The Singapore property "porridge pot" has been searing hot and bubbling vigourously until the government turned down the heat to keep the searing hot temperature but dampen the bubbling.
Essentially, my reading of the policy makers' decision is that they are comfortable with the sky high prices but they are worried about the liquidity situation. In short, the porridge can be kept very hot but "let's not boil the liquid away".
To achieve that, a few measures were put in place. I am not entirely sure that I agree with them but let's have a look. All policies take immediate effect on 30 Aug 2010.
1. Private property owners who buy HDB (government housing) apartments must sell their private properties 6 months after receiving their HDB flats.
I agree with this policy. In effect, if you want to live in subsidized housing, then please give up your private property. People call this an anti-speculative measure. But I find this policy did not go far enough. Whereas "downgraders" (people who move from private housing to public housing) are forced to give up their private properties, "upgraders" (people who move from public housing to private housing) are not required to give up their HDB flat. Why then do we allow subsidized housing dwellers dabble in private property investments but disallow the other way around?
Many netizens have rightly pointed out that subsidized housing should be reserved for Singaporeans - including me - who can ill-afford private housing. Why does the government find it acceptable for people who take a subsidy from it thereafter invest their monies elsewhere instead of paying off the government subsidy?
Some who absolutely adore me will argue that I can well-afford a private apartment. But why should I saddle myself with a mountain of debt when, as a Singaporean, public housing should be a basic right enjoyed by all citizens? Just because I am not married, I am not allowed to buy an HDB flat directly from the government. Yet, if I were to agree to marry - even if it were a bogus marriage just to defraud HDB - I could apply for an HDB flat at a subsidized rate. What logic is there?
2a. Private property owners who flip (sell for a profit) their units within three years of the units becoming "occupiable" will be required to pay sellers' stamp duty (1% for first $180k, 1% for next $180k, and 1% for the rest). Sellers get a third discount for every year they hold on to the property, up to year 3.
2b. HDB flat buyers must now serve a minimum 5 year occupation period in their flat before being allowed to buy a private property.
While these two regulations are actually separate, it does take a genius like me - yes, you did not see wrong! - to place 2(a) and 2(b) together to show the contrastive effect of comparable policies.
Whereas the private property owner is penalised through monetary formats, HDB owners are made to serve time. If we are indeed to discourage speculation, then why do you apply such a light stamp duty for such a short period? Shouldn't the stamp duty penalty stretch over 5 years, just like the way HDB dwellers are "imprisoned" in their flats?
If HDB are indeed public housing, then shouldn't the public be made to make sensible choices for what they want and also for the longer term? One should imagine that HDB dwellers should not be allowed to buy any private properties until they pay off their respective HDB loans. However, make provisions to allow HDB dwellers to "upgrade" or "downgrade" after 5 years. There should not be a penalty from HDB to HDB, since no one is allowed to hoold on to two HDB flats as a matter of government policy.
3. Buyers of a second or subsequent property who have existing loans are now required to pay 10% of the property's price in cash (compared to 5% for those without loans) and 20% from their CPF (Singapore's pension/saving fund) (compared to 15%). In other words, the bank loans extended to first time home owners or those without additional debts will be 80% while for the rest of the population, it will be 70%.
Where is the help promised to the first timers? How about reducing the first timer cost outlay to 5% plus 5%? This was done to spur the housing market when it was in the doldrums. Given the eye popping housing prices now and how singles like me (NOT myself - I wonder why people cannot get this grammar item correct) really don't have that much disposable cash for the downpayment, don't say that by fending off competitors, you are "helping me". If the government is truly genuine in wanting to help me, then show me the money.
Ok, the government cannot do that because the banks are going to be over-exposed? Then how about the government bankrolls me a bridging loan? Cap it at the lower of 5% of the property valuation and 50,000, charge me bank interest rates, and make me repay the entire sum over 5 years. That would help a lot. How about that?
While the housing fiasco has turned every Singaporean with an additional dime to spare into an opportunistic home buyer, there are many a Singaporean out there who are struggling because the pennies they have are shrinking in buying power and they are not accumulating money fast enough to catch up with the property price increases.
There is little logic in "cooling" the magic private property porridge pot. The only time sanity will re-enter the market is when the entire township is covered by porridge and anyone who wanted to get home had to eat his or her way in. But then, it wouldn't be porridge that these people are going to eat.
Logic must prevail and to do so, there must be the political will to correct the imbalances.
6 comments:
My head is spinning. I read and re-read your post several times. I am baffled and bewildered how anyone can afford to buy or rent a home in your country. I do not mean any disrespect. I guess I can count my blessings. Good luck, my friend!
Hi BHD,
I actually left the math out. In 1988, a "5 room HDB flat" (1 master bedroom, 2 other rooms, a hall and a dining room - that's "5" rooms) of about 120 sq m cost $80,800 if one buys it from the HDB. Today, a 5 room HDB flat is probably 110 sq m or less and it costs nearly $400,000 to buy it from the HDB.
I saw a condo development that I liked. The indicative price quoted to me was $820,000 for a 872 sq ft (81 sq m) 2 bedrooms + a study room unit. That works out to a whopping $940 per sq ft.
My sister, who bought a comparable condo unit in the adjacent development (side by side, really!), paid less than $700,000 for it. That was three years ago.
In 3 years, housing prices have gone up 20%! For your info, when the world entered "recession" in 2008, Singapore housing prices remained stout. No correction whatsoever took place.
I need more than blessings and good luck. I need to strike a decent price in the lottery before I can even afford the first 5% cash downpayment for a pad.
For your info, a mickey mouse apartment (usually the size of 4 parking lots or less) cost in excess of $400,000. Smaller units are even pricier in terms of cost per sq foot.
And public housing is no better, given the need to top up additional cash (asked for by the sellers) on top and above the national valuation of the flat. These additional values are now hovering around $50,000 and if you add another 5% cash on the national valuation plus the various stamp duties and lawyer fees and renovation, one must be prepared to stump out $100,000 or more to buy that government flat. Go figure.
So... please find me a nice house near you... I can do with a great neighbour. :)
A single-family house down the street from where I live has a mere 3500sf (325 square meters). It sits on a rather small lot of 1/2 acre (0.2 hectare). It is for sale for only US$550,000, and can be negotiated lower. I would love for you to be my neighbor.
That's less than S$770k...
I should so jump at the opportunity. Buy it and then rent it out. Let the rental take care of the bank loan.
Wonder if that works.
In my estimation, I regret that rental income would be insufficient to cover the costs of carrying a standard loan on that property. Even with historic low mortgage rates, you're looking at approximately US$2900/month on a 30-year fixed rate loan at 4.5% to cover principle, interest, and taxes. Add to that the cost of insurance and maintenance, and you're looking at US$3500/month.
Rental of a house of that size may command US$3000/month or less, so you're in the hole from the start.
As you know, I own and rent some houses, but my initial costs of acquisition were much, much lower and I do not carry loans on any of them. Thus, my rental fees can cover my carrying costs for taxes, insurance, and maintenance. But even then, I am close to breaking even every month. I keep the homes in order to provide affordable housing to community heroes, and to have as an asset that I can sell in the future when I retire and my measly pension and social security requires an infusion of cash.
In Texas there are several two-bedroom house for about $30,000 plus acreage.
Living in Texas - problematical at best for a number of reasons!
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