The cooling demand for resale Housing Board flats has put some sellers in a quandary.
These sellers are those who have already got, or will soon get, their keys to newly completed Build-To-Order (BTO) flats or executive condominiums.
They have to sell their existing Housing Board (HDB) flats within six months of getting their new homes. But with buyers thin on the ground, some can't find buyers within that time frame. So far, the HDB has been flexible and given them more time to sell their flats.
But how tenable is this situation, and should more be done?
Anecdotally, a handful of sellers are asking to collect their keys later, or for an extension of the deadline to sell their flats. These will give them more time to find a buyer for their unit.
The issue was raised by MP Lee Bee Wah on her Facebook page recently.
In the first half of this year, the HDB got 18 requests a month to delay the collection of keys.
But is this a matter of sellers holding out for high prices?
One expert thought so. "I think most HDB resale flat sellers are finding it difficult to sell their flat because the price that is offered is too low for their consideration," says R'ST Research director Ong Kah Seng.
But some sellers have said there were no viewers, let alone offers, for their flats.
How did this situation come about, of people being unable to sell their flats to gain possession of a new one?
It's partly due to government property cooling measures.
Soaring HDB resale prices caused unhappiness during the 2011 General Election. Since then, a flood of new flats has been built. Home loan curbs have lowered demand, meaning lower prices and fewer flats sold.
As of June, the Singapore Real Estate Exchange's HDB resale price index has fallen by 6.8 per cent from its peak in April 2013.
Last month, 1,315 flats changed hands, down from 2011's average of more than 2,000. In this weak market, the difficulty some BTO buyers face in disposing of their existing flats may be an unintended consequence, but is also an unsurprising one.
The Government arguably bears some responsibility for their plight. But what should it do?
If the problem is a lack of buyers, the obvious solution might be to boost demand.
One reader wrote to me with the suggestion that property curbs be eased on the resale market, so that the market can pick up again.
Another reader had a specific tweak in mind: Allow private property owners to buy resale HDB flats, as was the case until 2010.
Current rules require them to give up their private home if they want a resale flat. If this is relaxed, they could form a pool of ready buyers, said the reader.
But when posed this question by The Straits Times, some property experts dismissed this idea.
Any attempt to boost demand has wide-ranging effects, as this very problem demonstrates. The point of cooling measures was to reduce demand and bring prices down. Raising demand would risk raising prices again.
More to the point, it would be a very blunt solution for what is essentially a niche problem.
Most new flat owners don't have an existing HDB flat to sell. Only "second-timers" do and they are a minority of BTO buyers. They form no more than 30 per cent of those buying two- and three-room flats, and 15 per cent for larger flats in non-mature estates.
For mature estates, a mere 5 per cent of the BTO supply is reserved for them. Of these, only a tiny number has problems disposing of the existing flat.
The 18 requests for delayed key collection each month in the first half of this year is a smaller proportion of all keys handed over than the 11 requests a month in the second half of last year.
Over the last one year, such requests represent less than 1 per cent of all flats to be handed over.
Mr Ong adds: "It may be better to grant such sellers a longer period to dispose of their flat, instead of introducing new types of buyers for resale flats, which might affect the dynamics and pricing equilibrium that the recent cooling measures have painstakingly hoped to better."
The HDB has essentially been doing this, by considering and often granting deadline extensions. This may not seem like a long-term solution. But in the context of an ever-changing property market, it might well suffice.
OrangeTee head of research Christine Li thinks that HDB resale transaction volumes could bottom out this year.
Admittedly, things could also worsen. This year will see over 28,000 completed BTO flats and 17,000 private residential units. This could mean a flood of people trying to offload their flats, making it harder to do so.
If the situation indeed worsens and more needs to be done, then targeted measures may be needed. For now, it is worth waiting to see if changing market conditions can do the trick.
Any attempt to boost demand has wide-ranging effects... Raising demand would risk raising prices again.
This article was first published on July 23, 2014. Get a copy of The Straits Times or go to straitstimes.com for more stories.