Saturday October 24, 2009
Buyers feeling the squeeze
INSIGHT DOWN SOUTH
By SEAH CHIANG NEE
As foreigners with PR status compete with young Singaporeans for public housing, impacting also on private development projects, prices rise and the government limits the entry of foreign arrivals.
SINGAPORE’S public housing, which has gained world acclaim for creating a nation of homeowners, is sagging under the weight of a wave of foreign arrivals.
In recent weeks, the government has been peppered with complaints from Singaporeans — some of them newlywed graduates — about insufficient new subsidised flats despite repeated applications.
One claimed he had failed 11 times while others talked of two or three failed attempts.
The latest public offer of 2,132 new flats for sale drew 20,394 applicants, which means that nine in 10 will be disappointed.
Another 5,000 units will be launched before the end of the year.
The rejected Singaporeans who cannot wait any longer will have to turn to the dearer resale market, where they will face stiff competition from rich foreigners holding permanent residency (PR) status.
PRs made up 40% of buyers in the open market during the past five years, resulting in prices rising by 40%.
One local benefit, however, is that a newly married Singaporean couple is given a S$40,000 (RM97,121) grant to buy a HDB resale unit.
The squeeze is due to two factors: firstly, a PR population hike of 51% to 553,000 since 2004, and secondly, more citizens demanding central or mature areas.
Today’s inadequacy is a far cry from the previous generation’s when the Housing Development Board (HDB) successfully mass-built cheap homes for hundreds of thousands.
One of the earliest stories I wrote as a reporter was about the HDB’s world record of building one housing unit every 45 minutes.
The question of subsidised housing is of crucial importance to Singaporeans who are trying to cope with one of the highest costs of living in Asia.
The passion Singaporeans have for property can only be understood by people living in land-squeezed cities.
After independence in 1965, then Prime Minister Lee Kuan Yew announced the objective of creating a home-owning society.
“If every family owned its home, the country would be more stable … I believe this sense of ownership was vital for our new society,” Lee said later.
Today, 86% of Singaporeans live in HDB flats and more than 90% own their home.
It was Lee’s housing programme that endeared his party to the old generation of squatter-living Singaporeans.
Now, the HDB is facing a strong challenge, catering to a new generation with higher expectations than their parents.
“Its achievement made the PAP (People’s Action Party) one of the most successful parties in Asia; it can also bring it down if it stumbles,” said a professional, who is still paying off a 30-year HDB loan.
Critics have accused the HDB of trying to replace the social task of providing cheap public housing with one dictated more by market forces.
Government officials say the HDB is building enough flats for local needs, and applicants failed to get one — even repeatedly — because they were too choosy, not because of inadequate supply.
“We promise every eligible citizen an affordable flat, nothing about meeting his choice location,” one official added.
There are regulations against speculating on HDB flats but there is no ban on it.
As a result, many Singaporeans and PRs — including those from Malaysia and Hong Kong — have made profits buying and selling resale apartments after a few years.
No foreigner may buy HDB flats but may rent them, also indirectly pressuring supply.
However, PRs are allowed to buy resale units.
Several years ago, there were stories of Hong Kong businessmen settling here as new PRs and making a killing selling their HDB units (the second time entailing a levy on the profits).
The slow building rate is not entirely due to poor anticipation of demand — but also to shrinking living space, particularly in choice areas where prices rose the sharpest.
The older generation was happy to accept any home offered to it, but not today’s.
“Now, people want only new units in a mature estate,” an official said. “Unfortunately, such places are becoming fewer.”
The foreign influx is, of course, the biggest cause of recent price increases.
With Singapore out of recession, financial consultant Leong Sze Hian has predicted another 10% hike in resale HDB prices.
Minister for National Development Mah Bow Tan insists there are sufficient public flats for Singaporeans and prices “remain very affordable”.
Eight out of every 10 first-time applicants of HDB flats would succeed in getting one on their first try, the board said.
In a recent online poll, however, 65% of Singaporeans described HDB prices as totally or slightly unaffordable.
Three out of 10 said they were “barely” so while 5.19% found them comfortable.
The sharp price rise in public flats is generally good news for the vast majority of existing owners, allowing many to sell out and upgrade to private properties.
In a speech during the generation change, Lee likened life in Singapore to a marathon race in which the second lap was about to begin.
For all who finish this race (not merely the “winners”), Lee said one possible reward was to provide everyone a second property.
That was, of course, before the massive arrival of immigrants.
Prime Minister Lee Hsien Loong, whose priority is to contain the problem, has announced that the intake of foreigners will be slowed down.
As Singapore’s population hits five million, the space squeeze is also being felt in the private market.
In the past year, developers have been selling tiny flats of less than 46.45 sq m — the latest on offer being a 26.48 sq m “Mickey Mouse” flat.