HDB resale policy has weeded out speculators

HDB resale policy has weeded out speculators

As recently as five years ago, private-property owners were snapping up resale Housing Board flats at market rates, making up 10 per cent of yearly resale transactions.

But tightened policies have cut the number of such transactions to just 3 per cent in the first six months of this year, going by fresh data from the Housing Board.

This means those going after resale units are now genuine downgraders who have either cashed out amid a property boom, or want to move to live closer their children, analysts said.

The turnaround was sparked by a change on Aug30, 2010. Before that, private property owners could buy a non-subsidised resale flat at any time, even while hanging on to their private property.

The policy that kicked in on that date required private property owners to sell off their property within six months of buying a resale Housing Board flat. This was to reinforce the principle that Housing Board flats are meant for long-term owner occupation, not for rental income or to make a quick buck.

The change effectively cut back on speculation in public housing among those well-off enough to own a private property and buy a Housing Board flat as investment.

ERA Realty key executive officer Eugene Lim said: "A substantial number of people bought flats in the past for investment and never lived in them."

The attraction for them was that Housing Board flats offer up to twice the yearly rental yield, at 6 to 8 per cent.

As of current, only genuine downgraders are entering the resale market, as they are saddled with a minimum-occupancy period of five years before they can sell the flat. It will be a constraint on their investments thereafter.

Source: The Straits Times – 10 August 2012