A Singaporean’s hunt for a HDB flat – and getting stumped by crazy COVs

I don’t really know when the HDB changed its rules to allow permanent residents (PRs) to purchase resale HDB flats. And I didn’t know how many PRs were buying up these flats – until I saw the following report:

Private property owners and PRs make up 30% of HDB resale transactions. This concurs with my and my friend’s experience hunting for a flat recently.

I had never really paid much attention to the numbers, although many have been speculating that PRs are pushing up the prices of HDB flats.

So, in January this year, MND minister Khaw Boon Wan clarified the matter:

Maybe Mr Khaw is right. I don’t think he is lying, of course. But still, the perception persists.

This past month or so, I’d been accompanying my friend to hunt for a flat. Our experience seems to tell us a slightly different story. Out of every 2 or 3 buyers/sellers we came across, at least one of them was a PR. And our experience also says that PR-sellers ask for sky-high COVs, while PR-buyers are willing to fork out much more COV too. For example, S$35,000 to S$40,000 COVs are quite common. Sellers’ typically ask for COVs of between S$40,000 and S$50,000, the latter being the most common we’ve come across, even for flats which are on the lower floors and/or which do not have much furnishing.

And mind you, we’re talking about 5-room flats here – which tells me that these PRs are people with money who can afford bigger flats.

Why do PRs find it more sensible to buy resale flats? Here’s a thought (from Yahoo: “Are PRs to blame for high HDB resale flat prices?“):

“To get a clearer picture, I spoke to some PRs who have bought HDB resale flats. Their prime reason for purchasing was to make use of their CPF contributions and shelter themselves from the higher rental prices.  For example, taking an EMI (equated monthly instalment) of around S$1,200 from their CPF is far better than forking out S$2,500 as monthly rent, leading to savings of around 50 percent.

While the benefits of the CPF housing scheme could be the main driver for PRs looking to buy HDB resale flats, the high rentals tend to create a sense of urgency in them to buy flats sooner than later. It is this mad scramble for resale flats that gives sellers the confidence to ask for higher prices, resulting in rising COVs. So while the asking prices for resale flats can always be influenced by supply and demand dynamics, some factors like COVs can be “contained” if there is no rush to buy.

As such, it is time that the policymakers increase the supply of subletting flats and implement measures to cool the red-hot rental market, thereby minimising the rush to buy HDB resale flats.”

It can be frustrating (very much so) when you come across such ridiculously high COVs. For those who need a flat urgently but who may not have money to spare, it makes no sense to us that PRs are allowed to purchase public flats. I think citizens must be given the right to own public flats funded by the public – and foreigners or PRs should not be allowed to gain from this.

After their MOP (minimum occupation period), these PRs can sell their flats, make a bundle and go back home, made for life. We Singaporeans are then left with what we’re facing now – the ridiculously high prices of public housing.

I do feel, as does my friend, that the Government should introduce measures to curb PRs gaming the system, especially now that curbs have been put in place for those owning private properties who want to buy HDB flats. As for PRs, a levy can perhaps be imposed on them when they sell their flats – a levy which is substantial enough to prevent them from profiteering from the system.

Another suggestion is for PRs who purchase HDB flats to be given an ultimatum on taking up citizenship. Say, for example, within 3 years of a purchase of a HDB flat, PRs must take up Singapore citizenship. If not, they will be required to pay the levy as suggested above when they sell their flats.

After all, Senior Minister Goh Chok Tong (I still cringe to call him “Emeritus”, so I won’t address him as that) did once suggested the same. He had said that some PRs will be approached to take up citizenship and if they didn’t, their PR status will be revoked. (See here.) Unfortunately, SM Goh later “clarified” his comments and that he didn’t mean that all PRs will have their status revoked in this way.

But the point is that there should be more done to discourage PRs from profiteering from public housing, which they clearly can at present. Whether they are actually the ones propping up the ever-increasing prices of HDB flats, the point remains that they should not profit or be able to profit from what is suppose to be basic public housing for citizens.

My friend’s hunt for a home continues. Hopefully, she won’t have to end up having to engage in a bidding war. She is adamant that she won’t be coerced into one. And I stand by her conviction.


Post-script: The issue of PRs pushing up HDB resale prices was debated in Parliament in January 2012. MND Minister Khaw Boon Wan later posted the following on his blog, providing information on the COVs forked out by segments:


12 thoughts on “A Singaporean’s hunt for a HDB flat – and getting stumped by crazy COVs

  1. Obviously lar, Khaw had to say politically correct answer, much as his predecessor Mah Bow Tan had to lie through his teeth to say that HDB flats were very affordable.

    So what is the reason why PAP refused to impose any sort of curbs on PRs buying and renting out public housing. I have a good theory. When PRs are given unbridled rights to acquire HDB flats, they actually prop up the resale market substantially with their willingness to bid at higher prices. Then HDB can come in and offer Singaporeans at “market rate subsidized” prices some 10% to 20% lower. Viola! The end result: HBD making a bundle of money, thanks to the PR accomplices, while providing “market discounted” flats. Poor ordinary Singaporeans are left with little retirement funds.

  2. While I empathise that they don’t wish to fork out $2500 for rent, they always have a choice of flatsharing with others to reduce their rental. This is a common thing any workers in the first class city like Paris, London or NYC will do. It helps support the local community (in rental income) and SG doesn’t not owe these transient PRs/workers to make their housing easier! Where the hell do they get such an entitlement once again!!? And you see this govt bending backwards to cater to their whimps and fancy. Is time they bloody wake up, take up citizenship or accept the fact that they are transient professionals, instead of profiting from honest, hardworking Singaporeans. I even think healthcare should not be subidized for this group either!

  3. COV paid by different groups is a red herring. Even if you follow this red fish, PPO is only 8% and PR is 20% of the transactions. PPO also unlikely to buy small HDB. Buying bigger HDB, it is expected the COV will be higher. The statistics are all wrong and are meant just to find a red fish with a big fin to attract everyone attention away from the real problem.

    Any A-level economist who read Lim Chong Yah’s textbook will know what will happen if you pull out 20% (the PR) from the buyer demand side. That is the real question. Zaqy asked this question. Khaw skipped it.

  4. renting out of whole HDB flats should not be allowed. HDB are public housing, for the public with housing need. If you do not need your HDB flat anymore (ie moving into private accommodation), then, you should be made to sell off your HDB flat to someone else who needs it more.

  5. @ts

    I think for Singaporeans, it is still ok.

    But to allow PRs to rent out as well!!!! My property agent fren says he has handled quite a few cases of PRs renting out their HDB flats. They just claim they have to move overseas, and secure hdb’s approval to rent out the whole flat. At $3000 per month for a 5room flat, there is plenty of CASH left after deducting for monthly installment.

    Singaporeans are the real losers here. Perhaps we should also find a job overseas and rent out our hdb flats?!

    All the talks about Singaporeans first is cosmetic, eg relative priority for primary school enrollment, jacking up PRs medical bills, if PAP refuses to fix this huge bear hug of housing problem. After all, what does Maslow say about accommodation needs again?

  6. Singaporean, you are very tired. Ho wstupid topic you are talking here, small red dot!!! no hope, no wish… no life. no smiling, no happy,, only complain left. Why you live? better …go and died.

  7. I happened to come across this article and am interested so I read on. I am a PR in Singapore and have recently purchase a flat with my Singaporean husband.

    I am not sure how people derived the high COV to PRs. Does it mean that all PRs are cash rich? I don’t know, maybe they really do. I truly understand Singaporean’s frustration when a big chunk of the resale housing is taken up by PRs. Given I am in the situation, I probably feels the same.

    But I always have these questions lingering in my mind… Does it mean that if the 30% or even lesser PR stop buying resale, Singaporean will be able to get resale flats? Really? All these while when Singaporean went for resale house viewing, really becos a PR come into your way because they pay more COV? You mean none of you ever experience that another Singaporean pays more COV than you, causing you lose the deal?

    I really don’t get it. seller sells to whoever pays the most. Buyer choose whether they willing to take or not. If saying that PR buyers pays a lot for COV, I really doubt they will just to under cut Singaporean in getting a flat. Who would wanna spend a dime more if you can save? The price honestly, its asked either by owner / agent representing them. PRs are made no choice but to pay for the price, especially those sandwich classes people. If you say that PR seller are asking for COV, didn’t you guys go for viewing and those agent ALWAYS tell you it is a MARKET PRICE? who started this benchmark? no one can trace.

    I am not saying that Singaporean are wrong, but i just think that there are more to be done to make the situation better. Even PRs can’t purchase resale HDB anymore, you will soon see competition in offering high COVs among Singaporean too.

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  10. would you buy a second hand product higher than a brand new one?? In the next 20yrs the building gets problems from tap water due to rust,cracks on ceilings and walls and worst of all with only 60yrs to go prices drastically drop….you loose either way! so stop and think carefully before you buy a resale flat coz it should be going at a discount actually!

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