Written Answer by Ministry of National Development on data on HDB flat transactions affected by the Ethnic Integration Policy and help for flat sellers or buyers impacted by the policy

Jul 26, 2021

1380. Mr Xie Yao Quan: To ask the Minister for National Development with regard to the Ethnic Integration Policy (EIP) (a) whether the Ministry will consider introducing a discount to the fixed resale levy payable by non-Chinese homeowners selling at lower prices in Chinese-constrained transactions as a way to reduce the economic impact of the EIP on minorities; and (b) if so, what may be a suitable price benchmark to determine such a discount.

1387. Mr Zhulkarnain Abdul Rahim: To ask the Minister for National Development whether HDB can consider other policy options to alleviate the financial burden of HDB flat owners who are unable to secure a purchaser of a particular race in adherence with the Ethnic Integration Policy such as by providing greater subsidies to attract potential buyers of that particular race to purchase such flat units.

1388. Mr Zhulkarnain Abdul Rahim: To ask the Minister for National Development given that HDB flats tenanted out in the open market are not subject to the Ethnic Integration Policy (EIP), whether HDB monitors the frequency and tenure of the letting out of HDB flat units and take a proactive step to ensure that the EIP is adhered to in spirit, especially for longer term leases or HDB flat units which are frequently leased out.

1414. Dr Tan Wu Meng: To ask the Minister for National Development with regard to the Ethnic Integration Policy (EIP) and resale flats sold below market valuation due to EIP constraints (a) in each of the last three years, what was the median price differential (i) in absolute terms and (ii) as a proportion of the respective prevailing market valuation; and (b) whether HDB will consider establishing a risk pooling mechanism to underwrite and reduce the economic impact for homeowners selling below market valuation due to EIP constraints.

1422. Ms Mariam Jaafar: To ask the Minister for National Development what is the difference in the gains from sale of HDB flats in neighbourhoods where the Ethnic Integration Policy limits are reached and the open market, broken down by (i) BTO flats and (ii) resale flats at the time of purchase.

Answer: 

The Ethnic Integration Policy (EIP) seeks to ensure that our HDB estates remain diverse and inclusive, and to foster interactions and shared understanding amongst Singaporeans of various races. The EIP applies to all ethnic groups and caps the proportion of flats in each HDB block and neighbourhood that can be owned by households of each ethnic group. The EIP limits are higher than the national demographic proportion of each ethnic group to allow for local variations in each block and neighbourhood.  

The EIP applies to the sale and purchase of all HDB flats, as well as in the allocation of HDB public rental flats. Tenants who rent HDB flats or rooms on the open market are not subject to the EIP, as their stays are typically more temporary in nature. That said, to prevent the formation of foreigner enclaves, HDB introduced the “Non-Citizen Quota for Renting Out of Flat” in 2014 to cap the number of flats that can be wholly rented out to non-Malaysian non-citizens within each block and neighbourhood. The non-citizen quotas at the block and neighbourhood levels are 11% and 8% respectively. 

When the EIP limits are reached for an ethnic group, sellers from other ethnic groups are unable to sell their flats to buyers from that group. With a smaller pool of eligible buyers, sellers may have to lower their asking price or may take longer to sell their flat. This happens across all races, including Chinese sellers who are affected by the non-Chinese EIP limits. That said, we do receive more appeals from sellers from the minority races who find it more difficult to sell their flats at their desired price. This is because Chinese buyers form a larger proportion of the market, and the impact on individual non-Chinese sellers is therefore larger when the Chinese EIP limits are reached.  

However, it is difficult to size the exact impact of the EIP on financial outcomes. The selling price of a flat could be affected by many factors, including the location, storey height, and the physical condition of the flat. Timing also matters, as market sentiments change over time. Similarly, the price of a flat at the point of purchase also depends on multiple factors. In particular, if a flat had been purchased on the resale market and was affected by the EIP limits at the point of purchase, the current seller could have bought the flat at a lower price, a positive financial impact from the EIP at that point. As such, the financial gains would vary for each transaction, and for reasons other than and even due to the EIP. 

As I shared in Parliament earlier this month, we are studying the situation carefully, including what more we can do to help affected sellers. We appreciate the suggestions raised by Mr Xie Yao Quan, Mr Zhulkarnain and Dr Tan Wu Meng, and will consider them in our review. But let me say that any potential measure must apply to all races, and should be targeted at addressing the unintended effects of the EIP. For example, it might not be appropriate to tie the resale levy to the EIP as they serve different policy objectives. The resale levy is intended to reduce the size of the second housing subsidy from HDB, and hence applies to those who buy a second subsidised flat from HDB. Not all EIP-constrained flat sellers will buy a second subsidised flat and be liable for a resale levy in the first place. 

HDB will also continue to exercise flexibility for EIP-constrained owners on a case-by-case basis. For instance, HDB may give the household more time to sell their flat, or even waive the EIP limit if there are exceptional circumstances. We will keep working to smoothen the rough edges of the policy, and seek Singaporeans’ continued support for the EIP and the vital role it plays in fostering racial harmony and understanding.