More on the HDB Market

Well, now that the news is public, I guess I can talk about it ....

ST Jan 29, 2010
HDB reviews rules to stamp out possible speculation
By Jessica Cheam

THE Housing Board is embarking on a review of its rules to ensure that property speculators are not abusing the system - and driving up flat prices.

It will check if any rules are 'encouraging or allowing' people to speculate on HDB flats, said National Development Minister Mah Bow Tan.

At the same time, it will step up efforts to make sure people do not get away with abusing the system.

No, Mah Bow Tan is not my uncle. However, back in December, I already knew that the HDB would be reviewing its rules to stamp out possible speculation.

How did I know? Back then I was looking for a place to rent. I viewed many homes. And one property agent told me, in a most assured tone, that the HDB was in the process of reviewing its rules and would announce this publicly, in February 2010.

How did she know? She said that she had heard it from her "source", a friend working in the HDB, who constantly gave her the "inside news". She further exclaimed that I was fortunate to have just sold my own HDB flat (otherwise, by February 2010, its market value would very likely have been dampened by the HDB public announcement).

So much for official secrets.

Some disgruntled homebuyers, priced out of a rising market, worry that some HDB buyers are exploiting the rules to try to make a fast profit.

They claim these speculators snap up flats on the resale market and then either rent them out illegally or sell them legally after the stipulated one-year period.

Under HDB rules, citizens and permanent residents who buy resale flats without housing grants or HDB loans must live in the flats for at least one year before selling, or at least three years before renting out the entire flat.

Speaking on the sidelines of a housing conference hosted by the HDB on Wednesday, Mr Mah said these claims were worth checking and he wanted to ensure that such factors were not inflating the market artificially.

The HDB initiative does not impress me. In my opinion, it is at least partially politically motivated.

Mah wants to do something (more importantly, to be seen as doing something). After all, public unhappiness with high HDB prices is already quite palpable. However, the rise in HDB prices has, in my opinion, very little to do with speculation (unless one applies a very liberal definition to the word "speculation"). That's because the existing HDB rules, such as these, already effectively eliminate most of the speculative activity:

1. Resale flats bought on the open market without a CPF housing grant and with a private bank loan can be sold only one year after the date of resale.

2. Owners of HDB flats are allowed to sublet the whole flat only after living in it for three years, (for those who bought it on the open market without a CPF grant), or after five years (for those who bought it directly from the HDB or on the open market with a CPF housing grant).

3. Those who illegally sublet entire flats may have their flat compulsorily acquired or pay a penalty.

HDB flats are rising, simply because of the usual law of supply and demand. For years, this country encouraged a massive inflow of foreigners (and handed out citizenship and PR status generously), but the housing authority didn't factor this into their plans and projections at all. Now the demand for accommodation has outstripped the supply. Simple as that.