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Thread: HDB flats still affordable, says Mah

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    Default HDB flats still affordable, says Mah

    Sep 15, 2009 Tuesday

    HDB flats still affordable, says Mah

    8 in 10 households qualify for grants; first-timers use less than 30% of household income to service loans

    By Goh Chin Lian, Senior Political Correspondent

    AMID concerns about escalating prices of resale flats, National Development Minister Mah Bow Tan yesterday assured Singaporeans that HDB flats remain affordable to most.

    He said first-time households use on average less than 30 per cent of their household income to service their housing loans, which is within the yardstick the Government uses to measure affordability.

    Also, eight in 10 Singaporean households qualify for the various housing grants the Government gives to home buyers, even those who buy resale flats.

    He was responding to four MPs who queried the affordability of HDB flats, including Ms Jessica Tan (East Coast GRC), who was worried that young couples could not qualify for housing grants. She wanted the $8,000 income ceiling to qualify for a new HDB flat, or to be eligible for a grant to buy a resale flat, to be raised.

    Mr Mah rejected the request, saying: 'There must be a limit to the number who can qualify.'

    For households whose incomes just exceed the $8,000 cap, he said the Government would put up more executive condominium sites for sale next year. First-time buyers whose incomes are under $10,000 can get a $30,000 grant.

    Mr Mah also pointed to two other measures that make HDB flats affordable: One is the additional housing grant given to households earning less than $5,000, to help them own their first homes.

    The other is the income ceilings imposed on buyers of new two-room and three-room flats, at $2,000 and $3,000 respectively.

    'This ensures that the higher-income households do not compete with lower-income households for the smaller flat types, thus enhancing their affordability,' he said.

    To further allay MPs' concerns, he produced a chart showing the prices of new flats in non-mature estates and how these compare to the incomes of their buyers.

    For example, those who applied for a new $150,000 three-room flat had a median household income of $2,000 and enjoyed an additional grant of $35,000.

    Their monthly instalment of $460 worked out to 23per cent of their household income, within the 30per cent limit.

    But even as he stressed the affordability of HDB flats, Mr Mah conceded that households have to make trade-offs between price and location.

    For a household that earns $4,000 a month, the options are: a new five-room flat in Punggol or Woodlands, a resale five-room flat in Woodlands, a four-room flat in a popular estate like Tampines, or a three-room flat in a mature estate like Toa Payoh.

    Mr Mah also replied to Dr Lim Wee Kiak (Sembawang GRC) who wanted the minister to rethink what he called the 'cash over valuation system' in the purchase of resale flats.

    Cash over valuation is the amount that a buyer has to pay in cash, over and above the bank's valuation of the property.

    In his reply, Mr Mah said cash over valuation is not unique to HDB purchases but 'part and parcel of any property transaction, whether private or public'.

    About a third of HDB resale transactions are at prices at or below valuation, he noted.

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    Sep 15, 2009 Tuesday

    HDB flats: Prices and quantity

    The affordability and availability of HDB flats were concerns raised by several MPs. This is an edited excerpt of the replies from National Development Minister Mah Bow Tan.

    Cash over valuation

    # MP Lim Wee Kiak (Sembawang GRC): Is the practice of cash over valuation - the additional amount that buyers are willing to pay in cash above the bank value of a flat - a barrier to cash-poor Singaporeans buying resale HDB flats? Can a loan be provided?

    Cash over valuation is not an HDB invention or imposed by the Government, but part and parcel of any property transaction. The additional amount has to be paid in cash because the banks and HDB lend up to only 90 per cent of the valuation.

    Buyers can choose not to pay cash over valuation. Latest data shows that almost one-third of transactions are transacted at or below valuation.

    Be prepared to shop around, do your homework and remember that not all cash over valuations that buyers ask for are realistic ones.

    The Government will not ban cash over valuations, but leave it to the market of willing buyers and sellers.

    Providing a loan is not prudent as it will cause flat prices to go up further, such that when they fall, buyers will get seriously hurt.

    Supply of new flats

    # MP Liang Eng Hwa (Holland-Bukit Timah GRC): Are there enough new flats to meet the demand of first-time buyers? Is the current waiting time acceptable? Are there ready-made flats that HDB can sell to soon-to-be married couples?

    HDB factors in the number of people who will buy resale flats when building new flats, to avoid over-building. It also takes into account such factors as marriage and immigration rates, and population growth.

    Most new flats are on the Build-To-Order system, in which the flats are built in about three years after people commit to buying them.

    Couples unable to wait so long can book a flat under the Fiance/Fiancee Scheme first, and submit their marriage certificate within three months of taking possession of the flat.

    If they cannot afford to pay the 10 per cent down-payment in cash, they can tap on a scheme where they pay 5 per cent first and the other 5 per cent when they take possession of the flat.

    But do not expect HDB to provide a flat in a mature estate at a comfortable price, as there is not enough land in the mature estates to build the number of flats that people want.

    Under-building of flats?

    # MP Low Thia Khiang (Hougang): From the minister's answer, it seems that HDB is under-building flats to meet the demand of new flat buyers. Will it not push up the price of resale flats?

    There is no basis to say that the HDB is under-building.

    The Build-To-Order system is responsive to demand. In 2007, HDB built about 2,400 flats because there were still flats available. Last year, it built 8,000 flats when demand increased. This year, it will build about 8,000 flats as well.


    # MP Lim Biow Chuan (Marine Parade GRC): Prices of HDB flats today are much more expensive compared with previous generations, and have risen more quickly compared with increases in income. How would today's generation be able to afford that dream home?

    New flats are affordable. While HDB flat prices have been going up much faster than incomes over the years and are much higher than those a generation ago, the flats today in Punggol, Sengkang and Bishan are different.

    First-generation HDB flats had to be built quick and cheap, so there were no lifts on every floor, no facilities and no MRT.

    Homes have also appreciated in value over the years in tandem with the growth of Singapore.

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