Opening Remarks by Minister Desmond Lee at the Post-NDR Reach Engagement 2023
Aug 21, 2023
Introduction
1. Welcome, thank you for taking time to join us today.
2. PM shared some major moves on public housing at the National Day Rally yesterday to ensure our public housing system meets three key objectives: 1) keeping home ownership affordable; 2) maintaining a good social mix in public housing and 3) keeping the system fair.
3. Let me recap the changes that PM announced and share a bit more about the thinking behind them.
Social compact on housing
4. We have engaged over 16,000 Singaporeans over the past year on public housing, as part of Forward Singapore (FSG). Through Our Housing Conversations, Singaporeans have reaffirmed the key principles of public housing, which are in line with our core values:
A. First, keeping homeownership affordable: this will give Singaporeans a tangible stake in our country. It also allows us to sink roots, build families, and connect to community.
B. Second, maintaining a good social mix: we want a good mix of Singaporeans in every town and region.
C. Third, the system must be fair: public housing should be primarily for owner occupation, not speculative investment. HDB flats will continue to be an important asset for Singaporeans, but many Singaporeans told us during the FSG conversations that it is not fair for a small minority to gain large windfalls when they sell their BTO flats in popular locations on the resale market.
Housing landscape of the future
5. At the same time, there are shifts in our housing landscape, which we need to take into account.
6. In the past, we had large tracts of undeveloped land to build our new towns and estates. These tend to be further away from central areas, and we called them non-mature estates. In the 1990s and 2000s, we launched many of these – Jurong East, Choa Chu Kang, Yishun, Sembawang, Sengkang and Punggol. But over time, our non-mature estates have also become more developed, well connected, with many amenities. In fact, as PM mentioned yesterday, many of them are effectively mature estates.
7. Our latest new town is Tengah, which HDB launched a few years ago after the military training area there was moved out. I recently joined the first batch of Tengah residents who were about to collect their keys and move into the very first project that was almost ready. Before Tengah, the last new town was Punggol – which was launched more than 20 years ago.
8. So where have our new flats been coming from? HDB will continue to build new flats in non-mature estates – and increasingly, will build more flats within and near to existing estate in central locations, with more attractive attributes. This is good news for aspiring homeowners and young families, who want to live near their parents or who desire the convenience of living near to the city or transport nodes for convenient access and shorter commuting time.
9. So how should HDB price these flats?
10. To ensure affordability, HDB assesses the market value of each flat and then applies a substantial market discount to bring the price down to the levels that are affordable to different groups of Singaporeans. But if we are to continue to keep subsidies broadly the same across all areas at each launch, then what we should expect is that flats in choicer, more popular locations will be priced much higher than other flats. Some Singaporeans will find that these prices are less affordable to them. Yet those who can afford them and successfully ballot for these popular flats will get larger windfall gains when they sell these flats on the resale market. To many people this is not inclusive because the better-off can afford the higher-priced BTO flats. And for many people, this is also not fair because these people will get windfall gains.
11. This is why we will be making significant changes to the way HDB classifies and sells new flats to uphold our key objectives of affordability, social mix and fairness.
12. We will move away from the longstanding classification of mature versus non-mature estates, towards a new framework: Standard, Plus, Prime.
A. Standard flats – islandwide, standard subsidies, standard restrictions.
B. Plus flats – choice locations within each region, more subsidies to keep them affordable, tighter restrictions.
C. Prime flats – prime, central locations in Singapore, most subsidies, tightest restrictions.
D. Plus and Prime flats reflect the amount of restrictions applied to them and the amount of subsidies needed to keep them affordable.
13. You may be familiar with:
A. HDB-Standard – Standard flats are the HDB flats that we know today. They will continue to form the majority of public housing across Singapore: standard subsidies, and standard restrictions like the 5-year Minimum Occupation Period (MOP). This is not new.
B. HDB-Prime – Many of you will know this as PLH or Prime Location Public Housing. These are the most prime, central locations within Singapore: more projects in the Greater Southern Waterfront area, and towns in and around city centre such as Queenstown, Bukit Merah, Kallang-Whampoa. Without the Prime model, we will not be able to build affordable public housing in these prime, central locations, and they will largely be private housing catering for the well-to-do. That was the thinking behind the Prime flats. Because these are in central locations, their prices will be high and we will not be able to put affordable housing in these locations. But we want to build HDB flats in these areas and not have only private housing in these areas. These HDB-Prime projects will have the most subsidies to make them affordable to more people, in addition to what we provide for Standard. Consequently, they will also come with the tightest restrictions.
14. We will introduce a new ‘HDB-Plus’ flat category
A. This will be offered at choice locations within each region or near the core central region, particularly in attractive locations near transport nodes and amenities. For example, next to the MRT station or near very good amenities. We will launch more projects in more developed estates and central locations such as Ang Mo Kio, Bishan, Clementi, Toa Payoh, Bedok, as well as Queenstown, Bukit Merah, Kallang-Whampoa, and we can expect some of these to be Plus projects. Several projects in Mt Pleasant and Bedok Bayshore are also good candidates for this category, and in the future, there will potentially be Plus projects in what we now know as non-mature estates today. These are very good locations within the non-mature estates.
New “Plus” model
15. Let me explain how the Plus model makes flats at choicer locations within each region more affordable and keeps our system fair.
A. First, how do we make them more affordable? To help Singaporeans who buy the flats from HDB, our new HDB-Plus flats will come with additional Government subsidies - more than the standard subsidies. But these additional subsidies will be less than what we provide for Prime flats.
B. For fairness:
i. Those who buy new Plus flats from HDB will enjoy higher subsidies, and will be subject to a subsidy recovery at the point of their very first resale. Because the Plus flats will enjoy lower subsidies than Prime flats, their subsidy recovery rate will also generally be lower than for Prime flats.
ii. Similar to Prime flats, we will apply a longer MOP of 10 years for Plus flats. Owners of Plus flats will also not be able to rent out their entire flat at any time. This is to ensure owner occupation for such flats and deter those who intend to “flip” the flats for quick gains or rent them out for long-term yields.
C. We also thought long and hard about how we can keep Plus flats affordable to Singaporeans beyond the first owners, after these flats go into the resale market at the end of the 10-year MOP. We will do so through the following resale conditions, which will moderate demand and keep these locations affordable and inclusive over time.
i. Like resale Prime flats, only Singaporeans will be able to buy Plus flats on the resale market. There will also be a 30-month wait-out period for private property owners who want to buy a Plus flat. We will also impose an income ceiling for resale buyers.
ii. For Plus flats, we will allow families who meet the prevailing BTO income ceiling to purchase all resale Plus flat types. This is currently set at $14,000, which will cover 8 in 10 Singaporean households. For singles who buy Plus flats on the resale market, we will also set the income ceiling at $14,000 – same as families.
iii. Except for the subsidy recovery which will only apply to the first owners, these conditions will apply to subsequent buyers, to keep flats affordable beyond first sale.
16. As there are many system and operational adjustments required, these changes will be implemented in the second half of 2024. There will be no change to the treatment of the 1.1 million existing HDB flats, which will continue under existing rules. These flats will not be affected. This means that your flats which have already been sold or booked under the current framework will not be reclassified. This means that Singaporeans who fall outside of the $14,000 income ceiling will still have access to the existing 1.1 million flats and Standard flats as they enter the resale market.
How does Plus work?
17. I have shared the Plus model parameters. Now you may be wondering, so how will Plus flats help with affordability?
A. Let’s say we have two couples - Couples A and B. They are looking for a 4-room flat now, in the central region and they want it to be near transport nodes, for example, an MRT station.
B. These are choice flats. In today’s market conditions, such BTOs are priced around $650,000 before grants, if offered as ordinary flats in mature estates. If we do not make any change to the system, this will be the price of the flat. This is even after significant subsidies from Government.
C. Take for example, Couple A earning $9,000, which is the income of a typical middle-income family today. They are eligible for an Enhanced CPF Housing Grant (EHG) of $5,000 and will not need to pay any additional CPF or cash top-up to buy this flat. Couple A will have to use about a quarter of their monthly income, with a monthly cash outlay of around $250. There is some cash outlay, but for this family, they may find it is still relatively affordable.
D. Now, Couple B earns $7,000 as a household, less than Couple A. They will be eligible today for EHG of $25,000. This flat will be out of reach for Couple B, as they would need to use almost one-third of their monthly household income to pay for their mortgage, and this will exceed the macroprudential limit of 30%. They would need to make an additional top-up of $52,000 in cash or CPF, and their monthly cash outlay would be around $400. This is under the prevailing scheme.
E. Let's see what happens when this same flat is offered under the Plus model in the future. The tighter resale conditions will help bring the price down. On top of this, we will also give additional subsidies to further improve affordability. Although they are in good locations, by giving them additional subsidies and with tighter conditions, we are able to make them more affordable for more groups of Singaporeans. The combined effect of both, is to reduce the price to around $550,000 and this is before we apply any grants.
F. Back to working out the finances.
a. For Couple A, if they buy this as a Plus flat, they now pay less than a quarter of their monthly household income. In fact, their monthly cash outlay is zero – this flat becomes even more affordable under the Plus model.
b. For Couple B, the $52,000 in additional top-up is now reduced to zero. They now pay slightly more than a quarter of their monthly income, and a monthly cash outlay of about $250. This flat – they may now feel - is within their reach.
G. Many Singaporeans tell us that they are willing to pay more for a flat in a good location. The Plus model helps make such flats affordable to a wider range of Singaporeans.
H. Even as we introduce Plus flats, I would like to assure everyone that HDB will continue to build a wide range of flat options for every budget and need. Even with Prime and Plus flats, Standard flats will continue to remain the majority of our flat supply. At the most recent BTO launch in May 2023, a typical 3-room flat at Parc Meadow @ Tengah was selling for around $280,000 before grants. For a family earning $3,000 a month, they will be eligible for $65,000 in EHG when they buy this flat and will not need to pay any additional cash or CPF top-ups. They will pay just under a quarter of their monthly income for this flat, most of which will come from their CPF. They will only need to pay $32 in cash outlay every month.
I. Of course, the figures I am sharing today are indicative and will change depending on future market conditions. But our commitment remains unchanged – we will continue to support Singaporeans of all income levels in their home ownership aspirations. Grants are progressively tiered to provide more support to lower-income families, and we will review these grants from time to time to ensure enough support is provided.
18. If we were to continue with the current framework, flats launched in choicer locations will be priced higher. This includes projects like Central Weave @ Ang Mo Kio, where the biggest flats ranged from $713,000 to $877,000 – even after heavy subsidies. Central Weave is right at the town centre of Ang Mo Kio, a Mature Estate. Central Weave is near to the MRT and bus interchange, a hawker centre, a wet market and Ang Mo Kio Hub. Some people felt that these prices were unaffordable but the project was heavily oversubscribed – 17 times oversubscribed!
19. Under the current framework, those who could afford such projects and managed to successfully ballot for them might expect to get a large windfall. At the same time, such prices will make it harder for lower income households to afford these BTOs in choicer locations. And over time, we can expect that society will divide. The new framework allows us to price new Prime and Plus flats more affordably, while ensuring that resale prices are kept within reach of a wider range of Singaporeans. This will ensure more social mixing and reduce the risk of social stratification based on where you live. This is a fairer system.
20. In fact, I received some feedback yesterday that with the Standard, Plus and Prime framework, we are actually dividing the HDB population based on income. I think if you don’t implement this, that will be the outcome. Some locations are very desirable and well served by transport nodes and amenities, and more people want to live there. BTO prices will then be higher than other areas and over time, these areas will attract better-off families. But with the additional restrictions under the Prime and Plus model, as well as more subsidies to keep them affordable for ordinary Singaporeans, we achieve a social objective.
Impact on Citizen Segments
21. With these changes, as well as those we have made in recent years, let me briefly set out how we will support different groups of Singaporeans:
22. For young homebuyers:
A. Many of you have told us that you would like to be able to buy a home in good, central locations. You want to live near your parents and your family members, so you can take care of one another. Many of you have shared that these projects see stiff competition amongst buyers and very high application rates. It is not easy to ballot for these projects. The alternative of purchasing a resale flat in these areas may be a strain on young families’ budgets, especially young Singaporeans who are just starting their careers.
B. Going forward, even as Standard flats remain the majority of our new flat supply, HDB will build more flats in attractive locations, so that you have more housing options. The Plus model will ensure that these homes remain affordable for you, and for your children, the next generation.
C. They will come with restrictions, because these flats are for homeownership, for owner-occupation. We are prioritising them for you – if you want to settle, stay, and put down roots. We have seen that these restrictions help to moderate application rates, which will make them more accessible for you.
D. As a First-Timer, you will continue to enjoy 2 ballot chances. If you are a First-Timer Parent, or Married Couple (FTPMC), who has never bought a residential property before, you will enjoy 3 ballot chances and enjoy priority under the Family and Parenthood Priority Scheme (or FPPS). These will continue to apply islandwide: today – it is for NME, ME and PLH; and from 2H 2024 onwards, these will also apply for all projects, Prime, Plus, or Standard.
E. To further support First Timer Parents and Married Couples who are buying their first home, we had announced that you would enjoy first priority under the FPPS, if you apply for a 4R or smaller flat in NME. Under the new classification, you will be able to benefit from first priority under the FPPS in more locations: across all Standard flats, which are islandwide. This means that First-Timer Parents and Married Couples should be able to select a flat after fewer attempts, and have more choice, in more locations.
23. For Singaporeans who are singles:
A. Today, Singles can buy 2-room BTO flats in NMEs if you meet the age and income eligibility. You can buy any resale flat of any size, except 3-Gen flats and PLH flats. From ForwardSG and other engagements, we have heard that singles want to have more choice in housing, to live near to your family for mutual care and support.
B. With the reclassification in 2H2024, eligible singles can buy new 2R Flexi BTO flats – whether they are Standard, Plus or Prime flats.
C. This also means that singles will also be able to purchase 2R resale Prime flats, at the prevailing BTO income ceiling of $7,000.
D. I had previously mentioned that for resale Plus flats, we will apply the income ceiling of $14,000. This will apply for both families as well as singles, and singles may purchase all resale flat types, except 3-Gen flats. This allows singles to have more HDB Plus resale options.
E. So, on the resale market, singles can continue to purchase Standard or Plus flats of any size, other than a 3-Gen flat. Or they can also purchase a resale 2-room Prime flat. To manage prices of Plus and Prime flats on the resale market, we will apply an income ceiling for singles buying such flats. Previously, singles were not allowed to buy any resale Prime flats. Under the new framework, singles can buy 2R Prime resale flats, with a resale income ceiling of $7,000. Singles will also be allowed to buy resale Plus flats of all sizes. To ensure that singles can afford the larger resale Plus flats, the income ceiling for singles buying resale Plus flats will be set higher, at $14,000 – same as families. Together, these moves will allow singles a wider range of options on the resale market.
24. For existing homeowners, especially our seniors:
A. Even as we expand access for singles, we will continue to set aside a proportion of 2R Flexi flat supply for seniors to facilitate right-sizing. We will launch more public housing assisted living projects called Community Care Apartments, which pair senior-friendly housing with care services that can be customised according to care needs for our seniors.
B. And for seniors who would like to age in place, we will enhance HDB homes and precincts with fittings and amenities designed to meet seniors’ needs. We will expand the EASE (Enhancement for Active Seniors) programme and offer more subsidised fittings under EASE 2.0 to make it easier and safer for seniors to go about their daily activities within their homes. Examples include rocker switches, smoke detectors, handrails at flat entrances, foldable shower seats, and widened toilet entrances for wheelchair users.
C. We will enhance our HDB estates to make them more senior-friendly. There will be more shelters, rest points and barrier free access ramps for safer and more comfortable commutes for our elderly. Larger and more colourful signages, with symbols will help seniors to find their way home and find their way around the estates. We will also provide more health-promoting amenities to help seniors stay active such as fitness trails, exercise machines and therapeutic gardens. More details of this programme will come at a later date.
Conclusion
25. With these changes, we will be better prepared to face upcoming challenges and write the next chapter of our public housing story together.
26. We want to hear your thoughts and feedback on our public housing system as we continue to refine and improve it, and work toward a future shaped by this vision of a home-owning society, diverse and inclusive communities, and a fair and sustainable system.
- We look forward to hearing from you at today’s session.