HDB resale market holds the key
DESPITE several rounds of cooling measures, property market prices remain stubbornly high, especially in the HDB resale sector which, in my view, sets the pace for price hikes in the market ("Reduced supply pushes prices up"; last Saturday).
So, government measures should be targeted at discouraging price hikes in the HDB resale flat sector.
Thus far, measures have reduced supply more than demand in the resale market, a consequence that arises despite the Government's bid to solve the problem by building more new flats and selling more land for building private condominiums.
There are three reasons the cooling measures are not working:
First, there are buyers who need a flat or apartment quickly, and prefer not to wait two to three years for a build-to-order (BTO) flat.
Second, resale flats tend to be better located, near MRT stations or good schools, while BTO flats are usually in new towns, where amenities are scarcer or uncompleted.
Although there may already be MRT stations built or planned in new towns, the choicest land - that is, the land near the stations - tends to be reserved for private or executive condominiums, relegating BTO blocks to locations further afield.
Third, it is more affordable to buy a resale flat than a private apartment at the same price.
Unlike private properties, in which the buyer must fork out a 20 per cent deposit, resale flat buyers do not have to stump up cash.
So, the buyer can use the cash he has to pay for the seller's stiff cash over valuation (COV) demand.
One way to cool the resale flat market is to attract more potential resale flat buyers to the BTO market by addressing the three reasons that galvanise them into buying from the resale market.
The Government could start building flats before obtaining the usual 80 per cent commitment, which will cut the BTO waiting period.
Some of the better-located plots should be reserved for BTO flats instead of selling them all for the building of private and executive condominiums.
Finally, modify the grant scheme to make it more attractive to buy new rather than resale flats.
Yeo Chee Kean