Is an oversupply or undersupply of HDB flats more of a problem?
(Is this town coming like a ghost town? Image courtesy of Singapore Tourism Board.)
The recent surge in demand for HDB flats has led to record-high resale prices, and the big question as to whether an oversupply or undersupply is the biggest issue for the Singaporean Government.
Less than a decade ago, Singapore was plagued by HDB “ghost towns” in areas such as Sembawang, Jurong West and Sengkang. These were created by an excess of completed but unsold blocks, totalling around 10,000 units in 2005.
This oversupply caused home prices to fall, affecting residents that already owned their homes and were looking to sell. In 1997-1998, the HDB launched their BTO (Built-to-Order) Scheme in an attempt to combat the problem.
However, now Singapore faces an issue of housing undersupply. This will greatly affect buyers who do not yet own their own home – first time buyers and the influx of foreigners into the country will be the greatest affected.
Singapore has therefore swung from one extreme to another. How can the HDB combat this and find that housing “sweet spot” that seems to have, thus far, eluded them?
It could be that HDB attempt to create a housing buffer. Minister for National Development, Mah Bow Tan, when speaking to The Straits Times, said that “although HDB does not plan for a buffer, there is in reality a buffer of flats over and above the BTO flats that are available”. These are accessible leftovers from other HDB schemes. However, in a housing market like the current one, this surplus is vanquished rapidly.
Perhaps the HDB can adopt a ‘steady-state’ policy that means they build a small percentage of extra new flats each year, say 10-20%, regardless as to whether they are bought at launch. To avoid a repeat of the ghost town scenario, they would be built scattered across the island, adding to already established estates. This would naturally attract buyers who are reluctant to wait three years for a BTO flat, and if demand is weak the holding risk is far less than in previous systems. Thus, the government would always have a reserve to offer buyers and avoid any issues of undersupply.
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