Do you believe in demand and supply?

Do you believe that the higher the demand, the higher the price; and the lower the supply, the higher the price?

So what is the problem?

Demand for flats is so strong that supply falls short , to achieve equilibrium we just built more flats! Simple!

There are 2 equilibrium that could result.

There is another equilibrium, which has a higher likelihood of happening.

The new flats are constructed at a higher land cost and higher construction cost. Naturally these flats would be offered at a higher price even though they are subsidized. We could see this in the prices of new BTOs being introduced in the same estate when compared to earlier batches.

And given that our government highly subsidized these new flats to ensure HDB remains affordable, HDBs will always be the lowest priced housing available in Singapore.

So 2 things happened.

A new equilibrium when the demand is met at a higher price.

And since HDB is the lowest priced housing, all other residential property would be benchmarked against it.

Everyone would accept the Executive Condominium (EC) is priced higher then HDB in the same estate, and private condominium is priced higher then EC and so forth.

When higher price equilibrium is achieved, all other property types tend to achieve a higher price equilibrium as well.

There is another long term effect.

The new equilibrium would only be stable if the demand remains. The flats once built would remain but demand might change.

So if demand for resale HDBs were to drop in 5 years time and these new BTOs reached MOPs and entered the resale market, there would be an abundance of HDBs in the resale market which has high downward pressure on resale price.

Our government has all these in mind, so it is never as simple as just build and build.

What would you do if you were HDBs?

What do you think would be the overall property landscape if resale HDBs market flatters and drops?

What do you think is more important; meeting short term demand for new flats or maintaining Singapore property stability?