Private-HDB home price gap hits record

Tough time for Singapore upgraders

Singapore: The price gap between mass market private homes and Housing and Development Board (HDB) flats has widened to a new record making it harder than ever for aspiring HDB upgraders to buy a private home.

This is according to a new report by Goldman Sachs, which said that the price difference between 99-year leasehold homes in the suburban areas and five-room HDB flats grew to about S$490 per sq ft in the first quarter of the year.

Translated into overall prices, this means a 1,200-sq-ft five-room flat would cost almost S$600,000 less than a mass market leasehold flat.

The last time the price gap hit near this level was during the spectacular property boom in late 2007, according to the report released last week.

After that, the gap narrowed to about S$300 per sq ft in early 2009, before rising steadily again. In the 10 years before 2007, the price difference largely hovered between S$100 and S$300 per sq ft.

The growing price chasm between HDB flats and private homes was turning into an “insurmountable hurdle to upgrading aspirations”, said the report's authors, Goldman analysts Paul Lian and June Zhu.

It also suggests the Government has “little choice but to ensure more affordable housing for all through the HDB and also moderate prices of private mass-end homes”.

Lian and Zhu suggested that new cooling measures could include lower loans for home buyers with existing mortgages. Such buyers can now borrow 60% of a home's price, but this might be cut to 50%.

Foreigners, who are now purchasing across all housing segments, might also face restrictions on the number of mortgages they could take, they added.

Other analysts agreed that more cooling measures are possible, although they expect these only after the property price index for the second quarter is released next month.

The government also needed time to assess the impact of its most recent release of new land sites, said Tan Kok Keong, property firm OrangeTee's head of research and consultancy. He believes any possible new measures are at least three months away, as the government observes the market's response.

Already, the government has hinted that the monthly income ceiling to buy new HDB flats may be lifted from the longstanding S$8,000 to S$10,000, making these cheaper properties accessible to more buyers.

But OCBC Investment Research property analyst Eli Lee said this move was likely to have a limited and delayed effect on the private property market.

“We believe the Government would likely have to implement more cooling measures (in the private market), especially if there is continued strength in mass segment prices,” he said.

Some, however, say more measures are unlikely.

Property consultancy Cushman & Wakefield Singapore vice-chairman Donald Han said early signs suggested developers' demand for land was moderating, with fewer bids in recent tenders. He said a 1% to 2% rise in quarterly prices was acceptable, given the healthy economy.

The Urban Redevelopment Authority was monitoring the situation, its group director of land sales and administration Marc Boey said. - By The Star

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