New Reporter
10-02-23, 09:28
70% of BTOs launched in 2022 affordable with S$8,400 median household income: Desmond Lee
PSP calls for “reset” to public housing policy, proposes BTO pricing solution
Feb 06, 2023
NEW Housing and Development Board (HDB) flats continue to be affordable for most Singaporeans, with prices remaining stable despite rising costs and a tight supply situation, said National Development Minister Desmond Lee on Monday (Feb 6).
“Close to 70 per cent of the Build-To-Order flats launched in 2022 across all estates can be affordably purchased with (the median Singaporean household income of) S$8,400 at a mortgage servicing ratio (MSR) of 25 per cent or less, meaning that these households use a quarter or less of their household income to pay for the mortgage instalment,” said Lee in his opening remarks for the debate on two parliamentary motions on keeping public housing affordable and accessible to Singaporeans on Monday (Feb 6).
A first motion, filed by Progress Singapore Party’s (PSP) Non-Constituency Members of Parliament Leong Mun Wai and Hazel Poa, called on the government to review its housing policies to deliver affordable and accessible HDB flats, strengthen the owner-occupation intent of public housing, protect retirement adequacy and keep housing inclusive for all Singaporeans.
Leong held that Singapore’s public housing policy requires a “reset”. He proposed that new flats be priced without including land cost, to maintain BTO affordability without “hurting” Singapore’s past reserves. He also suggested the the government could provide more rental options in prime locations for young families or groups of singles.
“Affordability is not about whether the housing loan can be serviced on a month-to-month basis by CPF savings or not, but by looking at the effect of the total cost of home ownership on the CPF retirement account,” said Leong.
He noted that a new 4-room BTO flat at Tengah that initially cost S$350,000 would actually cost S$592,000 in CPF savings after 25 years of principal repayment and financing costs.
Lee filed the second motion asking the House to “affirm the importance” of keeping public housing affordable and accessible, while protecting the interest of current and future generations of Singaporeans.
In his speech, Lee emphasised that the government has kept BTO prices “almost flat” in the past few years, even with strong demand and rising construction costs. In 2019, before the pandemic, four-room BTO flats in a non-mature estate, excluding grants, cost an average of S$341,000. The average price grew marginally in 2022 to S$342,000.
BTO flats in non-mature estates are generally priced at an MSR of 25 per cent or less, he said. Meanwhile, for BTO flats in mature estates – “where the locations are more diverse” – the MSR can exceed 25 per cent in certain areas, with a home price-to-income ratio (HPI) of five times or more.
“This means that it takes around four to five years of total household income to buy a home,” said the minister. In comparison, the HPI of major cities such as London, Los Angeles and Sydney range between eight to 15 times.
Still, Lee acknowledged that concerns remain over access to flats in mature estates, especially for young couples who aspire to live near their parents or closer to a transport node to “save time in terms of going to work”.
But the answer is not to make flats “even cheaper”, he said.
This is because Singaporeans might take advantage of the subsidies offered for BTO flats, selling the flat as soon as the minimum occupation period is fulfilled and making capital gains, he said. Lowering the price of these flats would then increase the “windfall gain that successful buyers enjoy”, resulting in stiffer competition for BTO flats in mature estates.
“At the end of the day, this will not help first-timer couples who are looking for a flat to build their families. It will also be unfair to all families who failed to secure a flat in a mature estate, and so missed out on the large windfall gain,” said the minister.
The PSP proposed that new flats be sold at a price equivalent to its construction cost and a “notional location premium”.
A land cost will be recorded by the HDB when the new flat is purchased. When it is sold after its minimum occupation period, the seller must then pay for the land cost with accrued interest based on the historical mortgage rates to the past reserves, before bagging the gains.
Leong also suggested that the government keep a large stock of “quality” rental flats in areas near the central business district for young Singaporeans. These “Millennial Apartments” will be smaller in size with a lease of two to five years for young families or groups of singles.
“Concentrating young Singaporeans together will allow those who are single to have more opportunities to socialise and perhaps marry, while those who are already married will have more time for their families because they live near their workplaces,” he said.
In the debate that followed, Nominated Member of Parliament Cheng Hsing Yao, who is chief executive officer of property developer GuocoLand, dealt with the argument that public housing is a public good.
This might be true in many other cities, as they are unable to “scale up their public or affordable housing programme”.
But in Singapore, roughly 80 per cent of Singaporeans live in public housing, and as such, Cheng said: “We can academically assume that up to the 80th percentile income earners live in public housing.”
“We have low income earners, middle income earners and a good proportion of rather affluent Singaporeans living in HDB flats.”
Flats in mature estates are naturally costlier, Cheng said, since “they offer more of what people desire” – being located close to hot locations with “more established amenities”.
“If we artificially suppress their prices through some form of price controls, additional subsidies or grants to buyers, we will be distorting the real prices,” he said, and would result in mature estates being severely oversubscribed. “Is living in mature estates a necessity or a non-essential?”
People’s Action Party MP Xie Yao Quan suggested a cap for BTO prices, based on current income benchmarks – at S$500,000 for four-room flats and S$650,000 for five-room flats.
This will keep new flats within reach of a Singaporean family at median income, pegged at five times their annual income, he said.
In his speech earlier, Lee reiterated the government has been ramping up supply of BTO flats to “catch up on lost time” – completing more than 20,000 homes in 2022. It will complete another 20,000 flats this year.
He also pointed to new flats with shorter waiting times, with buyers waiting less than three years, introduced before the pandemic. More than 8,000 of such flats will be completed in the next two years.
From 2024, the government will launch more of such flats and aim to reach pre-pandemic levels by 2025, launching around 2,000 to 3,000 of these flats every year.
“After that, over a period of time, we will recalibrate our building programme so that shorter waiting time flats form a larger proportion of our supply of new flats,” said Lee.
The Prime Location Public Housing model was rolled out as well, giving households additional subsidies for public housing in central locations.
“We are considering how to prevent the locational premiums from pricing out all but the most well-to-do buyers, while avoiding an excessive windfall gain to those who successfully book such a flat in the mature estates,” he said.
The government will also consider more housing support for first-timers buying a resale flat. New measures will be announced when ready, he said.
The debate continues on Tuesday.
https://www.businesstimes.com.sg/property/70-btos-launched-2022-affordable-s8400-median-household-income-desmond-lee
PSP calls for “reset” to public housing policy, proposes BTO pricing solution
Feb 06, 2023
NEW Housing and Development Board (HDB) flats continue to be affordable for most Singaporeans, with prices remaining stable despite rising costs and a tight supply situation, said National Development Minister Desmond Lee on Monday (Feb 6).
“Close to 70 per cent of the Build-To-Order flats launched in 2022 across all estates can be affordably purchased with (the median Singaporean household income of) S$8,400 at a mortgage servicing ratio (MSR) of 25 per cent or less, meaning that these households use a quarter or less of their household income to pay for the mortgage instalment,” said Lee in his opening remarks for the debate on two parliamentary motions on keeping public housing affordable and accessible to Singaporeans on Monday (Feb 6).
A first motion, filed by Progress Singapore Party’s (PSP) Non-Constituency Members of Parliament Leong Mun Wai and Hazel Poa, called on the government to review its housing policies to deliver affordable and accessible HDB flats, strengthen the owner-occupation intent of public housing, protect retirement adequacy and keep housing inclusive for all Singaporeans.
Leong held that Singapore’s public housing policy requires a “reset”. He proposed that new flats be priced without including land cost, to maintain BTO affordability without “hurting” Singapore’s past reserves. He also suggested the the government could provide more rental options in prime locations for young families or groups of singles.
“Affordability is not about whether the housing loan can be serviced on a month-to-month basis by CPF savings or not, but by looking at the effect of the total cost of home ownership on the CPF retirement account,” said Leong.
He noted that a new 4-room BTO flat at Tengah that initially cost S$350,000 would actually cost S$592,000 in CPF savings after 25 years of principal repayment and financing costs.
Lee filed the second motion asking the House to “affirm the importance” of keeping public housing affordable and accessible, while protecting the interest of current and future generations of Singaporeans.
In his speech, Lee emphasised that the government has kept BTO prices “almost flat” in the past few years, even with strong demand and rising construction costs. In 2019, before the pandemic, four-room BTO flats in a non-mature estate, excluding grants, cost an average of S$341,000. The average price grew marginally in 2022 to S$342,000.
BTO flats in non-mature estates are generally priced at an MSR of 25 per cent or less, he said. Meanwhile, for BTO flats in mature estates – “where the locations are more diverse” – the MSR can exceed 25 per cent in certain areas, with a home price-to-income ratio (HPI) of five times or more.
“This means that it takes around four to five years of total household income to buy a home,” said the minister. In comparison, the HPI of major cities such as London, Los Angeles and Sydney range between eight to 15 times.
Still, Lee acknowledged that concerns remain over access to flats in mature estates, especially for young couples who aspire to live near their parents or closer to a transport node to “save time in terms of going to work”.
But the answer is not to make flats “even cheaper”, he said.
This is because Singaporeans might take advantage of the subsidies offered for BTO flats, selling the flat as soon as the minimum occupation period is fulfilled and making capital gains, he said. Lowering the price of these flats would then increase the “windfall gain that successful buyers enjoy”, resulting in stiffer competition for BTO flats in mature estates.
“At the end of the day, this will not help first-timer couples who are looking for a flat to build their families. It will also be unfair to all families who failed to secure a flat in a mature estate, and so missed out on the large windfall gain,” said the minister.
The PSP proposed that new flats be sold at a price equivalent to its construction cost and a “notional location premium”.
A land cost will be recorded by the HDB when the new flat is purchased. When it is sold after its minimum occupation period, the seller must then pay for the land cost with accrued interest based on the historical mortgage rates to the past reserves, before bagging the gains.
Leong also suggested that the government keep a large stock of “quality” rental flats in areas near the central business district for young Singaporeans. These “Millennial Apartments” will be smaller in size with a lease of two to five years for young families or groups of singles.
“Concentrating young Singaporeans together will allow those who are single to have more opportunities to socialise and perhaps marry, while those who are already married will have more time for their families because they live near their workplaces,” he said.
In the debate that followed, Nominated Member of Parliament Cheng Hsing Yao, who is chief executive officer of property developer GuocoLand, dealt with the argument that public housing is a public good.
This might be true in many other cities, as they are unable to “scale up their public or affordable housing programme”.
But in Singapore, roughly 80 per cent of Singaporeans live in public housing, and as such, Cheng said: “We can academically assume that up to the 80th percentile income earners live in public housing.”
“We have low income earners, middle income earners and a good proportion of rather affluent Singaporeans living in HDB flats.”
Flats in mature estates are naturally costlier, Cheng said, since “they offer more of what people desire” – being located close to hot locations with “more established amenities”.
“If we artificially suppress their prices through some form of price controls, additional subsidies or grants to buyers, we will be distorting the real prices,” he said, and would result in mature estates being severely oversubscribed. “Is living in mature estates a necessity or a non-essential?”
People’s Action Party MP Xie Yao Quan suggested a cap for BTO prices, based on current income benchmarks – at S$500,000 for four-room flats and S$650,000 for five-room flats.
This will keep new flats within reach of a Singaporean family at median income, pegged at five times their annual income, he said.
In his speech earlier, Lee reiterated the government has been ramping up supply of BTO flats to “catch up on lost time” – completing more than 20,000 homes in 2022. It will complete another 20,000 flats this year.
He also pointed to new flats with shorter waiting times, with buyers waiting less than three years, introduced before the pandemic. More than 8,000 of such flats will be completed in the next two years.
From 2024, the government will launch more of such flats and aim to reach pre-pandemic levels by 2025, launching around 2,000 to 3,000 of these flats every year.
“After that, over a period of time, we will recalibrate our building programme so that shorter waiting time flats form a larger proportion of our supply of new flats,” said Lee.
The Prime Location Public Housing model was rolled out as well, giving households additional subsidies for public housing in central locations.
“We are considering how to prevent the locational premiums from pricing out all but the most well-to-do buyers, while avoiding an excessive windfall gain to those who successfully book such a flat in the mature estates,” he said.
The government will also consider more housing support for first-timers buying a resale flat. New measures will be announced when ready, he said.
The debate continues on Tuesday.
https://www.businesstimes.com.sg/property/70-btos-launched-2022-affordable-s8400-median-household-income-desmond-lee