Resale Flats Out Of Reach

Source : TODAY, Thursday, January 17, 2008

Allow potential buyers to make higher use of CPF to own a home

Letter from ANTHONY TAN

LIKE many first-time flat buyers, I am having great difficulty getting a Housing and Development Board (HDB) unit so that I can start a family.

To buy a unit, you can either ballot for one or buy one on the resale market. But at last month’s balloting exercise, there were 5,147 applicants for 316 available units. It is clear that there are insufficient new units from the HDB to meet the current demand.

The HDB has announced the release of 7,000 more new units during the first half of this year, but many of these are through the Build-To-Order (BTO) exercise, which means there are no units available to meet the needs of people who want to buy flats. Since BTO normally take three to four years to complete, the only choice for those who cannot wait that long is to look to the resale market.

But here’s the catch: The resale market is experiencing sky-high transaction prices, with a unit being sold recently for $890,000. Egged on by such news, many owners seem to think they, too, can find buyers who would be willing to pay a premium for their units, resulting in owners demanding anywhere between $60,000 and more than $100,000 above the valuation price for their units, even when their units are located in the suburbs, such as Boon Lay and Yew Tee.

With no available units that first-time buyers can purchase from the HDB and skyrocketing resale prices, it is no wonder people like me are having difficulty finding an affordable home. Since many of us have been working for about four to five years only, our cash savings are limited.

Many people do not have problems paying for the 10-per-cent cash downpayment. But if you buy flats at above their valuation price, the difference between the purchase price and the valuation price has to be paid in cash. Many find it difficult to pay for this portion of the sale price.

Since it is not possible for the HDB to meet the demand for new flats, I would like to suggest that the board allow the Central Provident Fund (CPF) Housing Grant and/or monies in the CPF Ordinary Account (OA) to be used to pay for that additional cash portion if we buy resale flats, most of which are now sold above their valuation prices.

Regarding the Government’s worry that we may use too much of our CPF towards paying for our flats, I believe the 120-per-cent valuation price cap for resale flats already limits the maximum amount of CPF savings we can use.

If this is not a feasible option, I hope the authorities can come up with some short-term measures to help first-time buyers get a house in the resale market as the problem could worsen when the Integrated Resorts are completed.

As a professional earning an above-average salary, I’m already feeling the financial pressure while trying to find my own home. I cannot imagine the difficulties low- income Singaporeans face.