COS 2015 - Speech by Minister Khaw Boon Wan "Family Matters: A Tale of Five Families"

Mar 10, 2015

Recently, UK newspaper The Independent (Jan 23) had an article and with this headline: “Londoners queue overnight in sub-zero temperatures to buy one bedroom flat for 400,000 pounds”. 400,000 British pounds is equivalent to about S$840,000. On the same day, in Hong Kong, South China Morning Post (Jan 23) reported 130,000 applications for 2,160 subsidised flats in Hong Kong. The article’s headline reads: “Only 1 in 60 chance to win in Hongkongers’ rush for subsidised flats”. The flats, which are roughly the size of our 2-room flats, are priced between HK$1.9million and HK$3.3 million. This is more than 4 times our Build-to-Order (BTO) prices.

These are sobering news about the acute housing situations in some cities. I think they put into better perspective our much more benign situation in Singapore. We did have a hot housing market in 2011, but it has cooled considerably since. After several years of increase, last year marked the first full year in which home prices fell. In 2014, the Resale Price Index for HDB flats fell by 6%, while the Property Price Index for private housing fell by 4%. All analysts expect the market to continue to fall this year.

We want a soft landing for our housing market because a market crash benefits no one. Ms Foo Mee Har said that we should not go into overdrive, and unwittingly undermine the retirement plan of our seniors who look to their housing assets for monetisation. I agree, and that is why we have substantially reduced the supply of new flats. Ms Foo and Er Lee Bee Wah suggested that we adjust the Additional Buyer’s Stamp Duty, especially for Singaporean buyers, when we are ready to unwind the cooling measures. I have also heard Dr Lily Neo’s very thoughtful words of caution. Indeed, we should not overkill. The property market is in transition and it is a time that calls for vigilance and nimbleness. We will be careful. Let me share some data.

The current property cycle picked up from its trough in 2009, this was 6 years ago. So between 2009 and 2014, HDB resale prices went up and reached the peak in 2013, but have since eased to 37% above the 2009 level. Over the same period, our median household income has actually caught up, rising by 38%. So 38% versus 37%. But if we look further back, the previous resale HDB market trough was in 2005, 10 years ago. This was 2 years after SARS, if you may remember. Comparing against this baseline, resale flat prices have gone up by 87%, between 2005 and 2014. But over the same period, household income has gone up by 72%. So, it’s 72% versus 87%. So we are not yet at the 2005 affordability level; and there is still a gap. Whether we use 2009 or 2005 as the base year, the situation today is very much better than in 2011. Our efforts in taming the housing market have seen results.

BTO flat buyers, who buy directly from HDB, have benefitted even more, as we subsidise new flats substantially. Between 2009 and 2014, BTO prices in non-mature estates have grown by a smaller extent: 15% without grants, or a mere 6% if you take into account housing grants. Measured against the household income increase of 38% during that period, we can see that public housing affordability has substantially improved since 2011. 38% versus 6%. Unfortunately, not everyone knows how affordable our BTO flats are. Recently we did a survey. We asked the people “how much do you think a 4R BTO flat in a non-mature estate costs?” One-third, a good 34% admitted that they didn’t know. 5% even said: more than half a million dollars!

So, what is the correct answer? The average 4-room BTO price in non-mature estates last year was $295,000, and this was before housing grants. With housing grants, a young couple, earning $4,000 per month, could get one for $260,000 on average, about a quarter million dollars. The same survey also asked those intending to buy a flat, how much were they willing to pay. Their answers were: up to $300,000 for a 3-room (3R) flat; and between $300,000 and $500,000 for a 4- or 5-room (4R or 5R) flat.

And what is the actual situation? Last year, about 20,000 BTO flats were booked by Singaporeans, or we sold 20,000 BTO flats. For 3R flats, 90%, so almost all were sold below a quarter million dollars. 81% of 4R flats were sold below $350,000, and 89% of 5R flats were sold below $450,000. These are actual transactions. They paint a comforting picture of young Singaporeans being able to get their first BTO flat, well within their expected budget, and if we include housing grants, the picture looks even better. As far as housing is concerned, young Singaporeans are many times better off than their counterparts in London or Hong Kong. This is the reality.

I would like BTO prices to be within 4 years of an applicant’s annual salary. But this assumes that BTO applicants will be prudent in their choice of housing. An alternative to assess affordability is to see if a 25-year mortgage loan can be serviced mostly by monthly CPF contributions without much out-of-pocket cash payments. PM in his 2013 NDR used this approach and illustrated that families earning $1,000 were able to afford a 2R flat, $2,000 for 3R flat and $4,000 for 4R flat. Of course, as income grows, then the income thresholds have to be adjusted accordingly.

So in Singapore, home ownership is not a privilege of the rich only. The benefits of our homeownership policy have reached all income groups, including the lower income group. In January, in reply to a question in this House, I told this House that 744 families in the $1,000 to $1,200 income bracket had booked 2R or larger BTO flats launched between Mar 2012 and Jul 2014. 744 families, not a small number. The MP did not ask about those earning below $1,000. So let me provide the information. During the same period, another 1,491 families, almost 1,500 families, with household incomes below $1,000 had also booked a flat, 2R or larger. So when we said that families with $1,000 household income could afford 2R flats, we were not imagining things.

This happy state is the result of a conscious effort to help make Singaporeans home-owners. We strongly believe that home-owning families provide stability for our society and offer the best environment to bring up children. As Mencius (孟子) put it: strong family values and relationships are foundations of a stable society.

"天下之本在国，国之本在家” (The foundation of the World is the Nation. And the foundation of the Nation is a strong Family.)

We set out, as a national priority, to give every Singaporean a home to start a family and a stake to prosper with the country’s growth. Because of our pioneers’ foresight, we have achieved one of the highest homeownership rates in the world.

There was a recent survey (PDF, 97.2KB)of what matters to Singaporeans, HDB was high up in the chart, and this was rightly so. HDB has transformed our lives in many wonderful ways. We have come across many heart-warming stories. Let me share, through the lens of several families, what we have achieved over 50 years of homeownership, and what more we can do for them. This is a tale of five families.

A Home for Life

First, a home for life. HDB is both a home and an asset. But through Our Singapore Conversations (OSC), we found that many preferred “home first, then asset”, because there are some things in life that money can’t buy.

Mr and Mrs Sarmani’s family epitomises this. They are my GRC colleague SPS Hawazi’s residents. They bought their first 4R flat in Marsiling directly from HDB in 1984 after they got married. They have stayed there ever since, for the past 31 years. They are one of the half a million Singapore families who still live in their first HDB flat. They make up 60% of HDB households. Their first HDB flat is where they started their family, raised their children, and built precious memories.

When they moved out of their kampungs into HDB flats, they thought they would lose the kampung spirit they used to enjoy. However, over the years, Mr and Mrs Sarmani have made many good friends in Marsiling. They know almost everybody. The old kampung spirit lives on and flourishes. Their daughters are planning to stay close and buy a flat nearby after marriage. Our Married Child Priority Scheme (MCPS) and the Higher-Tier CPF Housing Grant will help them do so.

When Mr and Mrs Sarmani bought their flat in 1984, they paid $45,000. The flat has appreciated in value, to more than $300,000 today. Some of their neighbours have moved out to realise the capital gains. However, for Mr and Mrs Sarmani, they are in no hurry to do so. They have chosen to stay put, because this is home, and they have family and friends nearby. I visited them last week and we had a good chat. We are happy for Mr and Mrs Sarmani, and we will do more for Singaporeans like them.

First, from next month (1 April 2015), the new Lease Buyback Scheme (LBS) will take effect. 4R flat owners will now be able to participate in LBS too. Ms Foo Mee Har suggested that we use a more long term property index, such as the past 3-year average value of the flat, to determine property price for LBS. Such an approach will benefit flat owners if prices are declining, but not if prices are rising. So we are caught. How do you set a policy that benefits both sides? So the only practical way is HDB adopts the current market value, as determined by professional valuers, to ensure that flat owners benefit at fair value based on prevailing market conditions. I thank Mr Chen Show Mao for his suggestion on how we can further adjust LBS. He has raised it before in this House, and I thought I answered him already. Basically, if the children have plans to take over the property after their parents have passed on, then LBS is not the best option for their parents. What is the best option? Look after the parents when they are still alive. Then there is no need for parents to look to HDB for cash payments, and then when they pass on, the flat is yours. But if you don’t look after your parents, then you are forcing your parents to look for other monetization options.

Anyway, let’s get the new LBS properly implemented first. We can make further adjustments in the light of experience.

Second, now that we have enhanced LBS, we will also review the Studio Apartment (SA) scheme. The SA scheme was introduced in 1998. At that time, HDB had stopped building small flats. The SA scheme therefore provided a smaller flat option for seniors who wanted to right-size. Today, we also offer new 2R flats. Mr Seah Kian Peng and Mr Gan Thiam Poh proposed that we introduce shorter lease tenure in some of our BTO flats. Mr Seah suggested this a few months ago and I have been mulling over this idea. We may be able to use this suggestion of shorter leases to rationalise the two schemes – the SA and 2R flat schemes. For example, if we have a new 2R flat scheme, offering varying lease tenure and lease terms, it may allow us to cater to different groups with varying needs, and in the process, unify both schemes. MND and HDB are working on this, and we will also gather some inputs from the public.

Singapore’s homeownership policy has benefited two whole generations of Singaporeans, like Mr and Mrs Sarmani and, soon, their children. Our commitment is to their grandchildren too, so that they can in due course own their own homes and raise a family. In 2011, many Singaporeans were swayed by the social media commentaries, and worried that the Singapore Dream would not be available to future generations. We have proved through action that the worry was unnecessary. After four years of hard work, we have cleared the backlog and placed our homeownership policy on even firmer foundation. Every generation will be able to afford their own HDB homes. This is our promise.

Mr Gan Thiam Poh asked that we build ahead of demand in a significant way, so that flats are available on demand. No developers adopt such a model, because the holding cost of keeping a large number of flats empty will be prohibitive. But actually, by building ahead of order today, HDB is actually building ahead of demand, but in a more measured way. As not all BTO projects are fully booked at the time of initial launch, we have a natural inventory of unsold flats. We refer to them as balance flats, and they come with a shorter delivery period. For example, currently, we have over 10,000 balance flats and they will come in handy for those with urgent housing needs. Because every now and then I receive appeals from MPs, for various reasons some of their residents have desperate needs for a roof and they can’t wait for a BTO. Although they can ballot for a BTO, they can’t wait, so this buffer stock of surplus flats will come in handy. If you come across genuine, needy cases do let me know so that I can show compassion.

Separately, we have introduced the Parenthood Provisional Housing Scheme (PPHS) for those who are willing to rent, while waiting for their keys to their BTO flats. PPHS has been very well received. It has benefitted close to 1,200 families and happily produced more than 120 “PPHS babies”, because some of them have to have babies, or be pregnant to qualify for this scheme. To answer Ms Lee Li Lian’s query, we are adding 800 more PPHS flats this year and we will spread them out, mainly 3R flats in various locations other than Jurong West, including Bukit Merah and Queenstown. The rentals will remain affordable because we impose a very substantial discount on the market rates.

Mr Ang Hin Kee suggested that we help young couples with low or irregular income get a HDB loan, by pegging their loan to their cohort’s median income level. Dr Lily Neo asked HDB not to forfeit buyers’ deposits when they are unable to get a sufficient loan to go through with their transactions. We do exercise flexibility in credit assessment as well as appeals for refund of deposits, and HDB looks into the specific circumstances of each case. We now, as a new procedure, require BTO flat buyers who intend to take a HDB housing loan to get a HDB Loan Eligibility (HLE) letter before booking, to help them better plan their finances. HDB needs to ensure that the buyer is able to finance the home and keep it for the long-term. It is not in the buyers’ interest to over-stretch, only to run into problems later.

Mr Gan Thiam Poh asked for greater priority or higher grants for couples with more children, as a pro-family incentive. We do give priority for those with children or who are expecting a child, especially those with three or more children. Likewise, we have increased the Special CPF Housing Grant just recently to help couples buy their first home. But we have no plan to peg the housing grants to the number of children one has. I think it is better for the Government to support parenthood in other ways.

Mr Hri Kumar felt that we should return to the basic aim of home ownership and de-emphasise the asset enhancement role of the HDB flat. Specifically, he asked that we further lengthen the MOP (minimum occupation period) for HDB flats. We have done some recalibration, and it is a balance that we have to continue to strike. However, I would be against an “all home, no asset” approach. In other words, it should just purely be for home occupation and we should not allow these flats to have commercial value, so that we forget about the asset enhancement role. If we do that, then home ownership would mutate into a permanent rental scheme. Many Singaporeans, including Mr and Mrs Sarmani, would not have had a nest egg, had we chosen such an approach.

Er Dr Lee Bee Wah, Mr Hri Kumar and Mr Gan Thiam Poh asked if we could raise or even remove the HDB income ceiling. We increased it in 2011. I don’t think we want to lift the ceiling completely because HDB flats are heavily subsidised and we should continue to target help at those who need help more. However, as income level rises, we must be prepared to adjust the ceiling. Anyway, I have noted the MPs’ call and I will mull over it.

One Family, Two Flats

Second, one family, two flats. While Mr and Mrs Sarmani were happy with their first flat, there are many others who took two steps, two prudent steps, as they pursued their housing dream. A smaller flat, and then a bigger flat. When Mr and Mrs Lim Bok Eng started out, they bought a 3R flat; they were young and did not need such a large flat. But when the first kid came in 1996, and then the second kid two years after, their priorities changed. They needed more space, and they bought a 4R flat in Ang Mo Kio from HDB. Capital gains from the sale of their first flat partly paid for the second one. Today, the family of four live happily in their 4R flat. Mr Lim’s mother is also happy. She stays with another son, also in Ang Mo Kio. It is like having one big family spread over two flats, secured by strong family bonds. I agree totally with Er Lee Bee Wah that we should help more families like Mr and Mrs Lim live close together with their parents.

First, we have recently converted the MCPS into a quota-based scheme, to benefit even more families. This applied to the BTO projects launched last year in Tampines North, and will also apply to Bidadari this year, when we launch the first BTO project there. This will benefit families with children who are looking for new flats living in Toa Payoh and Potong Pasir. We are also building more 3Gen flats, including in mature estates. But I am not sure if it is feasible to add rooms to existing flats, as suggested by Mr Gan Thiam Poh. We will need to add toilets too, and that would be quite challenging.

Second, we give the Higher-Tier CPF Housing Grant for first-timers who buy a resale flat near or with their married children or elderly parents. Nonetheless, there are couples who had earlier moved away from their parents, but would now like to move back closer, after they had their kids, or when their parents needed more care. While they can apply for a BTO flat, there are limited new flats that HDB can launch in the mature estates. In addition, they would also have to pay the resale levy. Mr Png Eng Huat commented on the resale levy, and mentioned his resident’s case of having to fork out resale levy now computed at $180,000. Of course we understand the rationale of the resale levy. The resale levy helps ensure a fairer distribution between first-timers who have never enjoyed a subsidy before, and second-timers who have already enjoyed one. But on a needs basis, HDB has helped, for example, by including it as part of the flat price and allowing it to be paid via instalments. I am keen to help this particular case with a resale levy of something like $180,000. Please send the case to me and I will take a look. Meanwhile, we will study whether we can further help those who wish to buy a resale flat near their parents. Like Er Lee Bee Wah, I am keen to foster strong families and allow family members to live near one another.

Single and Secure

Third, single and secure. While marriage and parenthood will remain at the core of our housing policy, I recognise that we are more diverse today, with many Singaporeans remaining single. Although most live comfortably with their extended families, many will desire the privacy and stability of homeownership. Many singles are proud owners of resale flats, some with the help of substantial housing grants.

Nevertheless, we recognise there is a limited supply of smaller flats in the resale market and not all can afford bigger resale flats. That’s why in July 2013, we broke new ground when we allowed singles to buy 2R BTO flats in the non-mature estates, if they have never bought subsidised HDB flats before. We also extended additional housing grants to support their flat purchase. And of course the response has been overwhelming; over 18,000 have applied. And half have had the chance to book a flat.

Mr Lim Sio Poh is one such happy beneficiary. And like many others, he received the Additional CPF Housing Grant (AHG) and the enhanced Special CPF Housing Grant (SHG). Mr Lim has just collected his keys and is moving to his new home soon. However, with high pent-up demand, A/P Muhammad Faishal Ibrahim noted that the queue is several thousand applicants long. To address this, we ramped up the supply last year. And this year, we will launch another 4,000 2R flats. We will also raise the 2R BTO flat quota for singles to 50% starting from the next BTO exercise which is coming up in May. This will help to provide greater assurance to singles and reduce the backlog.

A New Beginning

Fourth, a new beginning. From time to time, we come across families who hit a rough patch, circumstances beyond their control. One example was Mdm Hui. After divorce, Mdm Hui had the daunting task of raising 2 school-going daughters, even as she tried to rebuild her life. Her very first task was to secure a safe home and a stable environment for her kids. She took advantage of the ASSIST scheme, a new scheme introduced a couple of years ago, for divorcees with young children, and successfully booked a 3-room flat, not on her first attempt, but on her second BTO attempt.

Today, the courageous Mdm Hui is back on her feet as a breadwinner and mother. Her kids are doing well in school. She will move into her new home in 2017, but most likely late next year. In reply to Er Lee Bee Wah’s query, about 400 flats were set aside under ASSIST last year and this was more than the number of applications. So we have more than enough ASSIST flats to assist. HDB does not track the waiting time as that will depend on individual projects and the applicant’s preferences. But the important message is that, with determination, anyone can start afresh and we will help you. I’ve heard Er Lee Bee Wah’s appeal for Mdm Ong, and I will look out for her MPS letter.

From Tenant to Owner

Finally, from tenant to owner. So far, these stories are about families who have achieved homeownership. For some Singaporeans living in rental flats, homeownership may seem like beyond their reach. But we are keen to see them become home owners too. Mr and Mrs Hew Kim Mee are examples of rental tenants who made the successful transition. In 1982, they were allocated a rental flat. They have a son who grew up in the rental flat. The younger Mr Hew recently wrote in to thank the Government for looking after his parents all this time. It was a very touching and moving email that he sent to me. He also shared the good news that his parents have just moved in to their brand new 2-room flat, but this time a flat of their own. They are new residents in Mr Liang Eng Hwa’s ward. I visited them last week, and I am glad that they are doing well. Their son and their daughter-in-law were also there, and in fact they told me that they are also recent proud owners of an Executive Condominium (EC) in Punggol. Of course, I encouraged them to shoot for a Jubilee Baby. He said (it’s already) March; and I said he can do it, there is still time! Mr and Mrs Hew are HDB first-timers, and they could benefit from the significant housing grants to make the transition from rental to homeownership.

However, there are other rental tenants who have exhausted their housing privileges, and no longer qualify for grants. Many wish they can turn back the clock, undo some of their bad decisions, and be able to provide a better home for their kids. Mr Zainal Sapari offered some suggestions. The question is how we can help such families without creating a moral hazard. Can we formulate a scheme which requires the family to make serious commitment towards their children, for example, and in return we provide a small flat with shorter lease? MOS Dr Maliki has been hand-holding such families in his ward and has helped some graduate into homeowners. It requires intensive counselling and nudging. The test is how to ensure that they do not end up losing the third flat and returning to apply for another public rental flat again? This requires careful thinking through.

Conclusion

Madam Chair, as we help Singaporeans move on to homeownership, let’s remember the intrinsic value in life that comes with our home. We have formed our most cherished memories and our deepest bonds both within and beyond the walls of our HDB flats. Our HDB heartland defines the pulse of mainstream Singapore and reflects the shared daily life experiences of Singaporeans in all our diversity. We build flats, but it is never just about the hardware. It has always been about building the Singapore community, the larger Singapore Family that PM spoke about in his New Year Message. Let us rededicate ourselves to our values and social objectives, such as supporting family ties; building an inclusive community; fostering kampung spirit; and making Singapore Home for All.

We have achieved a lot, but we must not take our current success for granted. The future may not be plain sailing because the demographic challenges confronting us are severe. Last month, the Wall Street Journal (Feb 21) carried a troubling article: “The global flight from the family”. It observed the continuing decline in marriage and drop in birth rates, not just in the West, but also in the East. It is a global flight from the family. It warned of the dire consequences of this global trend. It named many countries “where marriage is being postponed, or increasingly, forgone; where networks of extended kin are withering due to extreme sub-replacement fertility; and where childlessness is on the rise”. Singapore is unfortunately not spared from the troubling list of countries listed by the author.

He noted that the global flight from family will have “unforgiving implications for the vulnerable old”. It went on to note the irony and to say that just when more care and support for seniors will be required, “family structures and family members will be less capable, and perhaps also less willing, to provide that care and support than ever before”. The author expected the people to look to their Government to fill the gap, but he warned “as the past century of social policy has demonstrated, government is a highly imperfect substitute for family – and a very expensive one”. Highly imperfect, highly expensive.

While the message is solemn, we must not despair. Instead, we should resolve to re-dedicate ourselves to the basic values of family ties and community spirit. And as we adapt our policies to new challenges, Singaporeans can find security and comfort in the constancy of my Ministry’s commitment to not only provide good homes but to enable homeownership for our citizens. We will continue to work with all Singaporeans to build their dream homes for their families, and to weave strongly knitted communities in our neighbourhoods and towns.