More subletting HDB flats

The number of Housing & Development Board (HDB) flats being sublet has more than tripled in the past five years.

The reasons include the relaxation of subletting rules, and an increase in foreigners.

With more HDB home-owners using their flats to earn rental income, some analysts are concerned this will lead to a shortage of supply in the resale market.

The number of HDB flats on the rental market has shot up from about 12,500 in 2006 to 40,026 in 2011.

Previously, flat owners could only lease out their flats if they could show proof they had been living overseas for a certain period of time.

Since 2003, the HDB has gradually brought down the minimum occupation period (MOP) after which owners can sublet their flats.

Currently, the MOP is five years for both new and resale flats, regardless of whether they are bought with a government grant.

The units can now be leased out five years after they are bought, and with more foreigners coming to study and work here, there is no shortage of demand.

These include students as well as foreign work permit-holders and employment pass-holders.

One relocation company, Orientations, said the number of expatriates opting to rent an HDB flat has gone up by 30 per cent, between 2010 and 2011.

Many of them are mid-level professionals from Asia who are receiving smaller housing allowances compared to previous years.

Orientations chairman Beverly Mayhew noted that the amenities in some public housing estates — such as swimming pools, transport hubs and recreational centres — make them very appealing to foreigners.

Owners must seek approval from the HDB before the flat can be sublet, and approval is only granted for a maximum of three years, after which the application must be renewed.

Figures from the third quarter of 2011 show that a four-room HDB flat can fetch rents of between S$2,000 and S$2,500 a month, based on median rents in various housing estates.

The going rate for a five-room flat is between S$2,100 and S$3,000.

HDB said allowing owners to sublet their flats gives them a source of supplementary income, while meeting the demand for rental flats.

But one property watcher said the reluctance to sell, has contributed to a shortage of supply in the open market.

Current measures also force dual-home owners to think twice about selling their HDB flat to finance another private property.

This is because if they were to re-enter the HDB market, they would have to sell off their private property within six months of purchase.

That is one reason resale prices in recent years have been hitting the roof.

Property watcher Chris Koh said: “In the past when they upgraded to a private property, the decision was very clear. You either sell away your HDB flat, or alternatively stay in your HDB flat and you rent out your private (property).

“So the distinction was there. Today, once they’ve collected the key to their private property, they can choose to rent out their flat. So they’re put in a position where they have a choice now.

“Once they hear that they can collect a S$3,000-rental every month from their flat, they say I’d rather rent out the flat.”

Mr Koh said authorities should consider enforcing a higher minimum occupation period, if owners wish to sublet.

For instance, he said it could be 10 years for those who wish to sublet, but five, if owners plan to sell.

That way, genuine sellers are not penalised.

“The key thing is to understand what an HDB is for. Whatever we want to call it, it is still government housing. So you cannot be capitalising on a subsidised housing and then subsequently renting out and earning good income from it”, Mr Koh said.

But not everyone shares this view.

PropNex CEO Mohd Ismail said: “I think we should not interfere and tweak with the rental amount, and I think it’s perfectly all right if the market is prepared to pay such an amount, and people who have owned such properties and have legally occupied them, that’s a form of return on their investments.”

HDB said the number of subletting cases remains a small proportion of the nearly one million flats here, and it will continue to monitor the situation.

Source : Channel NewsAsia – 24 Jan 2012

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