HDB to slow supply of flats from next year

SINGAPORE — The Government will slow down the supply of new public flats from next year — a year earlier than it had indicated previously.

Writing on his blog as applications closed yesterday for the Housing and Development Board’s largest joint Build-to-Order (BTO) and Sale of Balance Flats (SBF) exercise, National Development Minister Khaw Boon Wan said: “As the supply and demand for public housing returns to balance, we will begin to taper off the massive construction programme from next year. We will do so in a measured way, to allow the market to gradually adjust, just like what we had done to cool the property market earlier.”

He cited the downward trend for cash-over-valuation (COV) premiums in the HDB resale market and the falling average application rate for BTO flats, which has declined from a high of 5.3 in 2010 to a low of 2.9 this year.

Mr Khaw also noted that as at 5pm yesterday, the BTO application rate for second timers under the latest exercise was 2.4 — in contrast to a high of 25.9 in November 2011. Similarly, while the demand from singles remained high, the BTO application rate for this group has dropped from 57.5 in July to 25.2 under this exercise.

“Three years of sustained ramp-up have begun to restore the balance in our housing market ... We have cleared the backlog of young families buying their first flats, with average BTO application rate for first-timers holding steady at below two times,” he said.

In June, Mr Khaw told reporters that the increased supply of public flats in recent years was “not sustainable” and it could slow after 2015 to prevent a glut in the market.

When the latest joint BTO-SBF exercise was launched last week, the high number of leftover flats put up for sale also caught the eye of some analysts, including Chief Executive Officer of Century 21 Singapore Ku Swee Yong who questioned if the situation would worsen next year.

Welcoming Mr Khaw’s announcement yesterday, Mr Ku said that it was “timely to slow down the pace of launches” as the application rate of first-timers has fallen.

Nevertheless, he felt that the proportion of flats allocated for second-timers should be increased in the coming exercises, looking at the “reasonably strong” application rate for this group.

PropNex Chief Executive Mohamed Ismail noted that the demand for BTO flats has more or less stabilised.

“If you don’t start to monitor and reduce the supply, the situation might not be so good,” he said.

A supply glut could result in a drop in the value of property assets here, he added.

Chesterton Singapore Managing Director Donald Han said: “If you look at the number of applications, it is time to probably put in the brakes to ensure that the market moderates itself.”

Analysts were split on the impact of the reduced supply of new flats on public housing prices. Mr Han said the move could prevent the market from “overcorrecting”, while Mr Ismail said that it would do little to stem an impending “minor” price correction.

Pointing out that COVs have dropped by about half since the beginning of the year, Mr Ismail said: “I will not be surprised if public housing prices fall about 10 per cent over the next two years.”

Mr Colin Tan, Director and Head of Research and Consultancy at Suntec Real Estate Consultants, noted that there is a lag time between housing supply and prices. “Whatever (Mr Khaw) does now, the impact will be felt five to seven years down the road,” he said.

He added that policymakers will now have the luxury to draw up longer-term plans, having met an urgent need for more housing in recent years.

Applications for the latest joint BTO-SBF exercise — the final HDB launch of the year — closed at midnight yesterday.

As at 5pm yesterday, a total of 10,381 applications were received for 4,978 BTO flats.

In particular, two-room flats allocated for singles were heavily oversubscribed. At Admiralty Grove in Woodlands, for instance, some 75 two-room flats reserved for singles attracted more than 2,100 applicants.

For the leftover flats, 14,734 applications were received for 3,974 units. Notably, a unit at Pinnacle@Duxton attracted 240 applications.