Let Singaporean private homeowners own resale HDB flats too

Aug 07, 2023

FOR many Singaporeans, the first step in the homeownership journey is buying a build-to-order (BTO) flat from the Housing and Development Board (HDB). BTO flats are sold at subsidised prices, and many BTO flat buyers receive housing grants.

Subject to meeting eligibility criteria, one can get a grant when buying a resale HDB flat. But, resale flat prices are largely determined by market forces. When demand exceeds supply, prices rise strongly.

The HDB resale price index jumped 10.4 per cent in 2022, after rising 12.7 per cent in 2021. In the second quarter, the index rose 1.5 per cent quarter-on-quarter. Between the fourth quarter of 2019 and Q2 2023, the HDB resale price index increased 34 per cent.

Affordability of HDB resale homes

Over a longer timeframe, the growth in the HDB resale price index is fairly muted. For the 10-year period to Q2, the index grew at a compound annual growth rate of 1.7 per cent.

Affordable homes can be provided largely through building more BTO flats. Also, efforts are being made to build BTO flats with shorter waiting times to completion.

Still, HDB resale flat affordability matters. For some buyers, a resale flat in a mature estate is ideal for living near family members. For a young family with children, getting a resale flat can mean having one’s own home to live in almost immediately, versus waiting possibly for a few years to collect the keys to a BTO unit.

Local singles aged 35 years and above who want to buy larger HDB flat types have to look in the resale market.

While some HDB resale flats transact for over a million dollars each, such deals represent a small fraction of total HDB resale flat transactions.

In Q2, the median resale prices for a four-room flat in Ang Mo Kio, Hougang, Jurong West, Punggol and Toa Payoh were S$520,000, S$525,000, S$476,000, S$590,000 and S$715,000 respectively. Median resale prices of four-room flats in Bukit Merah and Queenstown were higher at S$838,000 and S$850,000 respectively.



Paying between S$500,000 and S$600,000 for a resale home translates to 4.1 times to five times of annualised monthly median household income including employer CPF contributions of resident employed households in 2022.

Owning HDB and private

Still, can more be done to help ensure HDB resale prices are affordable? In the parliamentary debate on housing affordability earlier this year, some suggested restricting the concurrent ownership of an HDB home and a private home.

Currently, a Singapore citizen who owns an HDB flat, can buy a private home, after fulfilling the minimum occupation period, which is typically five years, without needing to sell the HDB home.

Requiring future buyers of private homes to sell their HDB flats can add to the stock of resale flats available for sale. A more drastic move to require existing HDB flat owners who own private homes to sell either the HDB home or the private home by a deadline could further increase the number of resale flats for sale. Resale flat buyers benefit from having more choice and possibly lower prices if there are more such flats available for sale.

While an HDB flat-owning citizen can concurrently own a private home, a citizen who owns only a private home has to sell the said home before he can buy an HDB home.

To moderate demand for HDB resale homes, a wait-out period of 15 months applies for private homeowners as well as former private homeowners who buy a non-subsidised HDB resale flat. The wait-out period does not apply to people aged 55 and above who are moving from a private home to a four-room or smaller resale flat.

Equitable treatment

In terms of equity, should the policy be either to prohibit all citizens from concurrently owning HDB flats and private homes, or to allow all citizens to own an HDB home as well as private homes?

An argument for the former is that if people can afford a private home, then they should give up their HDB home for a buyer who may urgently need a home for owner occupation.

But what about supporting aspirations of HDB flat owners as they get richer, or private homeowners who want to concurrently own an HDB flat?

It’s debatable whether buying a private home here for investment is optimal. Still, buying a private home here may be less risky than investing in overseas property, non-residential property here, equities, cryptocurrencies and so forth.

I favour letting all citizens concurrently own an HDB flat and private homes. I declare a self-interest as a citizen who owns a private home.

Household formation is rising faster than population growth. Housing supply is trying to catch up with demand. Timing wise, it’s inopportune to widen eligibility criteria for the purchase of HDB resale homes. Still, the under-supply of HDB homes can be rectified over time.

Perhaps the underlying principle in homeownership here should be to clearly prioritise citizens, just as is the case with allocating places in local primary schools.

Households comprising solely of Permanent Residents (PRs) can buy HDB resale homes, if they have been PRs for at least three years, among other criteria. Maybe citizens should enjoy greater priority by being able to buy an HDB resale home while retaining ownership of a private home.

Allowing Singaporean private homeowners to buy resale HDB homes at non-subsidised prices for living can help boost socio-economic integration. These relatively affluent locals can live in vibrant and racially harmonious HDB towns, among people of different ages and income levels.

Some citizens may seek to live in a high-quality HDB home, while wanting the bragging rights of owning a private home, as well as the chance to earn recurring income from renting out such a home and make capital gains over time.

Moreover, widening the pool of citizens who concurrently own HDB and private homes, may lead to greater availability of rental homes to cater to the needs of both locals and foreigners.

As life expectancy rises, let more locals ensure retirement adequacy through owning an HDB flat for owner occupation and a private home for investment.

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