HDB bear market is more than 5 years already – due to ’99-year lease’ problem?

I refer to the article “HDB prices fall 0.2% from previous quarter; 3,800 BTO flats to be released in November” (Straits Times, Oct 1).

It states that “Housing Board resale prices fell 0.2 per cent for the third quarter from the previous quarter this year, according to the latest flash estimates released on Monday (Oct 1).

The resale price index (RPI) is estimated at 131.5 for the third quarter, which is also down nearly 1 per cent from 132.8 in the same quarter last year.”

The RPI has been in a bear market for more than 5 years, declining from 149.4 in 20132Q to 131.5 now. This is a decrease of 12%.

In contrast, the URA Private Property Price Index has increased by 9.1% in the last year from 136.6 in 2017 Q2 to 149 in 2018 Q2.

Why are they moving in opposite directions, when historically they may tend to move quite close in tandem most of the time?

So, to what extent is this due to the ‘HDB 99-year lease’ problem?

But, the HDB Resale Price Index is for all resale flats. What if we breakdown and get statistics on older vs younger flats?

Well, you can see from the chart below, that the price difference between more than and less than 60 years’ lease left 5-room flats in Toa Payoh is about 40 per cent ($420,000 (approximate) divided $680,000 (approximate))

 

So, as the RPI continues to decrease – instead of ‘propaganda’ in the media, or relying on ad-hoc price data from private sector property experts (the chart above), – the Government should start to provide regular data on the price gap between older and newer HDB flat types in the different housing estates.

After all, isn’t this arguably, in the public interest, and in line with the online falsehoods’ committee’s recommendation that the Government should give the reasons for decisions not to disclose information to the public, and to gain the trust of the public?

 

Leong Sze Hian

 

 

 

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22 Responses to “HDB bear market is more than 5 years already – due to ’99-year lease’ problem?”

  • LIONS:

    Good observation there.
    So stupid for young PMEs to rush to buying 99 yr lease condos.
    If i were younger n earning good income,i would look for FREEHOLD LANDED as we are more land scarce than housing scarce.

    Buy landed freehold for long-term value.

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  • Msia GE14 and Sgp GE2019:

    LIONS:
    Good observation there.
    So stupid for young PMEs to rush to buying 99 yr lease condos.
    If i were younger n earning good income,i would look for FREEHOLD LANDED as we are more land scarce than housing scarce.

    Buy landed freehold for long-term value.

    bro, they have this law. from memory, they can buy back your freehold at S$1 if they want to citing national development and then reselling to other property developers, as happened in tanah merah.

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  • opposition dude:

    Breaking down older than 40 year resale flats against those younger is too hard to do, it’s easier to just rely on those housing agents’ advertisements which you see pieces of so often in your blocks’ dustbins. I’m sure we have all had a look at just how much our HDBs are worth from time to time on these flyers.

    And that RPI chart provided by HDB is wayang as usual. Forever talking about prices coming down 0.1% or 0.2% compared to the last quarter or year isn’t anything. How about the fact that the RPI shot up 50% from 2007 to 2013? After all those rounds of cooling measures it has only dropped 20%, still far too expensive for the average couple. It should drop by at last 35% since the rise was on pure speculation and COV and not based on the average income of Singaporeans.

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  • Ah Seng:

    @LIONS
    true,I bought landed and it pays off.
    I can pass it to my grandson who is 8 years old.
    I sold my Exec condo.

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  • Selfish Sinkie Syndrome:

    LIONS:
    Good observation there.
    So stupid for young PMEs to rush to buying 99 yr lease condos.
    If i were younger n earning good income,i would look for FREEHOLD LANDED as we are more land scarce than housing scarce.

    Buy landed freehold for long-term value.

    Bro, actually there is little choice for the younger generation.

    If you got rich papa to buy you freehold landed or bequeath it to you, then of course, they can go ahead. Nowadays, only the lucky ones can talk about condo as first home purchase, most of the young grads now cannot even afford 5-rm HDB because their starting pay is suppressed for many years, compared to the rapidly rising property prices.

    For example, 20 years ago, fresh grad pay about $2500/mth but HDB 5-rm price maybe about 350K.
    Today, fresh grad pay maybe $3000/mth (i.e. 20% increase only) but HDB 5rm price move faster to about 600K or even more depending on location.
    In other words, your salary move up 20% but property price move up more than 70%.

    Over the long-term, definitely more and more will be priced out even if you are a grad with a good starting pay.

    So, I don’t blame the younger gen for their “mistakes” in rushing to buy 99 yrs leasehold lah. Really no choice for them unless they migrate elsewhere.

    If they stay here, have to get stuck here with a huge housing loan for many decades. Then, of course, their biological clock also ticking down.
    Nowadays, have to study so many long years, so by the time they graduate, already late 20s or some even early 30s if go for further Masters degree or PhD.

    then, by the time ready to settle down, not much time left to make babies, of course, have to RUSH lor. No matter 99 yr or HDB, get a roof first because need to to have private “small space for sex” first, right? Ha!

    You see, that is why I say Sinkies forever STUCK here in a loop.
    That is the deliberate plan of the Pay & Pay, to quickly LOCK-IN all the younger generation so that they not much choices, but get themselves STUCK here on this little prison island. Otherwise, how do you think Pay & Pay can “hold onto” young people to stay on little tiny island for the rest of their lives?

    Once they “fall” for the Sinkie TRAP by buying into over-priced housing here, then STUCK liao. Study hard, Work hard, Life is HARD. All their $ also go to pay the White Masters. CPF also STUCK. Then, by the time they have their own children in turn, their children also get into the same TRAP….and on and on and on.

    That is why Pay & Pay now so worried, because the young gen getting smarter now, don’t give birth to future slaves, so Pay & Pay also forced and…

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  • Selfish Sinkie Syndrome:

    continued….

    that is why Pay & Pay also “forced” to do mass imports.
    This cycle will not stop, even if Sinkieland reach 20 million or more because the cycle cannot stop.
    Just like the Ponzi scheme, once it stops, it will collapse, and if Sinkieland collapse, I don’t think it will ever recover.
    Hence, everyone just kicks the can down the road and hope that they don’t get to see the day Sinkieland collapse.

    Sinkieland is going to be a horrible place to live in the future….that much I can be certain of.

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  • Look before you leap:

    Fools Rush In Where Angels Fear To Tread.

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  • Not so fast:

    LIONS:
    Good observation there.
    So stupid for young PMEs to rush to buying 99 yr lease condos.
    If i were younger n earning good income,i would look for FREEHOLD LANDED as we are more land scarce than housing scarce.

    Buy landed freehold for long-term value.

    Do not be so arrogant and insulting.

    Freehold landed property cost millions which almost all young Singaporeans cannot afford to pay unless their parents are wealthy and are willing to pay for the property. What is a “good income”? Wages in Singapore are quite low so paying a mortgage amounting to millions is not likely.

    Freehold property also usually cost about 20% more than a similar property on 99-year leasehold.

    For private leasehold property, it is also possible to get a “top-up” of the lease for a fee. Property in Singapore, including landed freehold, can be compulsorily acquired by the Government.

    Is the 20% “premium” PAID UPFRONT for freehold property really worth it if one takes into account the time value of money? Think again.

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  • Malaysia boleh Singapore bodoh:

    The price of HDB resale flats will continue to fall for quite a while because they have been overvalued for decades. Now more and more HDB owners are forced to face reality – that the value of 99-year HDB flat is determined mainly by the REMAINING lease. HDB flats are basically a DEPRECIATING asset which will be worth ZERO, as indicated by Lawrence Wong when the lease ends. This is a fact which HIP1, HIP2 and VERS cannot change.

    When LKY said the price of HDB flats will never go down he was referring to NEW flats sold by HDB with a fresh lease of 99-years. He was not referring to resale flats. New flats would be worth more because older flats will have less lease period remaining.

    What the government really need to do is force HDB owners to accept that their flats will steadily depreciate (be zero after 99 years) so they should reduce the amount of their CPF money tied to their depreciating flat. They should just determine how many years they need the flat and sell back the balance of the remaining lease to HDB under the Lease Buyback Scheme (LBS). The cash they receive from LBS should be put back into their CPF account where it can earn 2.5% per annum instead of getting “negative returns” from being invested in their depreciating HDB flat.

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  • LIONS:

    many RESALE FREEHOLD are priced close to NEW 99 YEAR LEASEHOLD CONDOS.
    CHECK IT OUT.

    MANY buy 3 ROOM CONDOS FOR CLOSE TO $2-3 MILLIONS,for this amount ,they can try buying resale LANDED FREEHOLD in simiilar locations?

    do a bit of homework.

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  • LIONS:

    many younger sgs simply prefer condo facilities over FREEHOLD PROPERTY?

    look around,condos priced at 1600/1700 psf SUBURBAN while FREEHOLD LANDED RESALE (GOOD LIVING CONDITION) selling at $1000/1100 psf,you do the maths???

    think landed is still better over long haul.
    only my humble two cents for fellow countrymen shopping for houses to think about?

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  • HarderTruths:

    Remember there is no independent price discovery mechanism. Once the government determines the price arbitrarily the market cannot function as it should.

    By creating bubbles (more FT) and then trying to extinguish them (raise the price or duties or supply) only the $G locals get owned. Sooner or later the price is too high for some or too low for others.

    This is when capital flees and prices crash. Will the government prop up the housing sector to keep people from losing assets?

    Why should they? SG’s motto is ‘You die Your Business’.

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  • Rabble-rouser:

    @ Selfish Sinkie Syndrome:
    Mate, You’re Absolutely Correct! And it is an unsustainable loop that will eventually slow down until it comes to a complete halt (economic collapse). PAP exploitative mechanism of a repressed wages eco-system, hijacking of CPF retirement monies & continually cost-push inflation, etc were ultimately futile. It will eventually come against economic headwinds of:
    * An ageing & tired demographics profile in S’pore. An unavoidable reaction to the late LKY’s destructive policy of STOP AT TWO policy during the early 1970s. And the CPF withholding of people’s retirement fund would add to the demographic problems;
    * Constrained consumption due to repressed wage mechanism & high cost of living environment in S’pore. Retail trade & brick ‘n mortar structures like shopping malls can’t survive under a high rent mechanism;
    * False Prosperity Doctrine that encourages Conspicuous Consumption using rampant borrowing just to ‘invest’ in wealth trappings of condos, driving a prestigious car & having a ‘wealthy’ lifestyle (using a credit card). But the Interest Rate cycle is turning up!; &
    * PAP’s high land cost policy – responsible for the high cost of living eco-system. This will drive away foreign investments, shift foreign wealth funds elsewhere (overinflated property market/low SG$ interest rate regime) & in a trade war situation reduce the attractiveness of S’pore (read: PAP) corporate tax haven status of low tax corporate tax regime.
    The depressed resale value of ageing HDB flat is a symptom of HDB dwellers wishing to cash in (& downgrade) on their ‘assets’ but they are trapped by circumstances of ‘new’ discovery of lease decay.
    The upturn in private sector real estate market is a false dawn created by Real Estate Developers using the EnBloc process to kickstart the property market for their own agenda. But the liquidity & economic fundamentals are simply not there!
    People living in S’pore can be so stupid!

    Selfish Sinkie Syndrome: You see, that is why I say Sinkies forever STUCK here in a loop.

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  • pap sure win.:

    LIONS:
    many younger sgs simply prefer condo facilities over FREEHOLD PROPERTY?

    look around,condos priced at 1600/1700 psf SUBURBAN while FREEHOLD LANDED RESALE (GOOD LIVING CONDITION) selling at $1000/1100 psf,you do the maths???

    think landed is still better over long haul.
    only my humble two cents for fellow countrymen shopping for houses to think about?

    pap sure win.

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  • oxygen:

    PROPERTY SPECULATION IS EXACTLY A DOG CHASING ITS OWN TAIL – why? Because after you sell of your property, where do you live? Buy a bigger and more expensive property…..waiting for bigger gain which might come or might be of adverse outcome next?

    Or you DOWNGRADE to conserve and keep the cash so-called “PROFIT” that only exists inside your head?

    Now face the reality – Assuming you bought a property for $1 million putting in your cash+CPF of $500K (and along the way borrow $500K from bank) and sold for $1.5 million, so you think you are very clever having made a “profit” of $0.5 million in just two transactions.

    Now let us assume, you cut out your greedy tendency (unlikely that ever ends) and downgrades to 5-rm HDB costing $500K too, you now got a “free” $500K HDB PLUS $500k in your banking account.

    CONGRATULATIONS, YOU FEEL VERY RICH AND VERY CLEVER of $500K in your bank account.

    Phew!!!

    I got one question for this smart one – DID YOU GOT $500K richer BY REASON of your “profit” from property speculation or DID YOU FEEL $500k IN YOUR BANKING ACCOUNT FOR REASON THAT YOU DOWNGRADE your lifestyle from private property to HDB?

    Me thinks that you got richer $500K BECAUSE YOU DOWNGRADE your living. This is the truthful factual reality nobody can deny of fact.Without downgrading, you won’t have $500K in your bank account!

    Your profit is a MIRAGE of a FICTION profit because if you want to maintain the same lifestyle of condo living, YOU PROBABLY PAY A LOT MORE FOR YOUR NEXT CONDO PURCHASE after you sold yours for $1.5 million. That is to say you did NOT make any profit at all BUT SIMPLY GAMBLE BIGGER AND BIGGER each time and in any one fall, your so-called “profits” can be wiped out.

    In other words, those who “make profits” in speculating property are just silly dogs chasing their own tail TO EXHAUSTION AND COLLAPSE in defeat one day because you are UNLIKELY TO BE FOREVER LUCKY OR CLEVER OR BOTH.

    Do your financial mathematics, you will see what I mean. Here you go.

    If you bought a property for $1 million and it rises 100% to $2 million, you feel very proud of your achievement. You bought the next one (maybe better location) for $2 million BUT THIS TIME IF THE PROPERTY JUST TELL 50% ONLY, the value of your property is back to $1 million.

    In percentage term, a SMALLER FALL from a higher elevation would wipe out a far bigger gain from a lower base starting point.

    REMEMBER THIS CHINESE WISDOM SAYING – NO BANQUET LASTS FOREVER.

    IS THIS STILL NOT A SILLY DOG CHASING ITS OWN STUPID TAIL?

    I NEVER BELIEVES IN SPECULATING IN PROPERTY, but I may buy property shares from time to time.

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  • rukidding:

    Hope you don’t become another PAP supporter just because you bought a landed property !

    I can say that almost all Landed “sillyzeans” will vote for PAP because of the future$$$$…and not because of anything else !

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  • LIONS:

    pap sure win.:
    October 16, 2018 at 8:45 am (Quote)

    if oppo wins,LANDED WILL TRIPLE!
    new HDB flats will become more affordable.

    non-sgs can buy any type of property except HDB!

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  • LIONS:

    pap sure win.:
    October 16, 2018 at 8:45 am (Quote)

    if oppo wins,LANDED WILL TRIPLE!
    new HDB flats will become more affordable.

    non-sgs can buy any type of property except HDB!

    i live with my nephew in 5-room.
    happy,no need to worry about ups and downs of real estate.
    but i strongly believe that land scarcity will gradually means higher prcies for landed freehold to bring prices more to equilibrim with condos?

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  • OrangeTree:

    Actually,if not for the garment’s policy,home prices would have increased more with interest from foreign buyers.
    Sinkapore is seen as a decent place to bring kids up and regional buyers still keen to send their kids to study here.

    So,i am not as pessimistic as some here.
    I am also looking around but toying with buying new condo or resale landed.

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  • Harry:

    LIONS:
    Good observation there.
    So stupid for young PMEs to rush to buying 99 yr lease condos.
    If i were younger n earning good income,i would look for FREEHOLD LANDED as we are more land scarce than housing scarce.

    Buy landed freehtgold for long-term value.

    You really believe a freehold he owner really no the land?

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  • oxygen:

    RECENT PROPERTY BUYERS IN LEE-JIAPORE ARE EITHER EXTREMELY CLEVER OR EXTREMELY BRAVE AND STUPID, but elsewhere in the world, pessimism dominates. I checked the share price of Sinkieland’s listed property developer stocks, they have topped over and heading south since July.

    Investors more gloomy on world economy than at any point since 2008

    https://www.telegraph.co.uk/business/2018/10/16/investors-gloomy-world-economy-point-since-2008/

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  • Paradigm shift:

    Nowadays, there are 7billions people in the world. With the current situation, the richest 1% equal to 70millions peoples have nothing to fear from the others 90% Poor’s. Why? The reasons are previously like the rich landlords feared from been robbed and killed by the poor peasants as most of their properties and valuable are kept locally. Nowadays in this digital age their assets are untouchable when they keep them in safe places.
    Cities like Singapore, Tokyo, etc are targetted to assume this role. In the near future this 70millions of the richess will need bungalows in the air meaning a sixty storey high condominium building maybe have only 30 bungalow units in it. Ghurkas guards or sdu maybe employed to offer security. Gardens in the air, personally lifts, private swimming pools,private carparks, etc are normally incorporated.
    In Singapore, many old HDB buildings would acquired to build these bungalows in the air.

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