In a Sunday (Dec 11) Facebook post, Senior Minister of State for National Development Sim Ann responded to PSP NCMP Leong Mun Wai, who had questioned whether Housing and Development Board (HDB) subsidies are “really very generous relative to land costs.”
The Progress Singapore Party Non-Constituency Member of Parliament had written in a much-shared Dec 8 Facebook post that “land costs should be taken out of the picture” and that “the time has come for us to question whether even our public housing policy has lost its way.”
Ms Sim answered in detail the points Mr Leong had made, writing that the Government has kept BTOs (Built-to-Order flats) affordable for Singaporeans and will continue to do so.
“Essentially, Mr Leong wants the Government to price BTOs much lower, disregarding land costs if necessary,” she added.
She explained that most flat buyers use around four to five years of their total household income to pay for BTO homes, while in other global cities, the home price to annual income (HPI) ratio ranges “from 8 times to well over 20 times.”
In Singapore, the Senior Minister of State added, “many BTO flat buyers service their mortgages solely out of their CPF contributions, and need to pay little or no cash.”
The Mortgage Serving Ratio of 25 per cent or even lower in Singapore is less than in other countries, where it’s 30 to 35 per cent.
“Hundreds of thousands of homeowners who bought their flats from Housing & Development Board have sold them for higher prices in the resale market. They know HDB’s pricing of BTO flats is generous. Still, some people may find Mr Leong’s proposal attractive. We should not ignore their views. But will this truly help them?” she added.
However, one point Mr Leong made that Ms Sim agrees with is that BTO pricing should account for location differences.
But regarding the NCMP saying that “land costs should be taken out of the picture”, Ms Sim wrote that this cannot be done “if we accept that land values in fact vary across locations.”
“So I conclude that what Mr Leong is really asking for is the Government to price BTOs much lower, whatever the justifications may be,” she wrote.
And while this is “always possible,” the Senior Minister of State wrote that increasing housing subsidies would mean decreasing funding for other spending priorities such as education, healthcare, and security.
She then wrote, “Mr Leong’s response would be that the Government can charge HDB less for the land. By this he means that we should draw more from our Reserves, though he has avoided saying this explicitly.
We have explained a number of times that state land forms part of the nation’s Reserves. If HDB does not pay back into the Reserves the fair market value of the land, we would in effect be running down the value of our Reserves, to the detriment of current and future generations.”
Ms Sim reiterated that the HDB would ensure an affordable housing option for every eligible BTO homebuyer, as well as make existing policies even better for everyone, especially those who are starting families.
“We are sympathetic to their needs and concerns. But drastically lowering BTO prices, to the extent of disregarding land costs, would only end up hurting all Singaporeans, instead of helping them.”
/TISG