The Straits Times, 26 Mar 2022, Sat 5:00 am
By Michelle Ng
The move to allow home owners constrained by the Ethnic Integration Policy (EIP) to sell their units back to the Housing Board would level the playing field for sellers, said property analysts, though the big question is – by how much?
HDB will determine a buyback price and make a fair offer so that the household is not unduly disadvantaged by the EIP, said National Development Minister Desmond Lee when announcing the scheme earlier this month during the Budget debate.
The scheme allows owners to ask HDB to buy back their flat, if they have owned it for at least 10 years and made regular genuine attempts to sell it at a reasonable asking price on the open market.
If a flat owner is deemed eligible, a professional licensed valuer will be appointed to value the flat.
Professor Sing Tien Foo, director of the Institute of Real Estate and Urban Studies at the National University of Singapore (NUS), said that the EIP buyback assistance offers a solution to the “matching problem” that sellers affected by the policy face in looking for the right buyer.
But what constitutes a “fair offer”, one may ask, said the Institute of Policy Studies’ principal research fellow and head of its social lab Mathew Mathews.
Dr Mathews said a fair offer is unlikely to be in the ballpark of the top sale price in any area.
“This will be a source of contention, at least for some who were expecting to get as much as the outliers in transactions, perhaps because of what they felt was unique about their unit. Some of these perceptions have to be managed,” he said.
He also pointed out that owners who are resolved to get an offer from HDB may also not put in the effort to market their unit, which would then lead to some perception of unfairness from other owners.
“Some may not go all out to market their HDB flat – perhaps putting up listings in the relevant portals but doing little to engage property agents to actively market them,” he said.
But Dr Mathews noted that some locations are especially hard hit by the quotas, “so some of this behaviour will be expected”.
In 2020, HDB received 500 appeals from households to waive the EIP limits so they could sell their flats. About 21 per cent were successful.
The Singapore University of Social Sciences’ associate professor of economics Walter Theseira noted that Singaporeans who have bought an HDB resale flat should be fairly familiar with the valuation, which is a requirement if they wish to use their Central Provident Fund savings for housing purposes and to apply for an HDB loan.
“In other words, there is nothing special about the valuation process that EIP sellers should need to be concerned with,” said Prof Theseira.
But some property agents and sellers have expressed reservations about the transparency of the valuation process.
PropNex property agent G. Rajan, who services exclusively minority sellers and buyers, said sellers may wonder if the official valuation will also take into account the adjustments they often have to make to their asking price as a result of the EIP.
“If other four-room flats in Queenstown have been selling at around $800,000, does it mean that HDB will value an EIP-affected four-room flat at around $800,000 and will then buy it back at $800,000? Or will it be lower?”
Nevertheless, he said he will help put in an HDB buyback request for those sellers who want to throw in the towel after marketing their homes unsuccessfully and see what HDB will offer them.
“I think we have to wait till the scheme is fully in operation and study it to see if it’s worth selling back to HDB,” said Mr Rajan, who has been in the industry for 25 years.
On the other hand, said NUS’ Prof Sing, if the buyback price offered by HDB is not adjusted for the “EIP discount”, this could mean other flats in the area affected by the policy may also be able to command a higher resale price instead of having to sell at a “discounted” price.
Most property analysts agree that the HDB resale market will see minimal impact, as the take-up rate for the EIP buyback assistance is expected to be low.
ERA Singapore’s head of research and consultancy Nicholas Mak said the small percentage of affected flats in relation to the overall HDB resale market will have “negligible” impact on the market.
In addition, if the flat could not be sold after six months of marketing, removing it from the market would not dent the supply of flats, he added.
Another question is how HDB will price the flats it buys back when they are subsequently resold through the Sale of Balance Flats exercises or open booking. Flats up for sale via these modes are offered at subsidised rates and subject to prevailing ethnic proportions.
“Will potential buyers have to pay higher prices when they subsequently buy the returned flats from HDB? Does HDB sell them at prices that are adjusted for minority constraints?” asked NUS’s Prof Sing.
A further point of contention could surface down the road if an increasing number of flats requesting EIP buyback come with short remaining leases.
With older flats deemed less attractive on the resale market, Prof Theseira said issues will arise when the EIP buyback offers sellers a way to “exit” their flats, while those not affected by the policy do not have that option. “When that problem starts happening more, that’s when the Government will need to establish what exactly the plans are for redevelopment and buyback of older HDB estates,” he said.
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