Since the past year, values of resale Housing Board (HDB) flats, which can be bought only by citizens and permanent residents (including many Malaysians), are becoming more expensive in the wake of rising demand. With rents in the private condos escalating – by 30% or more – a growing number of expatriates are moving into these public apartments, pushing up rents to a 10-year high.

This is beginning to hit young professionals who are starting off in life. They usually buy a flat on the open market before they get married in order to be able to select a location they like.

In some places, runaway prices have put off plans to own a resale apartment. A recent example is the couple who waited for a year to buy one at a choice site only to find that the price had gone up by a third or S$118,000 (RM269,800).

Marketing executive Zubaidah Salim, 25, and her software engineer fiancé turned down an offer to buy a five-room resale HDB flat for S$349,000 (RM798,000). Now when they are ready, the price is S$467,000 (RM1.06mil).

“We feel like kicking ourselves for not buying (it) last year. Resale prices are so high now that I don’t think we’re able to afford a five-room flat anymore,” she told the Straits Times.

For expatriates, it’s even worse. When their private condo leases expire they have to fork out rental increases of 33% or more, depending on location.

Singapore is now the eighth most expensive city in Asia in terms of housing costs for expatriates, says a global human resources firm.

“The owners are getting greedy. It’s really a landlord’s market right now,” said a property agent.

Singapore’s residential property is facing a crunch that could worsen in the next few years under the weight of a large inflow of foreigners and a resurging economy.

About 85% of Singaporeans live in HDB estates, which have for decades been the government’s showcase of achievements. This has made housing costs much more bearable for its people in this land-short, high cost city. (Only citizens with a monthly household earning of S$8000 (RM18,280) or less can buy one but foreigners with PR status can purchase one on the resale market.)

During most of the past decade, Singapore’s real estate has been in a state of general neglect, languishing after a 35% drop in the mid-90s. This recovery has raised the value of people’s assets. This is good news for Singaporeans, who have the world’s highest proportion of homeowners. Nine out of ten residents own their apartments.

There is, however, a downside for those who don’t own one. Prices of newly completed ones sold by the Housing Board have also been creeping upwards but at a controlled pace over the years.

But since it is only available after a wait of several years and in places that people don’t like (many who plan marriage wish to live near their parents or workplace), they often buy one in the dearer resale market.

These days, the preferred blocks closer to the city centre are offered at prices not far below those of private suburban condos.

The government is faced with a dilemma. It wants to see people’s asset values rise, but only gradually, not excessively, which could prevent young people from buying a home.

The recent en bloc frenzy is seeing thousands of displaced owners seeking an alternative flat. Flush with cash, some turn to the resale HDB market, adding to the demand pressure.

A three-room HDB flat was sold for a record S$675,000 (RM1.5mil); a week later another fetched S$720,000 (RM1.6mil). As a result, other sellers have generally been demanding exorbitant prices.

Why the sharp jump, and will it last? It is caused by a large influx of foreign workers and a strong economy. Since 1990, the population increased by a phenomenal 62% from 2.7 million to 4.5 million, one of the fastest rates in the world.

Last year alone, the government granted PR permits to 58,200 and citizenship papers to 13,900 foreigners. In the next five years, at least 240,000 PR permits and citizenship papers will be issued, which will further exert demand on the supply chain.

The government is rushing to build 42,200 more private homes between now and 2010 but economists believe this will not be enough.

A Citigroup report said the property supply crunch was likely to get worse in the next four years despite these assurances. Its analysts said that units under construction suggested a potential shortfall.

Over the long term, demand for real estate in Singapore, which measures only 650 sq km, will always outstrip supply as long as there is stability and growth.

o Seah Chiang Nee is a veteran journalist and editor of the information website littlespeck.com

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