Updated from : The Straits Times, 24 May 2021
SINGAPORE – New flats with shorter leases and limiting resale only to the Housing Board (HDB) are some suggestions being looked at for future public housing projects in prime locations, said National Development Minister Desmond Lee on Monday (May 24).
Another idea is to impose a longer minimum occupation period (MOP) before the units can be sold or rented out.
However, each of these suggestions has its merits and trade-offs, with “no straightforward way”, added Mr Lee, who spoke at real estate agency OrangeTee & Tie’s virtual business conference on Monday.
While launching Build-To-Order (BTO) flats with shorter leases in prime areas will make them cheaper, he said: “But what about subsequent buyers – would the remaining lease be sufficient to meet their needs?”
Instead of letting owners directly sell their prime BTO flats on the open market, one suggestion is to allow them to sell only to the HDB, which can then resell them at an affordable price. But this idea has drawbacks too.
“It is challenging to ascertain a fair buyback price, and why should these home buyers have a stop gap when others don’t? And we want to avoid artificially guaranteeing the values of these flats, which existing flat owners may view as unfair,” said Mr Lee.
A longer MOP period beyond the current five years may emphasise that these HDB flats are meant for own stay and not be viewed as an investment, he added.
“But this may inadvertently hamper home buyers who have a genuine need to move out as their family’s needs change,” said Mr Lee.
The most expensive HDB resale flat so far is a five-room unit at The Pinnacle @ Duxton that sold for $1.258 million in September last year.
While some people have suggested not to have public housing in prime areas, he noted that there are important social reasons for the Government to do so, despite it being a “difficult balancing act”.
A new housing model was first floated by Mr Lee last December, with its main objective to keep future projects in prime locations – such as the city centre and Greater Southern Waterfront – affordable and inclusive for Singaporeans.
He noted that housing in many global cities has become so expensive over time that they are out of reach for the average buyer, resulting in wealthy households concentrated in prime areas.
But Singapore is determined to do its best to resist going down the same path, he said.
“We believe that Singaporeans of different income levels should have a chance to live in and enjoy these prime locations. And these prime locations, like other parts of Singapore, should reflect the diversity of our society,” he added.
Mr Lee reiterated the need to provide additional subsidies to these prime flats on top of what are already granted today, to ensure that they remain affordable not just at the BTO launch stage but also to subsequent buyers.
But he acknowledged that there are many downstream effects to consider, such as the first owners benefiting a lot more than those who buy without these additional subsidies.
“For fairness, we may thus have to find a way to recover some of these additional subsidies provided for flats in prime locations,” he added.
Savills Singapore’s executive director of research and consultancy Alan Cheong said none of the suggestions floated so far has provided satisfactory solutions to the “lottery effect” of HDB flats in prime locations.
“If all the solutions proposed come with side effects and are difficult to resolve, clearly it shows that we should avoid having this problem in the first place,” added Mr Cheong, who feels that HDB flats should not be built in prime areas.
“It’s already proven that there will be a lottery effect based on what’s happening now in places such as The Pinnacle @ Duxton and the cost of building more of such flats is higher than the benefits,” he said.
National University of Singapore real estate adjunct associate professor Steven Choo said perhaps a resale levy could be applied, based on the estimated appreciation of these flats, although the intricacies of such a policy need to be further worked out.
“Housing policies need to be fair, certain – meaning the Government cannot flip-flop – and easy to apply, so it’s a matter of calibrating all the various elements to achieve the best outcome,” he added.
“But at the end of the day, as long as the HDB resale market remains a free market, it can’t be distorted too much and market forces must be allowed to be at work,” he said.
On Monday, Mr Lee said BTO flats are not priced to cover rising construction costs, despite the challenges arising from a manpower shortage in the construction industry due to Covid-19. Hence, the pricing of new flats will not be affected significantly.
This comes as BTO projects are expected to be pushed back by a further three months, on top of the six to nine months’ delay previously announced by the HDB in April.
Mr Lee thanked the real estate sector for taking the lead in the built environment industry transformation, by conducting virtual viewings, webinars and property exhibitions in a bid to minimise the spread of Covid-19.
OrangeTee & Tie has launched a BTO dashboard, a free online platform to help home seekers compare upcoming sites, view launch prices dating back to 2016 and prices of nearby HDB resale flats and private properties.
Mr Lee also reminded property agents to advise clients to not overstretch themselves. He said: “Interest rates may seem attractive today but the economic situation remains uncertain, and a home purchase is a long-term commitment.”