Serving with Passion

September 26, 2015

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Min Khaw giving awardsModern Singapore was built by many pioneers who had selflessly toiled in the background. Mr Tan Lian Ker, who turned 86 this year, is one. He is one of MND’s longest serving board members, having served as President of the Strata Titles Board (STB) for 22 years. He has asked to retire, and we cannot say no.

Until his retirement in 1984, Mr Tan served in various appointments including as the Head of the Legal Department of the SAF, and as a District Judge. Not content to just sit back and enjoy his retirement, he set up a law firm to continue helping others. When STB was set up in 1988 to handle strata-titled property disputes, Mr Tan volunteered to be on the Board, despite his busy schedule.

STB news articles1Under his leadership, STB resolved over 1,400 cases, of which 85 per cent were mediated without trial. His motto is to resolve disputes amicably whenever possible, so that residents can live in harmony.  Even if it meant going down personally to homes to review the evidence, he was ever ready. His landmark decision in 2005 to abandon the then practice of sharing costs between the upper and lower units involved in disputes on inter-floor leakage led to a legislative change and we now see speedier resolution of such disputes. Mr Tan was also involved in the major legislative changes to the Land Titles (Strata) Act relating to en bloc sales. Over the years, he has effectively determined some 200 en bloc sales.

Thank you Mr Tan for years of sterling service!

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Shifting the Balance

February 20, 2015

Four years of hard work, ramping up new home construction, is seeing results. As flats and apartments take 3 or 4 years to build, we are enjoying the harvests of the hard labour.

As supply-demand rebalances, property prices are adjusting. 2014 was the first full year which saw home prices in decline. This was a great relief for home buyers. As the decline was moderate, it was also a relief for home sellers and home owners. A collapse of housing market benefits no one.

As projects’ completion dates vary, we put up a chart last year to track the pipeline supply of new homes for 2014-2017. A total of 200,034 units were projected. With the tapering of HDB’s BTO supply, the new figure stands at 195,788. Home buyers have plenty of choices.

As we move into 2015, we are updating the chart to show the pipeline supply for 2015-2018.

Our current stock is about 1.28m housing units: 960,000 in HDB; 320,000 in private sector.  By early 2018, our stock would have grown to 1.43m housing units, an increase of about 11%.

Our residential market has achieved a better balance between sellers and buyers.

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Revising the Resale Price Index

December 3, 2014

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In Singapore, property price movements are closely watched and commented upon. With more than 90% of Singaporeans being home owners, the state of the property market, especially the housing market, is of strong interest to all. This is particularly so in the HDB resale market. When resale prices shoot up continuously, buyers or potential buyers are anxious. When resale prices continue to moderate, the table is turned and sellers or potential sellers become nervous.

At one NTUC Dialogue, Secretary -General Lim Swee Say, in jest, asked me if I could create two housing markets in Singapore, a market for buyers where prices continue to fall, and a separate market for sellers where prices continue to rise. The audience had a good laugh!

Managing the property market is therefore both an art and a science: projecting and ensuring a good matching of supply and demand, while correctly sensing the mood takes some skills and good luck.

The science part of the skills requires a good property price index. For the HDB resale market, we currently have the Resale Price Index (RPI) which HDB publishes every quarter. The index gives a general sense of resale price movements and serves as a useful reference point for home buyers and sellers in their decision-making.picture2

To construct the RPI, HDB takes the average resale flat prices for a representative basket, by flat types, flat models and region, based on actual resale flat transactions. The average resale flat prices for each segment are then aggregated to derive the index.

To be effective and representative, RPI must reflect the prevailing resale market. In recent years, the HDB resale market has actually evolved considerably. First, we now see a wider range of flats, differing in designs and attributes. For example, newer flat models, including taller blocks, are increasingly being transacted in the resale market. We have also reintroduced 3-room flats since 2004, after the current RPI was last revised.

Second, there are now a lot more resale transactions for flats in newer towns, such as Punggol, Sengkang and Sembawang, but these towns are not included in the representative basket currently. In other words, the current RPI does not capture movements in resale flat prices in these towns.

Third, unlike the past, there is now greater variance in the age profile of flats being transacted in the resale market. Such variance must be taken into account in making price comparisons.

With these significant changes in the HDB resale market, the current RPI may not adequately reflect the resale market. It is therefore timely to review the RPI methodology to better capture price changes over time, and control for the variations in attributes of the resale flats transacted. This will allow the index to continue serving its purpose of providing timely and reliable information on the resale market movements.

Indeed, HDB has been working with a consultant from the NUS Department of Real Estate to review the RPI computation methodology. The review has recently been completed. HDB will be sharing more details soon.

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Who gets short-changed?

January 7, 2013

Super EC

In some recent EC launches, super-sized ECs units were offered and snapped up by buyers who did not appear to be from the “sandwiched” households. Understandably, there was public indignation at such deviations (both by some developers and some buyers) from what we had intended ECs to serve.

The developers explained that such super EC units were a minority and that they had priced them low (that was why they were snapped up by buyers who could actually afford private properties). The media reported that one such developer priced its super penthouse at $470psf, while selling the other smaller typical EC units at $770psf.

I was initially baffled by this. Why would the developer short-change itself? Why not sell more normal-sized EC units at a higher $psf, and make more profit? The space for one super penthouse, for example, can be used to build 2 or 3 normal-sized EC units.

As I probed, I discovered that the developer had not short-changed itself.

Let me illustrate: a super EC unit of 3,500 sqft may comprise 2,500 sqft of built-in space and 1,000 sqft of private roof terrace. Now, outdoor roof terraces are actually free space, space that developers do not have to pay development charges. URA allows this to encourage developers to build more outdoor space open to the sky, for the enjoyment of the residents. Developers can use this free space to develop private OR communal roof terraces, and they are NOT counted as GFA (gross floor area).

Communal sky terraces have been effective in promoting greenery and providing useful common amenities for residents in our residential developments. However, the creation and sale of super-sized private roof terraces (at the expense of communal sky terraces), is increasingly prevalent. What is happening at the roof top in the form of private roof terrace is also happening on the ground floor where it is referred to as “private enclosed space (PES)” for the buyer.

Developers’ selling off free spaces to make additional profit for themselves is not improper under current URA rules. But as more developers do so, with larger private roof terraces and PES, communal space in the development that benefits all residents will correspondingly shrink. There is a further downstream problem as some buyers may be disappointed later on, when they find out that these outdoor spaces that they have paid for are not allowed to be covered up or enclosed.

I have directed URA to review this policy and have it fixed.

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Exercise Flexibility Within Spirit of Policy

November 23, 2012

EC developers have flexibility in designing and pricing their units. But they must remember the policy intent of EC and the spirit of the EC policy. EC is to help Singaporean families earning within $12,000 per month acquire a condominium at below market rate. This is achieved through zoning and tendering out the land as specific for EC, thus allowing the developer to acquire it cheaper than private condominium land.

All EC applicants must therefore meet (a) the income criteria, as evidenced by payslips and/or income tax returns; and (b) the public housing subsidy criteria, i.e. not having already bought two subsidised flats before.

 

 

The recent media highlight on an EC penthouse supposedly sold for $1.77 mil has raised some eyebrows.

There is now another developer going to market a luxurious penthouse. I expect the developer to have done his calculations, to ensure that the unit will be affordable for the targeted EC applicants.

We provide EC developers with much flexibility, but they must be mindful that flexibility must be exercised in keeping with the intent and spirit of the EC policy.

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Judicious Market Intervention

September 4, 2012

As regulators, we try not to interfere in the normal functioning of the market, or to second-guess it.  But occasionally, some judicious intervention for public interest is necessary when the market outcome is less than satisfactory.

For example in recent years many residential projects in Telok Kurau area have led to a rampant development of tiny shoebox units in that area, resulting in disamenities such as severe traffic congestion, shortage of car parks and double-parking.  Residents in that area appealed for development guidelines to restrict the over-development of such tiny housing units.

After consulting with the stakeholders, URA decided to move in, but in a judicious way, without over-regulating or stifling the creativity of developers.

Hence, instead of specifying a minimum floor area for an apartment, URA chose to limit the maximum number of apartments that developers can propose in a particular development.  This way, developers are still free to build small apartments if there is demand, but there must be a good mixture of large and small units, in order to meet the URA guidelines.

The planning guidelines were implemented in Nov 2011.  It was very well received, by architects, developers and the local residents.

Meanwhile, elsewhere, outside of the Central Area, some new developments have included a large proportion of shoebox units.  I voiced concern about this trend in a couple of blog posts.  Many Singaporeans voiced similar concerns too.  Unlike the Central Area, the suburbs are largely for families.  While there is a need for smaller units, like studio apartments, 2-rm flats and shoebox units for the singles, retirees and small families, too many in the same locality cannot be optimal.

Many developers have frowned on this trend too.  To be sure, this is not a general industry practice, but largely confined to a few developments.

After watching this development for a while, URA decided that it should intervene as it had done before. This afternoon, it announced the new planning guidelines to address the issue of developments which consist predominantly of shoebox units outside the Central Area.

The new URA planning guidelines are measured and moderate.  There will still be shoebox units to meet the need of a segment of the population, but there will also be many more larger units,  to meet the demand of the other population segments.

I am confident  this judicious market intervention will again be welcomed by the stakeholders, developers and residents.

 

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En-Bloc Fever Receding?

January 21, 2012

 

I entered politics in 2001 and my first constituency was Moulmein, with a large number of private properties, mostly old apartments.

I was MP there for 5 years. During the latter half of that period, I saw many of my residents in several private estates becoming en-bloc millionaires overnight.  House visits to these estates inevitably ended up chatting about en-bloc, how much money they would be making and where next they would be going.

En-bloc has its pluses and minuses. It can rejuvenate the city by removing old and dilapidated buildings.  It enables owners to trade their units at a premium price if their units are sold collectively.

But if done excessively, en-bloc activities can waste resources, if relatively new buildings are prematurely demolished.

Moreover, not everyone favours living through an en-bloc exercise.  Some owners resent losing the home and community they have grown to be comfortable in.  In some instances, neighbours have turned against each other in the lead-up to obtaining the requisite 80% signatories.

En-bloc activities reached feverish heights in 2006 and 2007, when some 10,200 housing units were sold for redevelopment. This added stress to an already hot property market as housing units were removed from the market, and displaced owners or tenants had to look for replacement properties to stay and invest in, pushing up property and rental prices.

Private residential projects and units sold en bloc by year

Last year, about 1,400 units were sold collectively.  This en-bloc number is low compared to the peak in 2007.

It looks like the en-bloc fever is receding.  If so, it signals the increasing stabilisation of our property market.  This will be a good development for Singapore in the Year of the Dragon.

Happy New Year to all!

 

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