When I opened up the newspapers today, I saw the headline “HDB Flat Buyers Pay Less Cash Upfront” screaming at me on the front page. I got pretty annoyed about the article after I finished reading it.
That same headline could have been rewritten as “HDB Resale Flat Prices Continue to Rise“, and it would have fit the original article just as well. In fact I think it fits it even better.
The article states that the median cash-over-valuation (COV) prices in many popular estates have gone down. This is due to the increase in the market valuation of the flats.
“With valuations going up, the COV is coming down and this makes it more affordable”, someone was quoted as saying.
Granted, the lower COV means that buyers need to fork out less cash upfront. However, they are going to pay more for their flat and this is going to make them financially worse off in the long run.
Able to fork out the upfront cash does not equate to being able to afford a flat.
If I tell you that you can buy a Porsche for no money down compared to paying a 10% deposit previously, does that make it any bit more affordable for you? Whether you can afford it or not will also depend on whether you can service the monthly installments.
There was an example given in the article about a five-room flat in Bukit Batok.
In the fourth quarter of last year, the median valuation was $389k, the median COV was $41k and the median price was $430k.
Barely 6 months later, the valuation is $420k, the COV is $30k and the price is $450k.
This is an increase of 20k or about 4.7% of the flat’s price in less than half a year.
If you read the entire article, you will realise that the author, Jessica Cheam, is trying to paint an optimistic picture about the affordability of HDB flats – despite the increase in their prices.With rampant inflation, the national newspaper is probably trying to do its part to reassure the public. Seriously, I think they can do much better than this.
Ironically, another section of the newspaper shows the cost of three HDB resale flats in the Holland area.
The 3-room was going for $378k, the 4-room for $465k and the 5-room for $680k.
The (rapidly) rising property prices is a real cause of concern.
If left unchecked, how are the lower income families going to be able to afford basic housing for themselves?