Anyway, I have a few burning matters which I must blog about! First and foremost would be Mr Khaw's speech in parliament. Since I am a real estate practitioner, I must first take interest in his speech.
1) Getting a home for the first time home buyer.
This is very important! The first time home buyer makes a large chunk of the people in the market looking for homes. Be it resale or build-to-order. Do not think that the first time home buyer does not have cash on hand. I have many first time home buyers who can turn to their parents for a helping hand to fork out that $50K-$100K cash over valuation for a resale HDB flat. Most parents want their children to live near them. This may take some heat off the resale market. For the next year, cash over valuations should come down, there will be fewer scenarios whereby viewings will be packed with 5-10 groups of buyers vying for the same flat and eventually prices should ease a little. Reason why prices won't crash? These build to order flats are usually in far flung areas like Punggol or Jurong West. Places whereby the estate is less mature. The mature estates like Ang Mo Kio, Bedok and Clementi are the places where the parents of these first timers live. If the parents and children want to stay near each other, they will still have to go and dip their hands in the resale market to buy flats in these mature estates. Moreover, there are some first time home buyers who may want a home with close proximity to central areas and since they are well paid working executives, they will not mind forking out more for a resale flat.
My solution: The minister spoke about building the Bidadari estate. I would advise him to do so as soon as possible. Also, to cater for more BTO projects in highly matured estates. I am sure that there can be sites to be found in these mature estates. Then, if land is limited, build higher HDBs to really maximise the land use. I am sure I can find land available in places like Ang Mo Kio for HDB redevelopment. Why does Far East have to build Centro Residences to be the marquee of Ang Mo Kio? Ang Mo Kio is a predominantly HDB estate. Why not build a Pinnacle like structure in Ang Mo Kio? 60 storeys is just nice. The parent living in the block nearby can easily spot his or her child's home. Talk about family bonding. Think about it Minister Khaw. Create a HDB icon for a town to be proud about on-route to solving our housing shortage problems.
2) Catering for the needy. Those who fall between the cracks.
I feel that more can be done. It is not Singaporeans making noise for the fun of it when we mock about throwing money to the Youth Olympics or when we go big on Formula 1 but yet we should give more back to those in need. I believe the special housing grant does help but then by how much? The maximum the special housing grant can go is $20,000 and that is for households earning less than $1,500 a month. Moreover, this is for those who would like a 2-room flat.
Average Monthly Household Income* | SHG | Flat Types Eligible For With SHG |
Not more than $1,500 | $20,000 | 2-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats |
$1,501 to $1,750 | $15,000 | 2-room or 3-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats |
$1,751 - $2,000 | $10,000 | |
$2,001 - $2,250 | $5,000 | 3-room standard flats in the non-mature estates under Build-To-Order/Sale of Balance Flats |
* Based on average of 12 months
I would think that the majority of applicant should fall under the SHGs of $5,000 or $10,000. This may sound like the government is giving a generous handout but there are a few problems. Why only in non-mature estates? Also, the grant is too little to make a significant impact in their monthly installment. A $10,000 grant broken down in a 30 year loan based on HDB's concessionary rate is about $40.03 per month. Basically the grant serves to lower the monthly installment of the applicant by $40.03. This is almost the conservancy rate for a 3 room flat. I would think that more can be done. If the SHG is insufficient, we must think of more constructive ways to help the needy.
My solution: I believe that since we are talking about increasing the rental flats, could we instead build such flats with the option of the occupant purchasing the flat after a certain period of time? The occupant can have the option of renting the flat from the government first. Perhaps at a nominal rate of about a hundred dollars. However, he is not allowed to make major changes to the structure of the flat since on paper he is the tenant. He is also not allowed to apply for a car park lot as on paper, he has a low income and thus should not have a private vehicle. If he wanted to own the property, make changes to it or have a car lot, he must buy it from HDB at a certain price. The good thing about this system is that we identify the problem, help those who need a place by renting one to them and then hopefully when some start buying over their flat, it will spur others to follow suit.
3) Other groups will be tackled by 4 years.
This is a really dangerous statement. By other groups I would say that Minister Khaw meant the second timers and the HDB upgraders and people aspiring to own private property. Basically I would deem him telling the middle and upper middle class to "hold on" while he settles the first timers and the needy. I really took PM Lee's parliament speech well. He mentioned that we should all have a stake in the country. I would think that he meant that if we all have something to work for, we would be purposeful citizens of Singapore. Basically the gap between the haves and the have nots is getting wider. It is dangerous to have a segregated middle class. A middle class who is well off to live comfortably but have little means to move up the social ladder. The middle class who is stuck in his HDB even though he dreams of owning a condominium or landed property one day. The middle class who has seen his 5 room flat price spike from $400,000 to $600,000 only to find that his dream condominium has risen from $800,000 to $1.6 million in that same period of time. This middle class is well educated, many working professionals with household incomes of about $10,000. The social immobility is startling. I can forsee that the gap between the middle and upper class will only get wider. As an inclusive society, we have to solve this problem together with the two previously mentioned. The middle class is educated, well connected to mass media, affluent enough to enjoy some form of luxury like a personal vehicle. Moreover, with our country's good education system, this group of people is growing. I have friends who seem to resign themselves to never owning a private property or are purchasing private properties overseas. Why then are we letting this educated and affluent group of people place stake holds in other countries when we can let them do so in our own country? Is the current level of private property prices affordable?
Let us take a look at an analogy. A loan of about $650,000 for 25 years at 3% interest would cost about $3,000 a month in installment. This breaks down to $100 a day! I recently went to Bangkok and stayed in a 5 star hotel (which incidentally is larger than a shoebox apartment in Singapore) and I paid $100 a night! Basically if private property prices continue to rise beyond fundamentals, and I believe they are beyond affordability in some categories, then why not just live in a hotel with room service, no hassle of paying electrical and water bills? Imagine a 3 bedroom 99-year leasehold property in Kovan is costing about $1.4 million. The monthly installment for such a suburban property is going to be about $5,000 a month once interest rates start rising!
My solution: The property cooling measures should stay for a long time to come. (sorry developers and REDAS) We need them to stablise prices. To further moderate this overheated property market, much more land should be released. The introduction of a property gains tax should be done. Singaporeans taxed a certain rate, permanent residents and foreigners a higher rate. This tax should be implemented on PRs investing in HDB properties as well. PRs should also not be allowed to rent out their HDB flats.
Hopefully my message gets across to the minister somehow.
To quote Maslow's hierarchy of needs...
My solution: I believe that since we are talking about increasing the rental flats, could we instead build such flats with the option of the occupant purchasing the flat after a certain period of time? The occupant can have the option of renting the flat from the government first. Perhaps at a nominal rate of about a hundred dollars. However, he is not allowed to make major changes to the structure of the flat since on paper he is the tenant. He is also not allowed to apply for a car park lot as on paper, he has a low income and thus should not have a private vehicle. If he wanted to own the property, make changes to it or have a car lot, he must buy it from HDB at a certain price. The good thing about this system is that we identify the problem, help those who need a place by renting one to them and then hopefully when some start buying over their flat, it will spur others to follow suit.
3) Other groups will be tackled by 4 years.
This is a really dangerous statement. By other groups I would say that Minister Khaw meant the second timers and the HDB upgraders and people aspiring to own private property. Basically I would deem him telling the middle and upper middle class to "hold on" while he settles the first timers and the needy. I really took PM Lee's parliament speech well. He mentioned that we should all have a stake in the country. I would think that he meant that if we all have something to work for, we would be purposeful citizens of Singapore. Basically the gap between the haves and the have nots is getting wider. It is dangerous to have a segregated middle class. A middle class who is well off to live comfortably but have little means to move up the social ladder. The middle class who is stuck in his HDB even though he dreams of owning a condominium or landed property one day. The middle class who has seen his 5 room flat price spike from $400,000 to $600,000 only to find that his dream condominium has risen from $800,000 to $1.6 million in that same period of time. This middle class is well educated, many working professionals with household incomes of about $10,000. The social immobility is startling. I can forsee that the gap between the middle and upper class will only get wider. As an inclusive society, we have to solve this problem together with the two previously mentioned. The middle class is educated, well connected to mass media, affluent enough to enjoy some form of luxury like a personal vehicle. Moreover, with our country's good education system, this group of people is growing. I have friends who seem to resign themselves to never owning a private property or are purchasing private properties overseas. Why then are we letting this educated and affluent group of people place stake holds in other countries when we can let them do so in our own country? Is the current level of private property prices affordable?
Let us take a look at an analogy. A loan of about $650,000 for 25 years at 3% interest would cost about $3,000 a month in installment. This breaks down to $100 a day! I recently went to Bangkok and stayed in a 5 star hotel (which incidentally is larger than a shoebox apartment in Singapore) and I paid $100 a night! Basically if private property prices continue to rise beyond fundamentals, and I believe they are beyond affordability in some categories, then why not just live in a hotel with room service, no hassle of paying electrical and water bills? Imagine a 3 bedroom 99-year leasehold property in Kovan is costing about $1.4 million. The monthly installment for such a suburban property is going to be about $5,000 a month once interest rates start rising!
My solution: The property cooling measures should stay for a long time to come. (sorry developers and REDAS) We need them to stablise prices. To further moderate this overheated property market, much more land should be released. The introduction of a property gains tax should be done. Singaporeans taxed a certain rate, permanent residents and foreigners a higher rate. This tax should be implemented on PRs investing in HDB properties as well. PRs should also not be allowed to rent out their HDB flats.
Hopefully my message gets across to the minister somehow.
To quote Maslow's hierarchy of needs...
Based on this pyramid, the Ministry of National Development is the most important ministry there is for Singaporeans.
Yours Sincerely,
Daryl Lum
(+65) 9009 8731
visit my website @ www.DarylLum.com
read my blog @ www.DarylLum.blogspot.com
