For this budget debate, the biggest announcement is still under wraps.
KBW announced that there is a big property cooling measure pending. After 7 rounds, it is obvious that the previous cooling measures were not working. So he is going to try something new and radical. The following are key points to what he has said:
1) There is a need to balance the interest of home owners and home buyers. While we want to bring prices down to an affordable level for home buyers, the political cost will be too high if there is a sudden collapse in housing prices.
2) He has PLEDGED that the prices of NEW HDB flats will come down by 30%.
3) The current HDB rules need to be substantially changed. This is to the extent of possibly reverting to the 1971 rule where HDB flats can only be sold back to the HDB.
Looking at his comments in totality, we can see which of the current scenarios is most likely to happen:
Cheaper HDB flats which can only be sold back to HDB: This appears to be a red herring. The proposal was put forward by SDP and it is highly unlikely that PAP will adopt it wholesale. There is the huge admin costs of making a market for both buyers and sellers. KBW would also break the rice bowls of thousands of property agents and others involved with the real estate industry.
More financial curbs and controls: This has been done for 7 rounds and did not have the desired impact. If they do it for a few more rounds and it fails, KBW will have failed to keep his pledge.
NEW HBD flats with 60 year leases: Recently, the PAP changed the leases of industrial land from 60 years to 30 years. This was to reduce the soaring cost to business. The transition went smoothly. The prices for the shorter leases were considerably cheaper. At the same time, there was no collapse in the price of the older 60 year/freehold properties. With the empirical data from this exercise, it is possible to reasonably predict the impact of an equivalent move on residential property. From a political perspective, choosing this policy option has the benefit of pleasing both home owners and home buyers. Home owners who have paid substantial amounts for their HDB flats will not see a sharp drop in their flats. At the same time, new home buyers will have access to a "cheaper" HDB flat. This is therefore a politically optimum policy option.
Hypothesis: My hypothesis is that in the not too distant future, KBW will be announcing that NEW HDB flats bought directly from HDB will all have 60 year leases. The length of the shortened leases can be imputed by amount KBW has pledged the price of NEW HDB flats will fall. Since he has pledged prices will drop by 30%, a natural amount to assume that the lease will be shorted by is 30% or to 60 years. With the existing controls on occupancy period, there will be little opportunity for resale profit on these new HDB flats. Of interest and still unknown at this point in time is the type of flats the shortened 60 year lease will apply. It is given that it will be applied to BTO. It is however still 50-50 if it will be applied to DBSS and ECs.
KBW announced that there is a big property cooling measure pending. After 7 rounds, it is obvious that the previous cooling measures were not working. So he is going to try something new and radical. The following are key points to what he has said:
1) There is a need to balance the interest of home owners and home buyers. While we want to bring prices down to an affordable level for home buyers, the political cost will be too high if there is a sudden collapse in housing prices.
2) He has PLEDGED that the prices of NEW HDB flats will come down by 30%.
3) The current HDB rules need to be substantially changed. This is to the extent of possibly reverting to the 1971 rule where HDB flats can only be sold back to the HDB.
Looking at his comments in totality, we can see which of the current scenarios is most likely to happen:
Cheaper HDB flats which can only be sold back to HDB: This appears to be a red herring. The proposal was put forward by SDP and it is highly unlikely that PAP will adopt it wholesale. There is the huge admin costs of making a market for both buyers and sellers. KBW would also break the rice bowls of thousands of property agents and others involved with the real estate industry.
More financial curbs and controls: This has been done for 7 rounds and did not have the desired impact. If they do it for a few more rounds and it fails, KBW will have failed to keep his pledge.
NEW HBD flats with 60 year leases: Recently, the PAP changed the leases of industrial land from 60 years to 30 years. This was to reduce the soaring cost to business. The transition went smoothly. The prices for the shorter leases were considerably cheaper. At the same time, there was no collapse in the price of the older 60 year/freehold properties. With the empirical data from this exercise, it is possible to reasonably predict the impact of an equivalent move on residential property. From a political perspective, choosing this policy option has the benefit of pleasing both home owners and home buyers. Home owners who have paid substantial amounts for their HDB flats will not see a sharp drop in their flats. At the same time, new home buyers will have access to a "cheaper" HDB flat. This is therefore a politically optimum policy option.
Hypothesis: My hypothesis is that in the not too distant future, KBW will be announcing that NEW HDB flats bought directly from HDB will all have 60 year leases. The length of the shortened leases can be imputed by amount KBW has pledged the price of NEW HDB flats will fall. Since he has pledged prices will drop by 30%, a natural amount to assume that the lease will be shorted by is 30% or to 60 years. With the existing controls on occupancy period, there will be little opportunity for resale profit on these new HDB flats. Of interest and still unknown at this point in time is the type of flats the shortened 60 year lease will apply. It is given that it will be applied to BTO. It is however still 50-50 if it will be applied to DBSS and ECs.
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