More can be done to make housing affordable for lower income group: analysts

Property market watchers said the HDB resale market is showing signs of cooling. Median cash premiums (cash-over-valuation) for HDB resale flats hit a two and a half year low in July at S$20,000. This is down from a peak of S$35,000 in January 2013.

Resale flat prices also recorded a 0.5 per cent rise in the second quarter, the lowest growth since 2009.

Analysts said this could be the result of various rounds of cooling measures, including the seventh and latest round in January — where tighter loan restrictions were introduced — and the ramped up supply of new flats from the Housing & Development Board, with 25,000 new flats set to be launched in 2013.

Meanwhile, the resale market has still largely been left to market forces.

Analysts added that the government has moved in the right direction to maintain its role as a price setter for new flats.

Eugene Lim, key executive director at ERA Realty Network, said: “The key thing is that the government is moving in the right direction, with the de-linking of the HDB new flat prices from the resale market.

“Basically, by taking control of the setting of prices, HDB is able to control the affordability of housing for the people who are buying the flats. In this manner, they’re able to keep the flat prices affordable to the vast majority of the people.”

National Development Minister Khaw Boon Wan had earlier announced he was also looking at making new flats cheaper. However, observers said that even more could be done to help the lower income group own their own flats.

Associate Professor Sing Tien Foo of the department of real estate at the National University of Singapore, said: “There are a lot of subsidies and grants provided to help those low-income households or families to own a house. I think the issue is now whether these subsidies and grants have actually encouraged or reached out to these group of people.

“For low income households, either they do not have access to these information, or they actually do not quite understand how these policies may benefit them. There may also be constraints, because if your household income is below S$1,500, even though with the subsidies and grants, they may be worried about job security and whether they will be able to service a loan or so on.

“So probably if you have enough support and different schemes to help them, then maybe it would encourage them to apply for some of these houses.”

Another key issue that could be addressed is executive condominiums (ECs). Mr Khaw had earlier pointed to a “sense of inequity” with regard to government subsidies, seeing how EC owners enjoy big profits when they sell their unit.

He added this puts EC buyers ahead of the lower income group, when it comes to government help received.

First-timers buying ECs get up to S$30,000 in family housing grants.

Chris Koh, director of Chris International, said: “Taking away the grant may help to make citizens happier that they’re not helping this group who can afford semi-private housing. But the grant is really not that much if you think about it.

“So even if you take away the grant, you’re still helping them eventually buy semi-private housing. So we need to look at the bigger picture, of whether we still want ECs or not.”

However, other experts said the EC scheme still remains relevant. Assoc Prof Sing said: “I think EC is a very good scheme, especially for households in what we call the sandwiched group of households — where they cannot afford to buy a private condominium, at the same time they’re not qualified to buy a BTO flat.

“I don’t agree with some of the analysts who argue, that the EC causes the price to increase further. If that’s the case, you look at last two years when they actually suspended the EC scheme, when they were trying to review the EC scheme, the private market prices doesn’t come down.”

To keep executive condominiums affordable, some analysts have suggested a re-look at the competitive bidding for land set aside for Ecs. An executive condominium site in Jurong saw a record top bid of close to S$272.8 million, or S$419 per square foot per plot ratio.

Some said this has contributed to rising private property prices as well.

Mr Lim said: “In the beginning when ECs started, the land was not sold on competitive bidding, the land was basically allocated to developers, but on the condition that the pricing will be kept affordable.

“Perhaps this is a route to take to evaluate again, whether it’s in the spirit of keeping EC prices affordable, whether this is the way to go again.”

All eyes will be on the National Day Rally to see if the EC scheme will be tweaked as part of the move to make government housing subsidies more equitable.

Source : Channel NewsAsia – 12 Aug 2013

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