Speech by SMS Sim Parliamentary Motion for Affordable and Accessible Public Housing and Public Housing Policies
Feb 7, 2023
INTRODUCTION
1. Mr Speaker, thank you for letting me join the debate.
2. Minister Desmond Lee’s opening speech:
a) Gave an overview of how we have been building and pricing HDB flats;
b) Explained the causes for the current tightness in supply of BTO flats and higher prices in the resale market;
c) Laid out the moves we are making to address the situation; and
d) Reaffirmed the Government’s commitment of keeping public housing affordable and accessible while protecting the interests of current and future generations of Singaporeans.
3. It is natural to adjust public housing policy from time to time:
a) In response to changes in demand, societal trends and buyer expectations; and
b) Major events with profound impact on the housing market, such as the Asian Financial Crisis in the past and COVID-19 pandemic which we have so recently experienced.
4. But to require a reset as the Member Mr Leong Mun Wai has claimed, is something else altogether. So let’s revisit the bigger picture.
The bigger picture: more flats built, affordability mantained
5. Members would recall the points that Minister Desmond Lee has made yesterday in his opening speech. He has given us some handouts, which I trust that members have saved because they’re very useful, but if not, we have made extra copies available. In his speech, he showed that:
a) We have been building HDB flats faster than HDB residential population growth, and that’s in Annex 1
b) Median household income growth grew faster than the increase in average 4-room BTO prices, and this you can see from Annex 7
c) HDB has also kept to our affordability targets:
i. Annex 2 shows how the HPI for 2R, 3R and 4R BTO flats in non-mature estates have remained below 5 since 2015
ii. More than 8 in 10 buyers who collected their keys to BTO flats or bought resale flats in 2022 can service their monthly mortgage fully from CPF contributions, with little to no cash outlay;
iii. Close to 70% of the BTO flats launched in 2022 across all estates can be affordably purchased with a household income of $8,400 at a MSR of 25% or less, meaning that these households use a quarter or less of their household income to pay for the mortgage instalment.
iv. For first timers who apply for BTO flats in non-mature estates, virtually everyone gets a chance to select a flat within 3 tries.
6. Minister Desmond Lee’s presentation has shown how, over the long term, we have not underbuilt BTOs, nor have we lost sight of affordability, especially for NME BTOs.
PSP’s Proposal Does Not Solve Any Problems
7. We agree with Members’ observations about short-term imbalances in supply and the spike in resale price levels. Not only did Minister Desmond Lee lay out the causes, he also explained what we are doing about these imbalances.
a) Our building programme fell behind in the last 3 years due to COVID
i. We are catching up
ii. And are committed to launch up to 100,000 new flats between 2021 to 2025 if needed
iii. The median waiting time is now 4 to 4.5 years, and we are working to bring this down to 3 to 4 years from 2024.
iv. This is the median, but even if we look at the range, it is not the 5 to 7 years that Mr Leong mentioned – it is more like 2 to 6 years, and the BTO project with the longest waiting time today is an almost 50-storey development at just under 6 years
b) Resale prices have indeed grown more sharply recently
i. Due to buyers turning to resale when BTO construction was delayed due to COVID, and shifts in social norms exacerbated by the experience of the pandemic, contributing to overall increase in housing demand
ii. Cooling measures have been introduced which are starting to take effect
c) Mature estate BTOs present a specific set of concerns, which Minister Desmond has also addressed:
i. These mature estate BTOs are in desirable locations, and cannot possibly be priced the same as other locations
ii. As NMP Cheng Hsing Yao has alluded to, mature estate BTOs are really more-than-basic.
iii. Although some prospective buyers find them pricey, there are still many buyers within the eligible income range who are able and willing to pay the posted price – as can be seen by the high application rates.
iv. The issue is how to price mature estate BTOs so that they do not become out of reach for most buyers, and also not in a way that induces its own demand.
v. Min Desmond Lee has also indicated new measures we are considering to manage demand.
8. So he has laid out the long-term picture, and he has also addressed the short-term imbalances, and what we are going to do. And in the speeches that have followed, I was very glad to see considerable common ground. For instance, members like Mr Gerald Giam and Mr Leon Perera have also agreed that building more flats with short waiting times and also, efforts to manage demand are important, and this is what we are doing or considering. Dr Shahira Abdullah also raised suggestions for managing demand amongst BTO buyers and again, we thank her for agreeing with us that these are important issues to consider.
9. Also, members have made suggestions that affirm the need to make sure that resale prices are moderated. But this means ensuring that price increases are sustainable and not crash or be very volatile. And again, I think we are in agreement here. So if we agree that the imbalances that Minister Desmond Lee has laid out are the challenges facing us, then Mr Leong’s proposal of the Affordability Housing Scheme does not quite solve any of them. His scheme also raises more questions than it answers, as many members including Mr Xie Yao Quan, Mr Sitoh Yih Pin, Mr Raj Joshua Thomas, Ms Carrie Tan, and Mr Lim Biow Chuan have been quick to point out.
10. I do not wish to recap too much of the scheme because I think many members have done so. I think suffice to say that the scheme has attracted much comments. And yet I think it also perplexed commentators, because it's not so clear whether it really will be attractive to applicants or not. And if it's attractive to applicants, I think commentators see problems; and if it's not attractive to applicants, I think there are also problems. What do I mean by that?
11. So for instance, if there are a lot of applicants, then perhaps they are attracted by the super low price upon entry. However, there is also a very high clawback consisting of the land cost if they wish to sell and at the point of entry, because if the low prices really do attract applicants, we can imagine that you will also attract many applicants, but if there's a lot of demand, then does that not make it harder for first timers to get a flat? And does that not worsen the current concerns that some have about accessibility.
12. And for those who may wish to one day sell, because the clawback is very large and as members have pointed out, this is a clawback on a cost-based model, not the affordability model that we currently price BTOs on. So it's possible that prospective sellers on these flats are looking at actually a much higher price that they have to pay to Government if you add everything up together.
13. In fact, the paradoxical feature of the scheme is that you buy when you sell, or you sell when you buy. So if they are not able to muster the financial resources to sell, then what are their options? What does this mean for those who actually do want to exit or they want to upgrade or move somewhere else? Are they able to find sellers who are willing to pay a very high price? And also, should there be strong demand amongst applicants, Members have also pointed out the implications of upheaval in the resale market and their concern that the value of existing homeowners’assets would also be negatively impacted.
14. Now that's if the scheme is attractive to applicants. If the scheme is not attractive to applicants, actually for the reasons that commentators have pointed out, I think that's also a concern, because wouldn't that mean that young people, including applicants, will abandon the public housing scheme, and how is that better for Singapore on the whole? So I think that's probably enough said about the perplexing nature of the (PSP) BTO pricing scheme, but I think it is important to also address another prominent element in it.
15. Now many Members, including Members from the Opposition, have cited fiscal sustainability concerns. We are glad that to see convergence on this important issue. But this prominent element in the Affordable Housing Scheme which Mr Leong proposed doesn't quite meet the test of sustainability:
16. Under the scheme, the land cost is not paid if the applicant or the person doesn't sell the flat, but this is a draw on reserves. In fact, from the get-go, we can think of the scheme as a prepaid rental scheme leveraged on Past Reserves, because as long as the person is living in the flat, actually, he's not selling it. He is not able to realize any gains, or any value and it doesn't seem that he has the rights of ownership.
17. Now, HDB must pay for the cost of the land used to build flats i. It is simply incorrect to say that the land on which HDB flats are built should be treated like the land on which public infrastructure is built
ii. Although we call it public housing, the use of the flat is exclusive to the household that owns it. This is completely different from public infrastructure
iii. More importantly, HDB flat owners can sell their flats if they wish, and keep the proceeds, but we cannot break public infrastructure up, sell it off and pocket the proceeds as individuals
Subsidised rental housing for the young
18. Let me move on to another proposal that Mr Leong has put forth the “Millennial Apartment Scheme” to appeal to young people who are not yet ready to buy their own HDB flat. Mr Louis Chua and A/P Jamus Lim have made similar points.
19. The Government has heard a range of suggestions in our Forward SG conversations and we will be studying them and some of these suggestions also relate to similar ideas. We are sympathetic to the aspirations and diverse needs of our young people.
20. But we have good reasons for keeping subsidised rental housing very targeted, for families that cannot afford home ownership:
a) Homeownership remains an important goal of public housing as it gives Singaporeans a tangible stake in nation-building and also boosts their financial security, especially in retirement
b) Paid rent, even if subsidised, is a consumption expense that could have gone towards financing a home purchase.
c) Compared to subsidising rental as a lifestyle, subsidising homeownership brings more benefits, especially if it is for the majority of Singaporeans for whom home ownership is attainable. PSP and WP Members, who have spoken on their concerns about retirement adequacy, ought to appreciate how having one’s own home protects us against the uncertainties of the rental market. And I will speak a little bit more about that later.
21. And we are doing our utmost to ensure BTO flats continue to be accessible and affordable to younger buyers.
Home ownership and retirement adequacy
22. Several Members have identified resale prices as a concern. Here, I wish to make a distinction between the long-term trend in resale prices, and the short-term spike that occurred during the pandemic.
a) Resale prices have moved up over the long term, certainly more than BTO prices have. That is because we changed the basis of calculating HDB loans since 1993. Instead of giving out HDB loans for resale based on the posted price of new flats, we began to provide HDB loans based on the market valuation of the actual resale flats. And this is a good thing for HDB homeowners, because they would otherwise not be able to benefit from the fully realised market value of their flats.
b) Over the long term, resale prices reflect raw economic conditions and income levels. Ideally, prices should be stable, with as few sharp fluctuations as possible
c) What about the buyers of resale flats? We recognise that some first-timers do turn to the resale market instead of buying direct from HDB. And this is why the Government provides grants to make resale flats more affordable to eligible buyers.
d) We believe this approach is fair to both sellers and buyers - allowing homeowners to enjoy the full value of their asset, and yet also giving some help to buyers to bridge the affordability gap.
23. These points I have made about resale are relevant to my next topic, a concern that the PSP’s curious BTO pricing proposal is purported to resolve and that is, liberating more CPF from being deployed for housing purchase, and thereby improving retirement adequacy.
24. The PSP claims that as the value of a homeowner’s flat falls as the lease diminishes, and since much of his CPF savings had been used towards the flat’s purchase, retirement adequacy is at risk. A/P Jamus Lim appears to share similar thoughts.
25. This claim is flawed and has to be clarified.
26. Helping Singaporeans achieve home ownership and retirement adequacy are both important goals for the Government
a) Hence our CPF and HDB policies are closely inter-linked
b) Owning a HDB flat that can last us for life is, in itself, important for retirement security
i. Why? The retiree would be assured of a home without having to rent accommodation
ii. The flat could potentially be monetised to supplement living expenses, through renting out a room, the whole flat, or through the Lease Buyback Scheme
c) And this is why we allow the use of the CPF Ordinary Account towards housing purchase
d) But we do not depend on home ownership alone for retirement needs. And this is why CPF policy is also focused on helping individuals secure a lifelong cash pay-out through CPF LIFE
i. CPF monies cannot be channelled wholly into housing purchase. Your Special Account is safeguarded, and as you grow older, more of your CPF contributions will need to go to SA rather than OA. There is also a limit to how much you can draw on the OA for your HDB loan
• For BTO flat owners who took HDB loan, HDB does encourage those who have the means and are able to do so, to make early repayments. The earlier they repay the loan, the more they can save on the accrued interest.
• And many are able to do so. The average tenure for those who have fully paid up their loans is 17 years, while their average original loan tenure was 23 years.
ii. Mr Leong advocates for Singaporeans having the Basic Retirement Sum or BRS in CPF without having to downgrade or sell part of their lease to the Government.
iii. Well, today, we expect about eight in 10 active CPF members turning 55 in 2027 to be able to set aside at least the BRS in their Retirement Account, and hence receive the corresponding BRS payout or more. And that is without having to right-size or monetise their HDB flat.
• Of the remaining two in 10, a significant proportion will be expected to accrue additional contributions through employment from age 55 so that they could receive similar pay-outs at age 65 as those who set aside the cohort BRS when they were at age 55.
• Many seniors also receive additional retirement support from their loved ones and from their private savings.
iv. For members with less in retirement, the Government can provide additional support, such as the Silver Support scheme
v. I should add that individual prudence in housing choice is also relevant here. CPF Members who choose not to max out OA use towards housing purchase and thus set aside more savings for retirement can look forward to higher CPF LIFE pay-outs
e) A/P Jamus Lim expressed concern about the scenario where a homeowner has bought a lease that he is likely to outlive. Will his retirement be less secure? The Government has already considered this possibility and put in place safeguards
i. Notwithstanding the fact that 99% of those owning a HDB flat now can live in it till age 95 or more;
ii. We recently refined our policies to make it even less likely that a Singaporean would outlive the lease of his flat while also not having a significant CPF LIFE pay-out.
• Those purchasing a flat whose lease can last them till age 95 can obtain the maximum CPF usage and HDB housing loan, while those buying flats with shorter leases would have CPF utilisation and HDB loan amounts pro-rated
• Having a lease that lasts the buyer till age 95 is also a condition for withdrawing CPF savings above the BRS.
27. So we have policies in place to safeguard Singaporeans’ retirement adequacy, which do not rely on whether the value of their flat holds or appreciates.
28. Still, I can sense a conundrum behind some of the speeches that Members have made. Which is, how do we reconcile the phenomenon of appreciating flat values with the fact of eventual lease expiry? Allow me to address this briefly
a) Yesterday, A/P Jamus Lim provided a handout showing how the value of a HDB flat with 94 years left on the lease would gradually rise and then decline from 2023 to 2116.
b) He acknowledged the effect of inflation, but he left out the impact of strong economic fundamentals and rising incomes on the values of our flats, these are important drivers of resale prices.
c) How do we achieve this? Well, unity, hard work and good policies would help to continue creating favourable economic conditions for Singapore.
d) Now that our economy is more mature, growth rates cannot be as fast as in the past, but we still work towards delivering a better life for Singaporeans, which would include improvement in incomes.
e) And getting this right would mean that the value of this flat would continue rising for a considerable time.
f) So on A/P Jamus Lim’s chart, the trajectory of value appreciation continues, I believe for more than 60 of the 94 years, before it begins to fall over its original value. I hope I got it right, I'm pretty sure he drew it to scale. I hope so.
g) 60 years, that means, a 30-year old who bought this flat on the resale market in 2023 can see asset appreciation over his lifetime
i. Our policies allow him to fully realise the value should he chose to monetise by selling – which would not be possible if we mistakenly view rising resale prices as a bad thing to be curbed at all cost;
ii. At the same time our policies are also flexible in providing monetisation options while ageing in place, such as through renting out rooms or Lease Buyback.
h) This is the reason why although the value of the flat must go to zero after 99 years, that same flat can be a good store of value over a buyer’s lifetime, over the owner’s lifetime, and possibly more – so his even his children might benefit to some extent, -- just not over his grandchildren’s lifetimes as well.
i) But his children and grandchildren will get Government support in turn to buy their own HDB flats and benefit from having a tangible stake that also appreciates in value
j) Mr Speaker, I have also explained how our policies put brakes on the purchase of leases that owners are likelier to outlive
k) I hope this reassures Singaporeans who are worried about claims that they will be stuck without recourse when the lease of the flat they bought expires on them
SERS, VERS and lease expiry
29. Which brings me to a favourite theme of Mr Leong’s – SERS, VERS and trying to make Singaporeans unhappy over the plain truth that a 99 years lease is for 99 years. He has not forgotten to riff on this theme during this debate too
30. I have explained how HDB flats hold their value well and can even appreciate over the owner’s lifetime, albeit not necessarily the entirety of his children’s lifetime, and certainly not his grandchildren’s lifetime.
31. The Government has been upfront about this with Singaporeans.
a) It is Mr Leong who has been creating ungrounded expectations by trying to convince Singaporeans that it ought to cost them little or nothing to extend the length and value of their leases when it approaches zero.
b) It is the benchmark by which he has been judging SERS and VERS, and unfairly too, because that is simply not their purpose.
c) If market valuation does not deliver the windfall outcome that Mr Leong so celebrates, then who will deliver it? It becomes a cost that taxpayers should bear.
d) This is something which Mr Murali Pillai has also pointed out yesterday.
32. Mr Leong does not acknowledge that what he is encouraging Singaporeans to expect would create an extended benefit that lasts indefinitely over generations, nor does he explain how this is fair.
a) Because he cannot.
b) Our policies already equip every generation with the opportunity to own homes and benefit for more than one lifetime. We all cherish this deeply
c) The fair and sustainable thing to do would be for land and buildings to be redeveloped after lease expiry, so that a new generation of Singaporeans can have the same opportunities to
d) Whether or not they were lucky enough to inherit advantages from their parents and grandparents.
33. Mr Speaker, I would also like to address some points about affordability that other Members have made. Mr Leon Pereira and also, I believe yesterday, A/P Jamus Lim have put forth the suggestion that perhaps the Home Price Index (HPI) for NME four-room flats should be 3. A HPI of 3, and not a HPI of 5. I would like to share, that the HPI is not our only affordability target. There is another one, which in fact, Professor Hoon Hian Teck has alluded to, which is the Mortgage Servicing Ratio (MSR). 9 in 10 first-timer BTO flat buyers who collected their keys to NME flats in 2022 had MSR of 25% or less and could service their loan fully with CPF without cash. And this, we believe is also a very good complementary affordability target, particularly because it demonstrates the unique benefits of our CPF system when it works in tandem with our housing policy.
34. However, let’s address this question of whether HPI should be 5, 4 or 3 because I believe it was a subject of some back and forth earlier in the day between Mr Leon Perera and Mr Xie Yao Quan. I think, whether or not HPI should be 4 or 3, as long as the target is about 5, I think any number that is below five must look attractive to buyers. But of course, there will be some trade-offs and i think it is also in the spirit of what WP Members have mentioned and are concerned about fiscal sustainability, that we also consider some trade-offs.
35. In fact, in the spirit of leaving no stones unturned, this is also a question my colleagues and I have been asking ourselves. So, we’ve done some projections, what would it take to bring the HPI down to 3. There is an estimated fiscal cost because additional subsidies would be required in order to make this happen and based on our projections, it comes up to more than $2.3 billion per year. This would be equivalent to about 20% of annual health care expenditure, or about 1/3 of what we spend annually on general education. If our members are curious as to what this means in terms of additional revenue, that has to be raised through taxes, well this is more than the value of the 1% increase in GST, actually it is more like 1.3%.
36. Mr Speaker, in Chinese please.
住房政策与房价是热门话题，众说纷纭。这场国会辩论为我们提供了几个澄清舆论的机会。
首先，我国公共住房政策是否出了大差错、偏离初衷，需要全盘纠正？
这是新加坡前进党梁文辉先生的观点。
李智陞部长在昨天的发言中阐明：
a) 建屋局长期以来确保国人买得起、买得到组屋，尤其是非成熟区预购组屋。组屋建造速度快于组屋区居住人口增长，屋价方面也大致达标。
b) 但由于疫情影响，建筑工程一度喊停，造成新房在短期内供应紧缺，不少买家转向转售市场，加上疫情期间人们对生活空间的需求发生转变，预购与转售组屋的需求同步增加，转售市场价格也迅速攀升。
c) 国家发展部与建屋局已着手增加供应，调节需求，尽快让市场恢复平衡和稳定。
梁先生在他的发言中无法证实 “公共住房政策出大差错” 的立场。他也提出了无视土地价值，把新组屋价格大幅压低，如要在公开市场上转售，则需要把土地价格还给政府。
这个建议，並不符合客观形势，因此对不了症更下不了药，非但无助于当前的住房供应短缺，還可能激发更多需求，对于转售价格也可能带来严重影响，自相矛盾 。因此引起许多来自议员们的疑问。
第二，国人是不是动用过多的公积金买组屋？如果房子不保值，卖了组屋无法全数偿还公积金户头，身为公积金会员的我们是否算吃亏？为了不让公积金会员吃亏，难道不该大幅度降低房价吗？
梁文辉先生昨天在国会里发的传单，就是在传达这个似是而非的论点。
其实，这笔帐不能这么算。
公积金制度，本来就是为了同时实现居者终身有其屋、外加年迈时可以 享有终身每月入息而设计的。
这就是为什么除了有可以用来买房的普通户头，还有无法用来买房的特 别户头和退休户头。
此外，能动用多少普通户头的款项，也是有限制的。
拥有属于自己的组屋，对于退休后的生活保障已经起到一定的积极作 用，因此用在买房的公积金，无论房价有赚没赚，都不能算是白费
有了自己的安乐窝，就不用为租房子烦恼。
必要时还可能通过将房间租出去、或是屋契回购等方式套现。
但是屋主即便不套现、不卖房，岁数到了也可以通过CPF LIFE 获得终 身每月入息。
按照估计，2027 年达55 岁人士当中，每十人中有八个人可以实现基本 存款（BRS）, 获取相应的每月入息， 并不需要通过任何形式套现自己 的组屋。
至于公积金存款偏低的人士，政府也可以通过其他援助计划为他们提供 生活保障。
当然，我们在买房的时候应该慎重，了解个中取舍，如果我们动用公积 金的态度是“能用多少就用多少”，那留在公积金户头里的款项自然就没有 那么多，日后CPF LIFE 每月入息也会相对少一些。
我们不应该认为公积金会因为买房而有所“亏损”。
第三，虽然组屋有可能多年持续升值，但是如果99 年限逼近，价值终究 归零，到时屋主怎么办？是不是只有变出大笔赔偿金，让屋主买一间全 新的组屋，才是正解？
这是梁文辉先生乐此不疲、不断炒作的政治话题，意图引起人们的焦虑 与不满。
政府绝不糊弄公众，99 年就是99 年，时限到了，屋价归零，这是常 识。
但是，99 年对一个组屋买家来说，是一段很长的时间，足以涵盖他的一 生。
在这漫长的时间内，他的屋价极可能会持续升值相当久。
会有多久呢？工人党议员林志蔚昨天发了一个他亲自演算过的图表，他 以剩下94 年屋契的组屋为例，估计这间组屋升值将持续60 多年，之后 才开始降价。
买家如果在成交的时候30 岁，那在他的人生过程当中，这屋价的走势都 是向上的。
如果他的孩子和他一起住，那他的孩子也会在成长和成年的几十年中见 证父母的屋子持续增值。
等到房子开始降价，孩子的年龄也不小了。
这房价为何会升？林志蔚议员说这是因为通货膨胀。其实他少说了几样 重要因素，主要还是靠优良的经济环境与人民收入的提高。
只要我们团结一致、支持正确和清醒的政策、努力付出，还是可以持续 创造良好的经济环境，全民追求更好的收入。
组屋买家只要不购买屋契太短的组屋，完全有可能在有生之年见证并享 受资产增值的好处。
顺带一提，万一屋主人还在，组屋的99 大限却到了，那怎么办？政府也 已想到了这个问题，并在近年调整政策，在动用公积金购买剩余屋契年 限较低的组屋时会有更多限制，就是为了减少这种可能。
所以，同一间的组屋极有可能为屋主毕生带来资产增值的好处，也可能 在一段时间内惠及他的孩子这一辈，但不可能惠及他的孙子那一辈，毕 竟99 年没有那么长。
可是屋主的孩子辈、孙子辈，也可以买自己的组屋，借助政府的政策为 自己缔造资产增值。
议长先生，我希望这些答案可以解开公众心中的疑虑，让他们对公共住 房政策更加认识、更具信心。
Conclusion
37. Mr Speaker, Sir, Mr Leong and the PSP have not shown that our housing policy is in need of a reset. And the proposal they put forth does not address real issues that we are working hard to address today. I therefore cannot support their Motion.
38. However, the debate thus far has been helpful in drawing out views that are on the minds of many Singaporeans. I thank Members, especially PSP and the WP, for the opportunity to reaffirm the Government’s approach towards home ownership, retirement adequacy and fairness across generations.
39. Sir, I support the Motion standing in Minister Desmond Lee’s name.