Minister Desmond Lee faces online criticism for blaming psychological factors for HDB price hikes

SINGAPORE: While National Development Minister Desmond Lee blamed psychological factors for the HDB resale price hikes, the online community expressed disagreement, arguing that the government’s failure to address the underlying structural and economic issues driving housing prices makes it appear out of touch with the realities faced by its citizens.

Additionally, some netizens voiced frustration that the HDB has strayed from its original mission of providing affordable public housing, calling for a reassessment of the government’s approach to monitoring the HDB market.

Detailing the government’s latest announcement of new property cooling measures on Tuesday (20 August), Mr Lee explained that tightening the loan-to-value (LTV) limit for HDB housing loans aims to temper demand at the higher end of the public housing resale market.

Effective from 20 August, the LTV limit has been reduced from 80% to 75%, aligning it with the mortgages offered by financial institutions.

He assured that the adjustment in the LTV limit is not expected to significantly impact the majority of HDB loan applicants, as nearly 90% of home buyers already borrow at LTV ratios of 75% or less.

“That 10 per cent disproportionately buy the larger flat types, which drive up the overall market … They also disproportionately pay much higher prices,” the minister noted.

Regarding the rise in HDB resale prices, Mr Lee attributed it to strong, broad-based demand across all buyer groups, partly driven by robust income growth over the last two years.

He also noted that rising private property prices have led more second-time buyers to the HDB resale market for upgrading. With the same budget, these upgraders can generally acquire a comparable-sized resale flat with better attributes than some condominiums.

Additionally, Mr Lee pointed out that a decrease in the number of flats reaching their Minimum Occupation Period (MOP) this year has contributed to tighter resale supply.

“There is also some Market psychology at work here,” Mr Lee said, referring to recent high-profile transactions and record resale prices that have attracted significant media attention.

However, he defended that in the past one and a half years, flats selling for over a million dollars have comprised about 2% of all resale transactions.

For smaller flats, such as room and four-room units, the most expensive ones are typically located in central HDB estates with strong transport connectivity and comprehensive amenities.

“More than half (of these flats) are located on very high floors about 30 stories and have good views, such transactions may come only 0.5% of all four room or smaller Flats transacted in the last two years .”

Mr Lee acknowledged that sellers, influenced by media coverage of record prices, have raised their price expectations, while buyers have become anxious to secure flats before prices increase further.

“if we are not careful, such market dynamics can cause the resale market to run out of line with economic fundamentals and cause a bubble.”

Call for Govt action on structural and economic factors driving housing price increases

Comments on The Straits Times Facebook post reveal that many netizens find Mr Lee’s attribution of the HDB resale price hike to psychological factors unconvincing.

Notably, Marcus Neo, a boxing coach, pointed out that while psychological factors can influence market behaviour, focusing solely on them without addressing the underlying structural and economic issues driving rising housing prices can make the government appear disconnected from the realities faced by its citizens.

“This perspective resonates particularly in societies with a growing perception of inequality and where the cost of living is a significant concern.”

While a netizen attributed the lack of housing funds to financial mismanagement by some Singaporeans and defended the government’s current policies, Marcus Neo countered by highlighting that this perspective overlooks the realities of income inequality and high living costs.

The netizen suggested that Singaporeans travel to Johor Bahru (JB) for shopping and argued that opportunities are plentiful, seemingly dismissing the significant cost of living concerns faced by locals.

Neo noted that while some individuals might afford holidays, many others, particularly lower-income groups, face significant economic strain, including untreated health issues and limited access to essential services.

“The argument that opportunities abound ignores systemic barriers, including gaps in education and skills development, which limit social mobility. ”

Additionally, he noted that cross-border shopping reflects the high cost of living in Singapore rather than affluence.

Concerns arise that million-dollar HDB flats could become the norm

While Minister Lee assured that million-dollar HDB flat only comprised small portion in the market, some raised worries over if the current rate of price increases for both new and old HDB flats continues, million-dollar flats could soon become the norm.

A netizen argued that the overall increase in market prices has driven up resale prices further, and pointed out that the rate of increase in resale prices closely mirrors the increase in new flat prices, which are regulated by the government.

Some raise doubt over the new cooling measures to address the affordability issue effectively, highlighting that likely that buying an HDB flat will become even more challenging for first-time lower-income buyers.

“Those with assets will still be able to pay $1 million for resale HDB, beacause they are most likely downgrading from condo or private”

HDB urged to refocus on affordable housing

There are also netizens expressed frustration that HDB has strayed from its original mission of providing affordable public housing for Singaporeans.

Some suggested that HDB flats should not be part of the resale market but instead be bought back by the government to maintain affordability.

They believe that the current approach, including offering grants, fails to address the core issue of high resale prices and that the government should focus on reclaiming and reselling older HDB flats to provide more affordable housing options.

Netizens warn of socioeconomic imbalances in prime areas

A netizen suggested to government to reconsider building high-end flats in prime locations, suggesting instead to sell these areas to private developers and use the funds to subsidize more affordable flats in less central locations.

By shifting the focus from building high-end flats in prime areas to developing flats in Outside Central Region (OCR) areas, the netizen believed the government could allocate more resources to subsidize these more affordable flats.

The netizen is concerned that if only younger and wealthier residents occupy these prime areas, it could lead to socioeconomic imbalances. They advocate for policies that ensure a more diverse population in desirable locations.