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BIRD'S EYE VIEW: Prices of HDB resale flats have dropped some 22 per
cent since 1996, and there are calls for the board to consider
rescinding or altering the resale levy. -- TAN SUAN ANN
Those asking for the change, including MPs, property analysts and
flat-owners, say it served an earlier purpose of cutting the waiting
time for flats but is now a burden on Singaporeans who want to
downgrade.

The resale levy is imposed on owners of new HDB flats, and those who
bought resale flats with a CPF housing grant, and who now want to sell
those to buy a flat from HDB.

It is a sizeable amount, ranging from 10 to 25 per cent of the resale
price of the flat or 90 per cent of its valuation price, whichever is
higher. The bigger the flat, the higher the levy proportion.

Hence, to sell a five-room flat for $400,000 and buy a new flat, you
would have to pay a 25 per cent levy of $100,000, in cash, to HDB. If
you had paid $350,000 for the new flat, you could be incurring a
$50,000
net loss.

HDB has defended the policy as necessary to allocate its subsidies
fairly, favouring first-time buyers over those who are coming back for
'a second bite of the cherry'.

But those who rail against the policy say it unfairly penalises
Singaporeans who need to downgrade due to financial difficulties:
making
them pay more to do so.

MP Amy Khor, chairman of the GPC for National Development, said: 'The
rule is outdated and needs to be modified. It worked when property
prices were rising, but not when the market has dipped significantly.'

Prices of HDB resale flats have dropped some 22 per cent since 1996,
and
HDB should thus look into rescinding the resale levy 'for those who
sell
their first flat purchased from the HDB at a loss and wish to buy
another HDB flat', said Dr Khor.

It is not a small problem, said MP Ang Mong Seng (Hong Kah), who in
January appealed in Parliament for the policy to be changed.

With current home prices much lower than 10 years ago, he had in the
past two years received five appeals from residents who had trouble
downgrading due to the levy.

Multiply them by the 84 MPs in Singapore - that is perhaps more than
400
families facing such a dilemma.

Said Mr Ang: 'I think residents will be very happy if the Government at
least cuts the resale levy by 5 per cent.'

But others have suggested that the HDB scrap the levy altogether, and
instead charge a premium on new flats.

That would allow owners to decide whether they can still afford them
while fulfilling the purpose of giving first-timers a higher subsidy,
said Mr Albert Lu, managing director of C&H Realty.

The idea is not new. Before 1997, flat-owners had the choice of paying
either a levy, or a 20 per cent premium on the second flat.

In 1997, to curb property speculation and to cut the time that
first-time applicants had to wait - more than four years in some cases
-
the Government chose the levy option. The premium on new flats was
removed.

Those measures worked well. Too well in fact.

Mr Nicholas Mak, director of research at Knight Frank, said it was
inconceivable back in 1997 that the HDB would ever be stuck with more
than 10,000 unsold flats, 'which it is now trying to sell through
brochures, snazzy showflats and advertisements'.

Real estate agents suggest a happy solution: drop the resale levy to
allow existingflat-owners to buy a cheaper new flat, and HDB can clear
its oversupply at the same time.

As Mr Lu said: 'It does not make sense to leave 10,000 flats lying
vacant, when they can easily be sold just by removing the levy.'

Mr Mohamed Ismail, chief executive of real-estate firm PropNex,
predicted that should the levy be scrapped, some 10,000 existing owners
may very well put their flats on the resale market to pick up the
cheaper surplus HDB flats.

He admitted that the effect of such a move would benefit housing
agents:
more resale deals equals more business.

'But to be fair,' he said, 'buyers benefit too, as removing the levy
will also prompt sellers to price their flats reasonably as they no
longer have a penalty from the levy.'

The additional stock of resale flats coming on the market could benefit
young couples, as the flats tend to be in mature estates and would
enable the newly-weds to be closer to their parents, he said.

Asked about the resale levy last week, National Development Minister
Mah
Bow Tan said that it would be reviewed, but not removed.

'The objectives are still very important to maintain. It allocates
housing subsidies more fairly. But how we implement the resale levy, it
is something we are still looking at,' he had said.

Thus far, HDB has shown some willingness to be flexible with the levy
when certain needs have to be met.

For instance, the levy does not apply to elderly Singaporeans who want
to sell their flat and buy a HDB studio apartment, nor to those who
want
to buy a flat from private developers under the new Design, Build and
Sell Scheme.

And in an attempt to clear its surplus stock this May, HDB had put up
100 of its new flats up for sale as 'resale' units, removing the
requirement for buyers to pay a resale levy if they were giving up
older
flats for these new units.

The response has been telling: 91 of the 100 flats were snapped up
within a month.

The question now is if, and when, the HDB will take action and do more.

darylloo@sph.com.sg

The writer is a reporter with the Straits Times News Desk.