Factors behind spike in resale flat prices

I REFER to Thursday’s commentary, ‘HDB resale prices: Don’t just find a scapegoat’. The 132,000 potential HDB resale flat buyers may not include two sections – singles aged above 35 years and those downgrading to HDB flats after selling private property.

The HDB resale flat turnover of 37,205 units out of a total stock of about 880,000, by itself does not explain fully the marked rise in prices every year.

When prices of private properties soar sky high through their purchase by foreign or Singapore buyers, HDB flat sellers will shun private properties and instead buy another HDB flat as replacement, adding to the demand.

Moreover, HDB flat valuations are affected by resale transactions which are affected by private property sale, resale and collective property sale transactions – which are affected by international flow of funds and borrowing costs.

In other words, the ‘magic wand’ of HDB to control Singapore property prices can work temporarily but will be countered or reinforced in the long term by international forces of inflation and asset allocations.

Loo Fook Kay

Source : Straits Times – 13 Feb 2010