What's the Buzz about $1 million HDB Flat

$1,000,000 HDB flat

What it's all about

HOME prices in Singapore continued to set new records this month, with the sale of a Housing Board flat hitting the psychological $1 million mark.

A resale executive flat in Queenstown is in the process of being sold for a mindboggling $1 million, beating a record set by a Bishan executive maisonette when it sold for $980,000 barely a week earlier.

Just a few days later, it was reported that a 1,680 sq ft HUDC maisonette along Shunfu Road was sold in July for $1.28 million, topping last year's $1.22 million sum for a 1,668 sq ft HUDC flat in the same area.

What's the buzz?

THE record prices have raised concerns that the housing market is still red hot, despite five rounds of cooling measures and the aggressive rollout of new HDB flats.

Analysts attribute the high prices to private-property downgraders who have cashed out and want to live in a flat of comparable size. But they have prompted many to ask: Is this an alarming trend or are these just outliers in a housing market where prices are stabilising?

Flash estimates from the Singapore Real Estate Exchange showed that HDB median resale prices rose 1.8 per cent in the third quarter, after rising 2 per cent in the second quarter.

In the wake of the record prices, National Development Minister Khaw Boon Wan had urged Singaporeans not to be "traumatised" by the sales.

It did not mean that home prices are all going to get exorbitantly high, he said, and urged people to look at general prices for most units.

Prices of new Build-to-Order flats have generally been affordable, he noted, and dismissed the need for additional measures to cool the housing market.

Why it matters

HOUSING prices have long been a hot political issue, though the Government's moves to clamp down on speculation and foreign investment, along with the promise to build 25,000 new flats this year, has taken the fire out of it. But if more record prices appear, it could well re-ignite the issue.

With the United States Federal Reserve launching QE3 - a third round of quantitative easing involving the printing of more money to pump-prime the economy - a flood of hot money is expected to hit Asia's shores again.

This money will be looking for appreciating assets like property to invest in, and will also keep interest rates - and therefore mortgage rates - depressed in Singapore.

And with no end in sight to the low interest rates, the effect of QE3 could be to bring forward demand from prospective buyers who were uncertain about the interest rate environment - thus driving up demand for homes and pushing up prices further.

What's next?

IN HONG KONG, the central bank said it will limit the maximum term on all new mortgages to 30 years, as part of further measures to cool the property market.

In Singapore, many property analysts are predicting home prices will continue rising, with some saying that more cooling measures will be needed.

Others, however, believe that too heavy a hand could kill the market, and plump for fine-tuning existing measures as the best way forward.

Source: The Straits Times – 22 September 2012