by Bernard Fook Weng Loo

OVER the past 18 to 24 months, HDB resale property prices have shot through the roof and many lower-income families have been priced out of the market. Although this is partly driven by the shortage of HDB flats and increased demand, what is not apparent to many people is the manner in which valuations have artificially fuelled inflation.

Take the three-room flat, for example. This is the smallest HDB flat and is targeted at the lower-income group.

Between March and May, prices of a three-room flat in Yishun, in the same block and with the same floor area, have shot up by between $18,000 and $30,000. The price of a similar three-room flat in Ang Mo Kio ranges from $184,000 to $300,000 in the same period. Similar trends are observed in almost every estate and in almost every flat type.

I accept that several factors may account for the differential in the value of a property, but is it realistic to expect the valuation of the same type of flat in the same block to have risen by 10 to 50 per cent over a short three-month period? Even if the interior renovation of a unit is particularly good, could it account for such a difference? And why does the trend keep increasing? A check with several properties in the weekend classifieds shows that the valuation of similar properties in these locations has gone up by at least another $10,000 since the last transacted prices last month. What can justify the drastic increases?

A three-room flat in a choice location, such as Bishan and Ang Mo Kio, now costs more than $300,000. A two-bedroom private apartment in an older development costs only slightly more - a clear sign that HDB flats are over-priced and out of reach for some lower-income families.

It seems that, in valuing a property, the valuer takes the last transacted price as a benchmark. Since the last transacted price includes the cash top-up sellers usually demand from buyers, the value of the property is artificially inflated.

Past experience in Singapore and Britain shows that when property prices are artificially inflated by valuation, sooner or later, prices will crash and many people will suffer.

The HDB should bar inclusion of the cash top-up in valuations.

Patrick Tan