SINGAPORE – Artificially lowering prices of Build-To-Order (BTO) flats in mature estates will increase the windfall gain for successful applicants, drive up competition for such flats and affect buyers with genuine housing needs, said National Development Minister Desmond Lee on Monday.
Application rates for BTO flats in mature estates have shot up in the last three years during the pandemic, giving rise to concerns over access to these flats, said Mr Lee in moving his motion on affordable and accessible public housing.
While available new land in mature estates is limited, the Housing Board has been working to launch more projects in mature estates in the last few years.
“But the irony is, the more BTO flats we supply in mature estates, the more buyers join the queue,” added Mr Lee.
“Why? Because Singaporeans can see that the subsidy in a BTO flat is real and that it means that after the minimum occupation period, they can sell the flat if they need to move and make capital gains… especially for flats in mature estates because they are highly sought after.”
Responding to calls by the Progress Singapore Party’s Non-Constituency MP Leong Mun Wai to remove land costs from the pricing of HDB flats, Mr Lee said pricing new flats even lower would only increase the windfall gain that successful buyers enjoy, thus prompting even more people to join the queue and increasing demand for BTO flats in mature estates.
This would result in greater anxiety among flat buyers, affect first-time buyers who are looking for a flat to build their families and is also unfair to the families that failed to secure a flat in a mature estate, he added.
Instead, HDB is consciously moderating BTO prices in mature estates through the prime location public housing (PLH) model, even as more flats are being built in these areas, said Mr Lee.
He noted that flats in desirable locations in mature estates cannot be priced at the same level as other flats – a point he said Mr Leong has also acknowledged in his Facebook post on the topic.
The Government is considering how to prevent “locational premiums” from pricing out all but the most well-off buyers, while avoiding an excessive windfall gain for those who successfully book such flats in mature estates, said Mr Lee.
“It is easy to ask, why not make flats even cheaper? As a society, we have to debate and agree on how affordability should be fairly defined, because ultimately, we – the people of Singapore – are all collectively paying for it,” he added.
He noted that substantial fiscal resources are already allocated to support HDB’s home ownership programme, with the board incurring a deficit of $3.85 billion in its last financial year.
“Many of us may not appreciate what this means. To put this in perspective, the revenue from the 1 per cent GST increase this year is less than half of this,” he said.
“What about the needs of our citizens for healthcare, education, transport and so on?”
Mr Lee said there have been many alternative housing proposals, including from opposition MPs. “I give them the benefit of the doubt that the intent is to improve the lives of Singaporeans. But they are not as frank about the trade-offs,” he added.
Citing Mr Leong’s suggestion that BTO flats can be cheaper if HDB does not have to pay for state land at fair market value, Mr Lee reiterated that HDB does not price flats to recover its costs.
BTO flat pricing and BTO development costs are two separate and independent things, he added.
As land is part of Singapore’s reserves, proceeds from land sales do not come back to the Government as revenue for spending.
Instead, they go back into the reserves, which is then invested and part of the returns are used to fund the Government’s annual Budget, said Mr Lee.
Not paying fair market value for state land means reducing the value of the reserves and allocating more of it for today’s housing, he noted.
Doing so reduces the resources available to meet other needs, as well as the needs of future generations, he added.
“Mr Leong deliberately avoids these trade-offs and sugar-coats the tough realities we face. But the Government cannot and will not take such an irresponsible approach,” said Mr Lee.
“What this Government believes in is to be frank about our challenges and trade-offs and explain how we seek to meet the competing needs of Singapore in the current generation, as well as balance the needs of this generation with the needs of future generations,” he said.
Eleven MPs spoke during Monday’s debate, including Nominated MP Cheng Hsing Yao, who made the case for why land price should be factored into the cost of public housing.
Mr Cheng noted that land is a rare natural resource for Singapore, and investments have been made to make land useful and more valuable.
He cited underground services such as sewer lines and water pipes, infrastructure such as roads, MRT lines, the airport and sea ports, as well as parks.
To ignore the value of the land when computing the cost of public housing would mean writing off generations of investments into Singapore’s economy, society and environment, he said.
“If we do not factor the value of land into the cost of public housing, we are creating an open loop for land value to be given away for free. Some part of society will enjoy a significant windfall from the free land, while another part of society will be paying for the windfall,” he said.
Mr Cheng added that while some believe that BTO prices in mature and non-mature estates should not be too different as public housing is a public good that serves those in need, HDB dwellers are not a homogeneous group.
Given that 80 per cent of Singaporeans live in public housing, there is a mix of low-income and middle-income earners along with a “good proportion of rather affluent Singaporeans” living in HDB flats, he said.
Flat prices in mature estates are higher because they offer more of what people desire, and buyers are prepared to pay more to live there, he noted.
To artificially suppress prices of BTO flats in mature estates through additional subsidies or grants to buyers would distort real prices, he added.
“Singapore’s public housing programme has gone way beyond providing just for necessity. It has been providing for ‘wants’ and ‘aspirations’ for some time now,” Mr Cheng said.
“The call to either bring down the prices of mature estates or provide more grants to make them more accessible ultimately leads to the same things – more subsidies in the form of taxpayer’s money or tapping the reserves,” he added.
“Source:[Artificially reducing mature estates’ BTO prices will spur demand, affect genuine buyers: Desmond Lee] © Singapore Press Holdings Limited. Permission required for reproduction”
