Strategies to Lower HDB Resale Prices

We Sell HDB Flat Prices have been a topic of concern for many Singaporeans in recent years. Even when you see the resale price index posted on the HDB website, it looks wild. If you look closer at the median resale prices by town, it seems like you need at least five hundred thousand dollars to get a four-room HDB. So, in one boring afternoon, I decided to ask the famous artificial intelligence chatbot, ChatGPT, what strategies the Singapore government can consider to lower HDB resale prices.

Before we get into it, just a disclaimer: even on their website, ChatGPT gave a disclaimer that the answers they generated might not be accurate or even offensive. So, consider this as a brainstorming session where we are just being open-minded about different ideas.

Okay, let’s look at ChatGPT’s suggestions:

1. Increase the supply of new HDB flats: ChatGPT said that in order to lower the resale HDB prices, the supply of new HDB flats must be increased. I agree. If you think about it, let’s say it takes around two years to ballot for a good BTO number, then you must wait another five to six years for the construction. That means we’re talking about a good seven to eight years until you get the keys. And on top of that, you typically need to do some renovation before moving in, which could take about six months. So, that’s like a total of almost nine years before you could finally move in. No wonder a lot of couples end up choosing a resale HDB flat so they don’t have to wait that long. But because so many people want the resale flats, that drives the prices up.

2. Implement cooling measures: According to ChatGPT, to lower resale HDB flat prices, the government needs to give higher stamp duties and tighter loan restrictions. Well, in a way, the government has done some of that. For example, there’s a five percent ABSD for PR couples, introducing loan-to-value ratio, etc. But we still see the price index keep increasing. The government recently just introduced the Plus and Prime models, where there are significantly more restrictions to sell them in the resale market later on. But the catch is, all of those regulations are only applicable for new BTOs or at launch mid-2024 onwards. It does not apply to existing HDBs. Some people are wondering why the rule is not implemented in the existing HDBs to cool off the resale market. But I can see why the government is in a tough spot. Because if the rule is implemented retroactively, it might be too harsh and potentially crash the resale market. It could even create chaos. So, by implementing it in the future, I think the government is trying to make the resale prices do a soft landing instead of flushing the market. But I agree with ChatGPT, if the government wants the resale HDB flat prices to go down now, then they will have to introduce regulations that will cool off the HDB resale market and not just forward-looking.

3. Subsidize HDB upgrading costs: This one is a little bit weird. I don’t get it. If the government subsidizes HDB upgrade costs, I think Singapore residents will take that opportunity regardless of whether they intend to stay or resell the place. Some sellers might even think of beautifying the place first so they can get a much higher resale price later on. So, now on this one, I’d have to disagree with ChatGPT.

4. Encourage right-sizing: ChatGPT suggests that the government should provide some incentives for families who want to downsize their flats when they no longer need the space. I think, on paper, this idea makes sense. But in reality, you don’t typically downsize to a small flat during your productive years. This means that typically, it’s the seniors who downsize to a small flat. But that usually also means that their previous flat is old, and as you know, once a flat hits a certain age, it’s more difficult to get a mortgage loan. So, I kind of have mixed feelings about this suggestion.

5. Extend lease renewal options: Here, ChatGPT suggests that if the lease is longer, then it potentially can reduce the resale prices because the flat is seen as an investment in a longer period. I didn’t think of it before, but I do wonder if there is a science behind picking 99 years as the standard lease. Why not 120 years or 150 years? Will the building crumble after 99 years? Was there any technical simulation behind the number? Well, I guess if the lease years are longer, then it’ll be easier for the potential buyer to get a mortgage loan, and technically, that can increase the amount of supply on the market. Another angle is perhaps ChatGPT thought that the HDB flat could be inherited from parents to their child, so they don’t have to buy their own flat. But yeah, probably it makes sense to discuss whether the 99 years lease can be extended safely.

6. Limit rental period for HDB flats: ChatGPT suggests that the government should limit the rental period for HDB flats, discouraging investors from purchasing the flats solely for rental income. I think this suggestion makes sense. Although it needs to be further refined, I mean, if you are retired above a certain age limit or have a disability, I can understand if some people really need that rental income to supplement their livelihood. But for those families who have completed their MOP and have moved on to a condo or landed property, I don’t see the urgency for them to keep their HDB. Granted, they might have paid ABSD when they purchased their subsequent property, but those HDB flats might be better off in someone else’s hands who really needs them. We know that with the upcoming Plus and Prime models, they come with a rule that the owner can never rent out the whole flat even after the MOP has ended. But again, this will only have an impact way down in the future, while we are now discussing what can help to bring the resale HDB prices down now.

7. Enhance public transport accessibility: I don’t see how this could help. I believe statistically, if a flat is surrounded by good amenities, then it will fetch a higher price. So, I’d have to disagree with ChatGPT on this one.

8. Promote mixed-use development: I don’t see how this could help either. I believe statistically, if a flat is surrounded by good amenities, then it will fetch a higher price. So, I’d have to disagree with ChatGPT on this one.

9. Incentivize green and sustainable building practices: I don’t see how this could help either. I believe statistically, if a flat is surrounded by good amenities, then it will fetch a higher price. So, I’d have to disagree with ChatGPT on this one.

10. Decrease HDB resale prices: ChatGPT suggests that we should encourage foster community ownership and let residents have a say in their living environment, so the residents will stay longer. What? How will this impact the resale price? ChatGPT even said that this would help reduce the supply of resale flats. But then again, if the demand is high and the supply is low, wouldn’t it be pushing the price even further up? Well, I guess managing HDB resale price is such a wicked problem that even ChatGPT’s suggestions are kind of a mixed bag.

What do you think? What will it take to lower HDB resale prices? Let me know in the comment section down below. Don’t forget to like and subscribe, and I’ll see you on my next video. Bye!