HDB - Isn't high prices good?

[longbow]

Lots of hype about HDB/Private Property Prices.

Isn't high resale prices good?

High prices reflect demand and that mean that older generation, esp those without CPF (taxi drivers, tutors, parttimers, small business), that need the money to retire can cash out on their flats by downgrading to a smaller flat. Many of them are empty nesters so they can sell their 4/5 rm for $450K and buy a 2 or 3 room for under $200K and have $250K to retire on.

HDB should relax rules (I believe one can have 2 dips) and allow those that own their flat for more than 20 years a second dip at buying new flats from HDB and keep profits.

Also with high prop demand they can chose to rent out rooms or rent out their whole flat and move in with their children (depending on their situation). That can net them bet $600 to $1.5K per month.

So high prop prices are good for majority of Singaporeans.

For the new buyers complaining about high prices, buying a new HDB is entirely affordable based on the 30 year loan. A way to help make it even more affordable is to allow those that have completed their 2 year NS an additional grant.

HDB could also offer purpose built rental flats to newly married couple that have booked a flat and are waiting for new flat to be built. That way they have their own space and can start a family sooner. These rental flats should be of better quality and have 3 rms (nice size for young family starting out), partially furnished with kitchen, cupboards (so that money is not wasted on furniture that they cannot bring to their new flat) and they can be rented for $800 to $1K - about what the typical housing payment will be.

Gov keeps lamenting about insufficient babies but they fail to realize that NS commitment (2years) as well as the 3 to 4 year wait for an affordable flat makes it difficult to start a family. Rental flats can be reserved the moment couple starts hunting for a new flat. Supply should be such that waiting list be under 6 months.

I think part of the unhappiness over high prices of HDB flats has to do with how they call it subsidized housing - pretty much the only perk true blue NS serving Singapore has over PR and FT. They should not call it subsidized flats but instead call it specially priced or discounted flats. Subsidized flats gives the impression that the Government is taking money out of its pockets to "subsidize" the citizens - which it does not. It is just that in most cases, Gov has less money to put into its pockets by selling HDB flats.

Property appreciation is a good thing at least for the 83% of Singaporeans that have an HDB.

 

[zuoom]

it's good if it can be maintained.

not so good if one thing leads to another, ie: falling HDB prices, leading to falling valuation, loans etc..

 

[halsey02]

Good..for more good years..SWISS STANDARD of LIVING..and ASSEtS enhancement... we upturn the downturn..sing, sing a song, make it simple...sing out strong...."UPTURN THE DOWNTURN"....

 

[dysentry]

stock market only has one last suckers' rally high in Nov or none at all... P3 crash coming...

 

[makapaaa]

What about the next generation? Indeed they have chosen to let the misery end in their generation by remaining single or not having children if they cannot emigrate. This is something the Familee is only too happy to see and justify in replacing them with FTrash to perpetuate their power!

 

[trulysingapore]

You mentioned that high price reflects high demand. that's only half the story. because price cannot be determined by demand alone. it has to be determined by both demand and supply. so all else being equal, high price tends to mean that supply cannot meet demand.

just like demand for rice. everybody eats rice. so demand for rice is great. but so too is supply. how much rice you want to eat, suppliers can import. so price is kept low. once in a while there is a bad crop, supply is constricted and price shoots up suddenly.

in the case of HDB, it's clear that there has been a sudden boomz in people but building of housing hasn't quite kept up.

now is high price good?

depends on who you are. for the seller, good. but for the buyer, bad. suppose the price shoots up by $100,000. the seller earns $100,000, the buyer loses $100,000. In other words, price increase is a zero sum game, like gambling. what one gains is at the expense of another.

notice it is not like selling an ice cream. when i pay the ice cream man $1, that $1 sets a chain in motion that leads to the production of the ice cream. you create employment for a lot of people and a lot of people are productively engaged in producing a good for you. in other words, this is real economy.

gambling is not real economy. it's transfer of money. that's it, pure and simple. similarly, when your HDB balloons by $100,000 overnight, it is no different from you kena Toto or 4D. it is no different from gambling.

is gambling desirable? most certainly not. because you're just transferring wealth from one to the other. it doesn't lead to the productive employment of human capital.

let's look at the changing of hands of a resale flat. let's say someone's flat appreciated by $300,000 over 20 years. so it ought to be good for that person because he has 'earned' $300,000. but someone else will end up paying for that $300,000. so from a nation's perspective, it is a zero sum game that adds up to nothing.

let's then look at the sale of new flats from govt to citizens. because new flats are pegged to old flats, there would be a commensurate appreciation of new flats too. let's say $200,000. so now, the new buyer pays $200,000 but who gets that $200,000? it's the govt!

so you see, the one player that always benefits in price increases is the govt. the rest of us are just gamblers with no net winners. also, since sellers tend to be older folks and buyers tend to be younger folks, what we have is simply younger folks paying for the gain of the older folks.

so if an old folk gained $300,000, all else being equal, his only child (if he only has one child) will end up paying that $300,000. if he has two or more children, his gain will be outweighed by the losses of his children.

so the only way to register a real gain in such a situation is to not have children ...

 

[trulysingapore]

we can't really say that price rise is good for 83% of the people. because its only a paper gain and unless you actually sell it, the gain is not realised. so if all 83% were to realise their gains, all would have to sell their flats. that would mean a total of say 400,000 flats to be sold. where to get buyers for 400,000 flats if everybody sold their flats?

so the correct number to use is the actual number of flats that were actually resold for a profit. but for every reseller that made a profit, there would be a corresponding fella who made a loss.

so the net profit if you look at the resale market, is zero.

 

[kakowi]

with high prices, you may not be able to accumulate the minimum sum

in which case, the bulk of your cpf goes to hdb

the remainder of your cpf goes to minimum sum

and the residual goes to medisave

 

[1sickpuppy II]

You mentioned that high price reflects high demand. that's only half the story. because price cannot be determined by demand alone. it has to be determined by both demand and supply. so all else being equal, high price tends to mean that supply cannot meet demand.

just like demand for rice. everybody eats rice. so demand for rice is great. but so too is supply. how much rice you want to eat, suppliers can import. so price is kept low. once in a while there is a bad crop, supply is constricted and price shoots up suddenly.

in the case of HDB, it's clear that there has been a sudden boomz in people but building of housing hasn't quite kept up.

now is high price good?

depends on who you are. for the seller, good. but for the buyer, bad. suppose the price shoots up by $100,000. the seller earns $100,000, the buyer loses $100,000. In other words, price increase is a zero sum game, like gambling. what one gains is at the expense of another.

notice it is not like selling an ice cream. when i pay the ice cream man $1, that $1 sets a chain in motion that leads to the production of the ice cream. you create employment for a lot of people and a lot of people are productively engaged in producing a good for you. in other words, this is real economy.

gambling is not real economy. it's transfer of money. that's it, pure and simple. similarly, when your HDB balloons by $100,000 overnight, it is no different from you kena Toto or 4D. it is no different from gambling.

is gambling desirable? most certainly not. because you're just transferring wealth from one to the other. it doesn't lead to the productive employment of human capital.

let's look at the changing of hands of a resale flat. let's say someone's flat appreciated by $300,000 over 20 years. so it ought to be good for that person because he has 'earned' $300,000. but someone else will end up paying for that $300,000. so from a nation's perspective, it is a zero sum game that adds up to nothing.

let's then look at the sale of new flats from govt to citizens. because new flats are pegged to old flats, there would be a commensurate appreciation of new flats too. let's say $200,000. so now, the new buyer pays $200,000 but who gets that $200,000? it's the govt!

so you see, the one player that always benefits in price increases is the govt. the rest of us are just gamblers with no net winners. also, since sellers tend to be older folks and buyers tend to be younger folks, what we have is simply younger folks paying for the gain of the older folks.

so if an old folk gained $300,000, all else being equal, his only child (if he only has one child) will end up paying that $300,000. if he has two or more children, his gain will be outweighed by the losses of his children.

so the only way to register a real gain in such a situation is to not have children ...

Hey don't forget even if after u sold your flat u can't take back the whole sum hor. U still have to pay the govt 22% of the sales right so in the end damn if u buy damn if u sell.

 

[longbow]

I did say that HDB should shoulder part of the blamed. They failed to anticipate the success of the Gov's job creation scheme which attracted so many PR and FT into Singapore.

Remember that this influx was pretty quick and sudden and the chart shows that much of the influx was over the last 3 to 4 years. The Pinnacle/Duxton project was launched in 04/05 and they were only going for $300K plus which was reasonable given the cost, complexity and location of the project. So in 2005 HDB demand was moderate. As you know, it takes time to build new flats so yes supply cannot meet demand at the moment.

Are high prices good? I think if you were to take a poll and ask Singaporeans if they would prefer that their flats be worth 20% more or less, 90% will want their assets to be worth more. Most Singaporeans look at their CPF as their savings. And it makes sense too since CPF is about 1/3 of income (used to be 40%). And most of this savings went into housing. So Singaporeans were asset rich but cash poor. Not good for retirement. And drop in housing prices will mean a bad retirement for many SIngaporeans.

As for the new buyers of property, they can always buy direct from HDB and prices there, after factoring in grants, are still reasonable for most. There is this shortage of new flats but HDB is ramping up demand.

Insufficient supply of new flats is the crux of the problem. New couples cannot afford flats from the resale market because they would be competing with the more PRs and rental units that are fetching good returns (new units cannot be rented out). Furthermore these PR probably have more income than typical new flat buyer so they can afford the $100K COV. As such if they want move to their own place they have little choice - supply of new BTO is scant and they cannot afford resale units.

Now if high housing prices is because of a bubble then it can be a zero sum game. However, we are seeing stats showing huge increases in FT/PR (fantastic). Singapore is now at 5M and they are planning for 6M. So this might not be a bubble. We walk around Singapore and MRT is crowded, food courts are packed and the number of foreigners has increased dramatically. If there is actual demand then it is not a zero sum game. Somehow Singapore Gov has created a lot of new wealth which as a result required lots of FT/PR to participate in this new engine of growth. So this is new money we are talking about that is pushing up prices. Lots of new money chasing limited flats.

In a way it is like Apple shares. The person selling Apple shares can cash out and go have a nice vacation. But what he has gotten cash exchange for all future benefits/liability of Apple. The person buying the shares are looking at potential future benefits from owning Apple shares. Maybe the new Apple Tablet will become the new interface and replace the PC. If so then the new owner will then to reap the gains. Our ability to buy new HDB flats is like Apple giving their employee stock options. We buy at 230K (discount to the market) but have a 5 year vesting period and can only sell after 5 years at price of $400K.

For the avg Singaporean, their parents can cash out and retire on their $250K profits (a good thing). Their children can gain access to this profit machine by buying direct from HDB. Lets assume that there are enough new flats to meet demand (something which HDB is desperately trying to do). It is not a zero sum game.

Anyway, I still believe that high prices are good provided that the high prices are not a result of a bubble but instead the high prices are due to the fantastic job creation scheme (no idea where these jobs are coming from) which is increasing the population.

You mentioned that high price reflects high demand. that's only half the story. because price cannot be determined by demand alone. it has to be determined by both demand and supply. so all else being equal, high price tends to mean that supply cannot meet demand.

just like demand for rice. everybody eats rice. so demand for rice is great. but so too is supply. how much rice you want to eat, suppliers can import. so price is kept low. once in a while there is a bad crop, supply is constricted and price shoots up suddenly.

in the case of HDB, it's clear that there has been a sudden boomz in people but building of housing hasn't quite kept up.

now is high price good?

depends on who you are. for the seller, good. but for the buyer, bad. suppose the price shoots up by $100,000. the seller earns $100,000, the buyer loses $100,000. In other words, price increase is a zero sum game, like gambling. what one gains is at the expense of another.

notice it is not like selling an ice cream. when i pay the ice cream man $1, that $1 sets a chain in motion that leads to the production of the ice cream. you create employment for a lot of people and a lot of people are productively engaged in producing a good for you. in other words, this is real economy.

gambling is not real economy. it's transfer of money. that's it, pure and simple. similarly, when your HDB balloons by $100,000 overnight, it is no different from you kena Toto or 4D. it is no different from gambling.

is gambling desirable? most certainly not. because you're just transferring wealth from one to the other. it doesn't lead to the productive employment of human capital.

let's look at the changing of hands of a resale flat. let's say someone's flat appreciated by $300,000 over 20 years. so it ought to be good for that person because he has 'earned' $300,000. but someone else will end up paying for that $300,000. so from a nation's perspective, it is a zero sum game that adds up to nothing.

let's then look at the sale of new flats from govt to citizens. because new flats are pegged to old flats, there would be a commensurate appreciation of new flats too. let's say $200,000. so now, the new buyer pays $200,000 but who gets that $200,000? it's the govt!

so you see, the one player that always benefits in price increases is the govt. the rest of us are just gamblers with no net winners. also, since sellers tend to be older folks and buyers tend to be younger folks, what we have is simply younger folks paying for the gain of the older folks.

so if an old folk gained $300,000, all else being equal, his only child (if he only has one child) will end up paying that $300,000. if he has two or more children, his gain will be outweighed by the losses of his children.

so the only way to register a real gain in such a situation is to not have children ...

 

[Papsmearer]

Lots of hype about HDB/Private Property Prices.

Isn't high resale prices good?

High prices reflect demand and that mean that older generation, esp those without CPF (taxi drivers, tutors, parttimers, small business), that need the money to retire can cash out on their flats by downgrading to a smaller flat. Many of them are empty nesters so they can sell their 4/5 rm for $450K and buy a 2 or 3 room for under $200K and have $250K to retire on.

Your kind of comments and thinking is what is afflicting the general population. Poor thought out and essentially dangerous. U are basically asking people to speculate on real estate and than retire on the profit. Any professional financial advisor will tell you that is dumb. Your retirement fund should be something that grows for sure, gives you interest and IS THERE when you need it. CPF is supposed to do that, although that is not going to be the case in the future. Under your premise, empty nesters will make loads of money. This is fallacious. Many people have lost money selling their flats in the past few years. Also, you don't know how much you can net out for sure if they do what you say. Your premise assumes that an older generation maybe bought a flat 30-40 years ago (started their working lives in their early 20s and now 40 years later want to retire in their 60s) for $20,000, now got no mortgage and can sell it for $450K. In the first place, how many people stay in their same flat for that length of time? In all probabilty, they upgraded along the way into a newer flat and they are not carrying a mortgage. Or the HDB demolish their estate and they had to buy in a newer estate and therefore still have a mortgage. And will someone really pay $450K for a older flat?

HDB should relax rules (I believe one can have 2 dips) and allow those that own their flat for more than 20 years a second dip at buying new flats from HDB and keep profits.

Also with high prop demand they can chose to rent out rooms or rent out their whole flat and move in with their children (depending on their situation). That can net them bet $600 to $1.5K per month.

So high prop prices are good for majority of Singaporeans.

High property prices are good for Sinkies? Are u crazy? The root cost of our need to import in cheap FT is because we are so expensive due to the property prices. High property prices mean that native sinkies must demand a higher salary or they cannot make ends meet due to the higher mortgage amount they need to carry. High porperty prices also spill over into the commercial market, making office rents, and shop rents more expensive, and translating that into higher retail prices for sinkies. If the Ah Pek used to pay $30K for his kopitiam at the bus interchange, and now has to pay $500K for his kopitiam, do you think he can still sell makan at the old price?


For the new buyers complaining about high prices, buying a new HDB is entirely affordable based on the 30 year loan. A way to help make it even more affordable is to allow those that have completed their 2 year NS an additional grant.

Affordability is based not only on the loan amount. It assumes that you can get a job that will pay enough that you will be able to debt service the mortgage, plus all the attendent costs like conservancy charges, etc. Also where is your down payment going to come from? When you are competing with FTs whose cost structure is essentially in their home countries, how do you win?

HDB could also offer purpose built rental flats to newly married couple that have booked a flat and are waiting for new flat to be built. That way they have their own space and can start a family sooner. These rental flats should be of better quality and have 3 rms (nice size for young family starting out), partially furnished with kitchen, cupboards (so that money is not wasted on furniture that they cannot bring to their new flat) and they can be rented for $800 to $1K - about what the typical housing payment will be.

Again, you are under some kind of illusion. The problem of a low birth rate and the later ages of new new mothers and newly married cannot be solved by giving them a new flat. The problem is much deeper, with job stress, desire to start a career first, inability to find child care, cost of raising a kid, etc.

Gov keeps lamenting about insufficient babies but they fail to realize that NS commitment (2years) as well as the 3 to 4 year wait for an affordable flat makes it difficult to start a family. Rental flats can be reserved the moment couple starts hunting for a new flat. Supply should be such that waiting list be under 6 months.

I think part of the unhappiness over high prices of HDB flats has to do with how they call it subsidized housing - pretty much the only perk true blue NS serving Singapore has over PR and FT. They should not call it subsidized flats but instead call it specially priced or discounted flats. Subsidized flats gives the impression that the Government is taking money out of its pockets to "subsidize" the citizens - which it does not. It is just that in most cases, Gov has less money to put into its pockets by selling HDB flats.

Property appreciation is a good thing at least for the 83% of Singaporeans that have an HDB.

The HDB can simply do what the Malaysians do. Have one price for native born sinkies and another price for non citizens. No need to talk cock about subsidized flats, and invoke stupid formulas to explain this, etc.

 

[halsey02]

with high prices, you may not be able to accumulate the minimum sum

in which case, the bulk of your cpf goes to hdb

the remainder of your cpf goes to minimum sum

and the residual goes to medisave

I have already donated to the 'gambling pool' with my hard earned "blood, sweat & tears" money; thank you to the 66.6% nitwits who gave them the MANdate...

I will see my money, if I live till then, in trickles...while I have to leave behind a huge sum for their disposal...

 

[Cestbon]

Good for those clear their mortage eg. older generation buy flat in 1980~1990.
But bad for those planning to buy 1st HDB flat.

 

[kakowi]

high hdb prices can be good for the PAP

if you pay such high prices, you will want to make sure that the PAP remain in your estate so that it will be looked after by the HDB, grassroots organizations and maybe your MP so that it will continue to grow in value

 

[chinkangkor]

For the younger generations who buy high now at $500k, will they be able to sell at $1million when they grow old and need cash for retirement? Are we postphoning the problem of the old today of insufficient retirement funds to the future?

A 30-year loan requires job stability, which sadly is non-existent today. What we face is increasing job insecurity and more intense job competitions, which make long-term loans highly undesirable. This is a needless addition to the already highly stressful life of S'poreans.

 

[hockbeng]

You mentioned that high price reflects high demand. that's only half the story. because price cannot be determined by demand alone. it has to be determined by both demand and supply. so all else being equal, high price tends to mean that supply cannot meet demand.

just like demand for rice. everybody eats rice. so demand for rice is great. but so too is supply. how much rice you want to eat, suppliers can import. so price is kept low. once in a while there is a bad crop, supply is constricted and price shoots up suddenly.

in the case of HDB, it's clear that there has been a sudden boomz in people but building of housing hasn't quite kept up.

now is high price good?

depends on who you are. for the seller, good. but for the buyer, bad. suppose the price shoots up by $100,000. the seller earns $100,000, the buyer loses $100,000. In other words, price increase is a zero sum game, like gambling. what one gains is at the expense of another.

notice it is not like selling an ice cream. when i pay the ice cream man $1, that $1 sets a chain in motion that leads to the production of the ice cream. you create employment for a lot of people and a lot of people are productively engaged in producing a good for you. in other words, this is real economy.

gambling is not real economy. it's transfer of money. that's it, pure and simple. similarly, when your HDB balloons by $100,000 overnight, it is no different from you kena Toto or 4D. it is no different from gambling.

is gambling desirable? most certainly not. because you're just transferring wealth from one to the other. it doesn't lead to the productive employment of human capital.

let's look at the changing of hands of a resale flat. let's say someone's flat appreciated by $300,000 over 20 years. so it ought to be good for that person because he has 'earned' $300,000. but someone else will end up paying for that $300,000. so from a nation's perspective, it is a zero sum game that adds up to nothing.

let's then look at the sale of new flats from govt to citizens. because new flats are pegged to old flats, there would be a commensurate appreciation of new flats too. let's say $200,000. so now, the new buyer pays $200,000 but who gets that $200,000? it's the govt!

so you see, the one player that always benefits in price increases is the govt. the rest of us are just gamblers with no net winners. also, since sellers tend to be older folks and buyers tend to be younger folks, what we have is simply younger folks paying for the gain of the older folks.

so if an old folk gained $300,000, all else being equal, his only child (if he only has one child) will end up paying that $300,000. if he has two or more children, his gain will be outweighed by the losses of his children.

so the only way to register a real gain in such a situation is to not have children ...

Well said!

Ultimately somebody has to pay for it. And it's going to be the next generation who will suffer.

HDB flats should be a depreciating asset. Remem its 99 yrs lease.

I see so many young sporeans speculating in real estate, and so many ppty agents trying to make an easy buck.
It's so unproductive. There is nothing real that is produced or exported. Nobody wants to get a proper job and earn a decent living.

Everybody wants fast $ without having to work for it.

If everyone in spore becomes a "investor" or ppty agent Fulltime, who is going to do the real work that powers the economy?

Vote opposition next GE. That's the cure for this disease!

 

[hockbeng]

For the younger generations who buy high now at $500k, will they be able to sell at $1million when they grow old and need cash for retirement? Are we postphoning the problem of the old today of insufficient retirement funds to the future?

A 30-year loan requires job stability, which sadly is non-existent today. What we face is increasing job insecurity and more intense job competitions, which make long-term loans highly undesirable. This is a needless addition to the already highly stressful life of S'poreans.

Disease = HDB

Cure = opposition

 

[trulysingapore]

longbow,

i agree with you that if we poll singaporeans, most will say asset appreciation is good. the problem is, most singaporeans don't understand that it is actually bad for them. the logic speaks for itself. go relate the logic to anybody. if he is a reasonable person, he would ponder and realise that it is indeed true. asset appreciation is good only if you have no children. the moment you set up a family, what you gain will be paid for manifold by your children's generation. many people simply don't understand that.

you say that buying direct from HDB is the solution. but the HDB pegs the price of new flats to the price of old flats. in just two years, old flats in Punggol appreciated by 33%. HDB gives a discount of about 10% - 15%. The new flat ends up becoming more expensive. so you can't run away from paying more, even if you're buying direct from HDB. the pain is less though, so you don't even realise you're being slowly cooked to death.

Many FTs coming in means it is a gain for us? think about it, would FTs come to give money or come to make money? many of them buy units for investment. when prices go up, they sell for a profit. who pays for them? it can be other FTs but it can also be singaporeans. and because property markets are all interconnected, ultimately, every singaporean that pays more ends up losing. so it is a zero sum game.

you liken the property market to that of the stock market. your comparison is right. but should the property market become like the stock market? people can choose not to buy stocks. but can people choose not to buy property? property is a roof over our heads. it is a basic necessity. it is like rice. price of rice is controlled. when it shoots up, the govt takes quick measures to bring in more supplies to calm down the price. the same goes for property. it is a basic necessity and shouldn't be allowed to fluctuate like stock prices.

you still don't get it. if the parents cash out $250K, it wouldn't be enough for three more $250K flats for three children. if it's just one child, then yes, the $250K the parents make equals the $250K the child has to pay. other than that it is a loosing situation. not even zero sum. zero sum is for the entire nation. for a family with two or more children, its a losing game.

if price increases is the result of job creation, can it shoot significantly higher than salary increases? just by looking at that, you'd get a lot of insight as to whether or not we're being sucked dry by our govt.

 

[Zombie]

Ok then....... but where are your solutions?

 

[trulysingapore]

It's the same with rice. the govt keeps very close tabs with rice price and is very quick to find supply to keep prices stable.

similarly, the govt must constantly keep track of the balance between supply and demand. supply takes years to ramp up. so the only other thing that can be better controlled is demand.

control the rate of immigration, control the flood gates to ensure that people can keep their heads above the water.