PR converts to citizenship, or when the couple has a Singapore citizen child, the Board will return the withheld subsidy.

‘These measures will give greater assurance to citizens that they are our priority, and at the same time, encourage our PRs to view citizenship more favourably,’ Mr Mah said.

A quota cap for PR households of 8 per cent in each block and 5 per cent within each neighbourhood was also announced. It will be applied on top of the ethnic integration policy (EIP) but will not apply to Malaysian PRs. The EIP was also tweaked slightly. In line with demographic shifts, the Indian/Others limit was raised from 10 per cent and 13 per cent at the neighbourhood and block levels to 12 per cent and 15 per cent respectively.

Property analysts said that the revision of the MOP to three years and the removal of the upgrading condition will affect the HDB market.

‘By standardising the MOP at three years, the ‘turnover’ rate is slowed down from one year to three years. This has the effect of preventing ‘flippers’ from pushing up resale prices with their short-term objectives,’ said Eugene Lim, associate director for ERA Asia Pacific.

But PropNex chief executive Mohamed Ismail said that there will be little impact from this policy which will, at most, just encourage buyers to adopt a mid-to-long term view when buying their flat. He feels that the most notable measure was the extension of the second HDB concessionary loan to downgraders.

‘We may see an increase in market activity due to an increase in downgraders,’ Mr Mohamed said. But he declined to predict if there will be an increase in resale flat prices as it is ‘too soon’ to assess the impact.

Noted Mr Lim: ‘With this change in policy, Singapore citizen households are likely to be attracted to take loans from HDB, leaving only PR households to take bank loans. Banks may now have to re-package their loans more attractively as they battle for market share.’

ERA has a 41 per cent share of the resale HDB market and based on its transactions, some 50 per cent of buyers use bank loans, another 40 per cent get loans from HDB and 10 per cent pay for their flats using cash.

Source: Business Times, 6 Mar 2010

To prevent foreign enclaves from forming in HDB estates, the Housing and Development Board (HDB) will introduce a new quota for permanent resident (PR) families buying resale flats, Mah Bow Tan, Minister for National Development said on Friday.

Mr Mah said even though PR enclaves are not a problem today, precautionary measures should be put in place early.

PRs will be subject to quotas of 5 per cent and 8 per cent at the neighbourhood and block levels respectively.

A PR family cannot buy a flat if the neighbourhood or block already has 5 per cent or 8 per cent of flats owned by other PR-PR families.

The quota will only apply to non-Malaysian PRs. Malaysians are excluded, because of Singapore’s close historical and cultural links.

In 2009, PRs make up 14 per cent of Singapore’s resident population. But PR families own only 5 per cent of HDB flats.

Source: Business Times, 5 Mar 2010

The Housing and Development Board (HDB) will remove the upgrading condition for the second concessionary loan to households, Mah Bow Tan, Minister for National Development said on Friday.

What this means in future is that both HDB flat upgraders and those who downsize will be eligible for the second HDB loan, with the focus on helping families to right-size their housing choices, he said.

‘With greater economic volatility, the flexibility to right-size will become more important. Therefore, I have decided to remove the upgrading condition for the second concessionary loan.’

Mr Mah was responding to feedback that by providing the second concessionary loan to households only for upgrading may inadvertently drive some people to upgrade even though it may be more prudent for them not to do so.

Source: Business Times, 5 Mar 2010

To reinforce the principle of owner-occupation and reduce the possibility of speculation, HDB will be raising the minimum occupation period (MOP) for resale of nonsubsidised flats from one and 2.5 years to three years.

National Development Minister, Mah Bow Tan, told Parliament on Friday that this will align the MOP for home owners to resell and fully sublet non-subsidised flats.

The extension of MOP will apply to all flats, not just larger flats, Mr Mah said as the focus of the revised MOP is to foster owner-occupation and not about affordability per se.

Source: Business Times, 5 Mar 2010

National Development Minister Mah Bow Tan announced in Parliament on Friday changes in housing policy to promote citizenship in HDB households and encourage social integration.

To promote citizenship and reinforce the privilege that comes with it, households comprising one Singapore Citizen and one Permanent Resident (PR) will have their CPF Housing Grant reduced by S$10,000 when buying a resale flat. This will also apply to Design, Build and Sell Scheme flats and Executive Condominiums.

Should such households opt for a new flat, they will have to pay a 10,000-dollar premium on top of HDB’s selling price.

Previously, PRs married to Singapore Citizens enjoyed the same subsidies as Singaporean couples. However, HDB will restore the S$10,000 should the PR family member take up citizenship, or if the couple has a child who is Singaporean.

Furthermore, in Parliament on Friday, Members of Parliament (MPs) aired concerns over PR enclaves.

Christopher de Souza, MP, Holland-Bukit Timah GRC said: “It is natural that people feel comfortable with their own kind, from similar backgrounds and culture. However, this could lead to a situation where integration within the Singaporean community is delayed or hampered.”

In response, Mr Mah said on top of fulfilling ethnic quotas under the Ethnic Integration Policy, non-Malaysian PRs will be subject to an additional quota, at 8 per cent at the block level, and 5 per cent at the neighbourhood level. HDB said Malaysian PRs are excluded because of close historical and cultural links.

Mr Mah said: “PR enclaves are not a problem today, but as always, we try to look ahead. And if we see the trend, we should put precautionary measures in place early. Otherwise, it may be too late when the problem is already there, and you have to unravel the problem later.

“It is important that PRs integrate well in our local communities as they are long-term residents of Singapore.”

The Ethnic Integration Policy will also be revised for Indians and other ethnic races living in HDB estates. At the neighbourhood level, their quota will go up from 10 per cent to 12 per cent. At the block level, it will be 15 per cent from the current 13 per cent.

There will be no change to the ethnic quotas for Chinese and Malays. For Chinese, it is 84 per cent at the neighbourhood level and 87 per cent at the block level. For Malays, it is 22 per cent at the neighbourhood level and 25 per cent at the block level.

Source: Channel News Asia, 5 Mar 2010

The Minimum Occupation Period (MOP) for the resale of non-subsidised HDB flats has been revised upwards to three years.

Announcing the change in Parliament on Friday, National Development Minister Mah Bow Tan said the objective of such a move was to reinforce the idea that HDB flats are for owner-occupation.

He stressed that flats are not meant for speculation or short-term profit.

And with the extension of the MOP, he said the demand in the resale market will more accurately reflect the interest from buyers who are buying flats for occupation.

Non-subsidised HDB flats refer to resale flats bought without a CPF Housing Grant.

Currently, those who buy such flats with an HDB loan are subjected to an MOP of 2.5 years.

Those who take a bank loan or do not take a loan at all are subjected to an MOP of one year.

The revised MOP takes effect from Friday but existing lessees of non-subsidised flats will not be affected.

Source: Channel News Asia, 5 Mar 2010