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property buyer: Are you overpay for HDB in SIngapore?

December 15, 2010

in Community Blog


“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property expected to continue to rise despite govt measures, Karamjit Singh) We read Mr. Singh’s comments and we did a little greater groundwork. We agree with Mr. Singh’s comments. (Read the following for the comprehensive Analysis) Singapore’s inhabitants (in ‘000s) with respect to the Singapore department of statistics are: – Year Total Singapore Residents 2000 — 4,027.9 — 3273.4 2001 — 4,138. — 3,325.9 2002 — 4,176. — 3,382.9 2003 — 4,114.8 — 3,366.9 2004 — 4,166.7 — 3,413.3 2005 — 4,265.8 — 3,467.8 2006 — 4,401.4 — 3,525.9 2007 — 4,588.6 — 3,583.1 2008 — 4,839.4 — 3,642.7 2009 — 4,987.6 — 3,733.9 The population growth in 2006 over 2005 is a net increase of 135,600 The population growth in 2007 over 2006 is a net surge of 184,000 The inhabitants increase in 2008 over 2007 is a net surge of 250,800 The inhabitants increase in 2009 over 2008 is a net boost of 148,200 There is a nice table at http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html which shows the relative growth rates of HDB. We are not against importing talent, but not even the USA have such a huge import quota. We are worried that the government has run out of ideas to grow the economy and is resorting to brute force economic expansion. Based on household size of 3.5 people (Source: Singstat), this would translate into a potential Singapore private property housing demand of: – 2006 – 38,743 units 2007 – 52,571 units 2008 – 71,657 units 2009 – 42,342 units “In year 2006, we were building about 2,400 new flats. This year, we are building about 8,000-plus new flats. Supply has gone up to meet demand. That’s why HDB prices have gone up but they have not gone through the roof.” (Source: Straits times)
Is that demand enough? HDB talk like they have built a lot, but they have under-built by a large margin.


The norm for tenors of Home loan in Singapore is also becoming 25 years and 30 years. This means you will work till you die. 

MASS Real estate market HDB BEING PROPPED UP


Several of these new stocks were “Built-to-order” flats which often can take three or four yrs to finish adding to serious shortages of HDB flats. Singapore resident’s demand from Household formation (Marriages) come in at a range of 23,000 to 25,000. These new families clearly need someplace to lodge. Why didn’t the HDB prepare for the need? Marriage rates is a situation which is very undemanding to guess and very consistent over the years. Besides that, although not all immigrants are given Permanent resident (PR) status, these people can usually end-up staying somewhere raising leasing yields. Rental rates are being pushed up. Mass market HDB property prices are now being pushed up. WHAT IS THE LIKELY Result? Without much alternative, Fussy Singaporeans will be forced to make a decision undesirable locations such as Punggol which in the past has unwanted units. Not only that, some may not wait and instead go directly to buy private housing. HDB flat owners whose valuations have risen and are sitting on profits will now consider to sell their HDB and buy a private unit instead. There is currently no shortgage of supplies of Private properties at around 60k units over several years. This is easily 7 to 8 years of supply based on average consumption trend. The end outcome is that a greater proportion of people would certainly end up living in Condominiums and private apartments. This will deplete supplies and bring smiles to property developers in Singapore. The Singapore government on the contrary could be pleased that prices of land will surge and reach the land’s minimum reserve price to trigger a bidding process. Extra land sales equal more revenues for the government. And more builders bidding for land means higher prices. These higher prices are then translated into higher priced real estate. Singaporeans have to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the significant price ingredient is the land price.



Singapore has improved upon the art of micro-management. At $8000 family income, HDB income limit, you are unable to buy HDB flats. At $10,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore. At a household income of $10,000 onwards, the Singapore government highly encourgage you to move upwards in consumption. Consumptions helps growth tax revenues (annual real estate tax, stamp duty, transaction fees for real estate agents which translate into taxes), and helps the economy in generating jobs. Exactly what THIS Suggests For THE SINGAPORE PROPERTY BUYERS AND THEIR home loans? In the event you are Singapore Property Buyers, you have to be knowledgeable that there is certainly a steady move in Singapore Government plan in play. The government is the largest land-owner, it can regulate supply to control prices. Being an honest and efficient Singapore government bent on maximising land efficiency, you may expect land costs to persist to rise and set new benchmarks. These understated or not so subtle policy guidelines will either enrich or impoverish you. And when you look at your Singapore housing loans, you ought also to take care to select the right structure to capitalize on these unwritten government policies or mis-calculations. We do not uphold or reject any government plans, we only highlight such procedures to the notice of our readers so that they can find ways to benefit from these policies or effects of government’s miscalculations.

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