Tuesday, November 27, 2012

It's time to put a ceiling for the cost of HDB flats

I was reading an article that recommended putting a ceiling in all sales of HDB flats. I do agree that this should be the way to go for a very simple reason. HDB flats are meant to be affordable.

HDB flats are public housing and were created to enable all Singaporeans to be able to own a flat. Therefore, if you use that as the principle, HDB flats should not be priced in a way that is not affordable to Singaporeans, but still allow Singaporeans to be able to fund their retirement, and allow them to purchase another flat after the sale of the HDB flat.

One of the thoughts I have is to put a hard ceiling on the cost of all HDB flat sales, pegged to a certain percentage above the valuation of the HDB flat so that the price of HDB flats will not runaway. For e.g., there can be a rule that HDB flats cannot be sold beyond 150% of the valuation of the HDB flat.

Pegging it to a certain percentage above valuation have a couple of advantages. Most important is that whoever who sells the HDB flat will still be able to afford to get another flat so that they can have a roof over their heads. Why we peg it to the valuation is based on the assumption that valuation of the HDB flats will be fair and transparent, and reflect accurate sentiments in that environment. Pegging it to a percentage above the valuation is to reflect certain situations where the location and renovation of the HDB flats do translate into higher value of the flat, in addition to the size of the flat.

At least pegging it to the valuation will prevent runaway prices. I'm still a firm believer that since HDB flats are meant for all Singaporeans, it should be kept affordable so that young couples need not always have to purchase BTO flats as the resale flats are out of reach of most young couples (not including those couples with rich parents).

Setting this ceiling will put the pressure off new flat and instead allow young couples to be able to purchase resale flats. This aligns with the principle of HDB flats. Personal thought though...

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