Smaller buyer pool leaves some with below-average resale prices
When account director Vijeshwariee Yoganathanput her five-room flat in Redhill Road up for sale in October last year, she thought she would have no problem selling it within a few months, given that it was opposite an MRT station and on the 26th storey.
However, after 10 fruitless months, only one offer came in.
Ms Vijeshwariee, 37, eventually sold her flat at $813,000 last month – more than $60,000 below the average price of about $880,000 that other five-room flats on high floors in the vicinity had fetched over the past five months.
She believes the reason is that her block had reached the ethnic quota for Chinese residents. That meant she was able to sell the flat to only people from minority races, a factor that significantly reduced the pool of potential buyers.
Ms Vijeshwariee, who received inquiries from Chinese people who were interested in the flat, feels she has been penalised by the rule. The flat had been advertised for sale at $860,000.
More attention is being focused now on home owners like her who have been affected by the Ethnic Integration Policy (EIP), which specifies the proportion of units in an HDB block and precinct that can be owned by a particular racial group to ensure a balanced mix.
Four MPs raised concerns in Parliament last week about the EIP, saying that while it is useful in promoting racial harmony, the policy has affected residents’ ability to sell their flats quickly or at market value.
National Development Minister Lawrence Wong reminded them that the EIP is not the sole factor in the sale of a flat as issues such as location, the storey it is on, its condition, remaining lease and market sentiments would also be considered.
He turned down Mountbatten MP Lim Biow Chuan’s suggestion for the Government to buy back HDB flats from owners who cannot sell due to the EIP, but said the ministry would consider a suggestion from Bishan-Toa Payoh GRC MP Saktiandi Supaat to put out monthly guidelines on how much flats affected by the EIP could sell for.
Mr Saktiandi told The Sunday Times that he hopes this can help to cap any potential economic shortfall from the sale of such flats, compared with those in unaffected blocks.
Dr Leong Chan-Hoong, head of the Institute of Policy Studies Social Lab, said owners from other races looking to sell flats in blocks where the Chinese quota has been maxed out usually offloaded their homes at about 10 per cent below the average transacted prices of a similar flat type in the same neighbourhood.
His estimates were based on focus group discussions with 26 estate agents in June and July.
ERA Realty key executive officer Eugene Lim said the price differential is because of the smaller pool of home-seekers eligible to buy a flat that has met the ethnic quota for the majority race.
As the quota for Chinese residents tends to be filled up in central regions such as Ang Mo Kio or Bishan, where prices tend to be higher, it could put a further squeeze on minority sellers as the supply of their flats could outstrip demand from viable buyers, he added.
On the other hand, blocks that are constrained by the Indian/Others and Malay ethnic quotas usually do not see a similar situation as they can still be sold to the relatively large pool of buyers, said Mr Lim.
More minority flat owners could be facing such issues now.
Dr Leong noted that 30 per cent of HDB blocks had reached at least one ethnic quota as of July this year, up from 27.9 per cent in 2016 and 24.4 per cent in 1989, when the EIP was implemented.
It was also noted in Parliament last week that the HDB received 1,600 requests to waive the quota rule between 2015 and last year. The HDB told The Sunday Times that about one in five appeals was successful.
Some sellers, such as retiree R. Sivanandam, 72, say they are unable to find buyers despite leaving their flats on the market for a long time.
Mr Sivanandam, who used to work in marketing, is asking for $720,000 for a five-room flat in Bishan Street 13, $50,000 below the average resale transaction price of five-room units in his block over the past year.
But no one from the eligible Malay and Indian/Others ethnic groups is biting, though he has been trying to sell the flat for about two years.
“How long must I wait before I can find a buyer? I have diabetes and other liver and cardiac problems, and I need the cash for my retirement and medical issues,” he said.
Mr Singh, 65, a security guard, who declined to give his full name, has been trying to sell his four-room flat in Clementi Avenue 1 for more than a year after his divorce.
He is asking for around $740,000, $10,000 less than what two other four-room flats in his neighbourhood had fetched in June, and earlier this month.
“My ex-wife doesn’t believe me when I say that there are no takers. I just want to settle this so that I can move on with my life,” said Mr Singh, who hopes the EIP can be reviewed.
But 54-year-old Mr Jain (not his real name), who is Indian, is more sanguine about the EIP, despite the fact that he had to let go of his three-room flat in Toa Payoh Lorong 7 for just $211,000 in August, below the average transaction rate of around $240,000 in his neighbourhood for the last three months. “We have to think about the country’s interests and it is important to have a good racial mix in our housing blocks.”
The EIP is also less restrictive for buyers who are in mixed-race marriages as they can choose their household ethnic classification based on either the applicant’s race or their spouse’s race at the point of purchase. But the same ethnic classification will apply when they sell.
When teacher Mohamed Shahrom Mohamed Taha, 39, and wife Yvonne Neo, 35, were hunting for a resale flat in the Bedok Reservoir area eight years ago, they knew that many blocks had filled their quotas for Malay families.
“We eventually got a flat that did not face any ethnic restrictions, but we were not worried even if there were, as we knew we could get around it by using my wife’s race classification,” he said.
“Source:[HDB ethnic quota: Tough sell for owners of minority race] © Singapore Press Holdings Limited. Permission required for reproduction”
