The government announced in late January 2o10 that they are considering imposing a quota on Permenant Residents (PR) buying resale HDB flats. This is taken from two angles. Firstly, they claimed this is to prevent congregating of groups of nationalities. Next, this is in light of their intention to cool the HDB prices.
In recent times, there are blames on PRs driving up property prices. Are the PRs really guilty of causing property prices to escalate in recent years?
(1) En-bloc
In the years 2005 to 2007, there were many en-bloc in mature private condominium estates. This made residents cash rich. While waiting for their new condo, some opt to purchase a HDB flat as their temporory housing.
With loads of cash on hand, they could easily dish out high Cash Over Valuation (COV). At one stage, a 5-room HDB flat was asking for $100,000 COV. So who drove up COV?
(2) PRs and CPF
Many PRs wouldn't have much CPF funds within the first 5 years of obtaining their PR status. Cash on hand is also limited for many. A simple senario:
- Valuation : $500,000
- Cash Over Valuation : $50,000
- CPF Available Funds : $30,000
- Downpayment : $100,000 (20% valuation) + $50,000 (COV)
- Total Cash Outlay : $120,000 ($150k - $30k CPF). This amt excludes Stamp Fees, etc.
Do PRs have that much money to pay high COV? Not forgetting, the amount above is just a simple illustration on purchasing a HDB flat, and not taking into consideration, renovation, purchase of applicances, etc.
(3) PR Quota
If there is a consistent amount of PRs buying HDB flats and a consistent supply of sellers of HDB flats prior to the quota, with the new quota (limiting PRs to HDB flats), wouldn't that drive up prices?
Demand is now narrowed to limited supply. When Demand exceeds Supply, prices goes up.
(4) Effect on Resale Flats that Can't Be Sold to PRs
If the neighbhour sold his flat at $550,000, would the next seller with similar condition sold his flat at $500,000?
So, how does the policy affect HDB prices?
Sunday, February 28, 2010
Subscribe to:
Posts (Atom)
