Speech by Minister Desmond Lee at the MyNiceHome @ SUTD Dialogue

Oct 9, 2024

Good afternoon. My HDB colleagues and I are very happy to be here at SUTD for the second time,and we are glad to be able to bring the MyNiceHome varsity talk series to SUTD. We have been doing this for some time, reaching out to young Singaporeans who are concluding their IHL studies because we wanted to answer questions and share information with all of you.

On a professional front, I understand that many of you are taking courses related to technology and design, and you are planning your careers. I just want to tell you that in the Built Environment sector, which MND looks after, we are responsible for designing, building and maintaining the buildings and infrastructure in our city. Technology and design play a very important part in shaping our city skyline. For example, through the Industry Transformation Maps, and through the Industry Digital Plan, we are rapidly digitalising the whole sector. We are also pushing the boundaries on robotics and automation, energy-efficient solutions, and sustainable materials. We hope that some of you will join our Built Environment sector and contribute to designing and building the future of Singapore.

On a personal front, I was outside at the arrival area and there were some exhibition pieces that my colleagues have been using to ask you for your ideas, your view, your preferences, and to share some basic information about HDB applications, and I gather that some of you may already be thinking about settling down after graduation or sometime after that, buying a home, and starting a family. Or you may be starting to think about your housing options after you graduate and start your working careers. And that may explain why you’re with us today. 

We want to use this opportunity to support you in your housing aspirations, and through the MyNiceHome series, we want to address your queries and concerns. I will cover three key areas in this opening presentation:

First, I will talk about how we aim to ensure a steady supply of public housing. For young people, there will be a steady supply all through the years.

Second, I will share with you about something that is already impending. In just a matter of days, we are going to launch the New Flat Classification Framework to ensure affordability and fairness.

The third thing that I am going to cover is how we support Singaporeans’ housing needs at different stages of life. While the bulk of the presentation will talk about buying homes by young people like yourselves, I will also cover housing options for seniors as well, because you may be asking questions for your parents or your grandparents.

 A Steady Supply of Housing

When you look at all the things that a Singaporean may buy or invest in in your lifetime, perhaps the home is the single largest ticket item that you will ever have to think about investing in and buying. As a student, I know, because you have not yet started working and not seen the full potential of your earning capability, some of you may find the idea of buying your first HDB home daunting, particularly during this time when you read news of strong demand for housing. You may have heard some people say that they applied many times but could not get a flat, and also about the state of the resale market. Some of you may have heard about million-dollar homes, high-priced flats and so on. So let’s start upfront by addressing these questions.

First, we will ensure a steady supply pipeline of new HDB flats:

We have around 730 sq km, very densely populated, lots of needs, but we will ensure a steady pipeline through the years and decades ahead. In fact, in the midst of Covid-19, we committed to launching 100,000 new HDB flats from the year 2021 to 2025. By next year, we will meet our target of 100,000, and then we will tell you what is the next bound. So you can always be assured there will always a supply of new homes.

In the upcoming BTO exercise this month, we will push out the largest number of projects ever – 15 projects on offer, with over 8,500 flats to meet every budget and need.

Of these 8,500 flats, some 2,000 units will come with Shorter Waiting Times of less than three years. These are flats which we start building ahead of demand, and then when we offer them for sale, the waiting time is less than three years. One project is in Bukit Batok, and it has a waiting time of just 2 years from booking, which is one of the shortest waiting times that HDB has ever launched.

The majority of these new flats are set aside for first-time applicants like yourselves, or people like you buying their first flat. There are various priority schemes you can qualify for when you are married and want to settle down quickly, or if you want to live nearer to your family.

So, supply will be there all through the years and decades.

Second, we will keep BTO flats affordable. HDB prices these flats below what you get on the market with significant discounts, so that they are affordable to a wide range of Singaporeans. Eligible first-timers like yourselves can also enjoy a means-tested Enhanced CPF Housing Grant (EHG) of up to $120,000 for new flats. Our flats are priced affordably such that when you take out a loan from HDB for your flat, you should be able to service that loan almost entirely with your CPF contributions, with little or no cash outlay at all. In fact, if you look at all the data last year, 8 out of every 10 first-timers who took out an HDB loan had almost no cash outlay. So that is the second – pricing it affordably, supporting with grants, so that you have little cash outlay.

The third thing I want to talk about is that we have moved to cool the resale market. The property market moves in cycles, a few years up and the a few years down, and it stabilises along the way. Before Covid-19, the HDB resale market was soft for more than 6 years. So ask your parents, do they remember what it was like before Covid-19? It was stable. In fact, it was soft. But since then, after Covid-19 struck, resale prices have increased over the past 3 years. This is largely due to a supply-demand imbalance, and that is why prices go up. Why is there a supply-demand imbalance?

First. there has been broad-based demand from young families, from singles, from seniors, all wanting to buy their own homes. In a way, Covid-19 caused some people to think, well, I now want my own space. In the past, maybe not, but now, I want.

At the same time, we have had to grapple with construction delays over the past few years, after construction was totally halted for the very first time in our history during the pandemic. And you may say, well, pandemic has been over for a while, but, in fact, our last delayed project will only be completed early next year. So there is a long-tail when there is a major impact, like total shutdown on construction, and then it is a slow start with a lot of catch up to do. So our last project that has been delayed can only be completed early next year. 

There is also market psychology at play, whether the market is on an up cycle or down cycle, there will always be some psychological contribution to the market movements on top of supply-demand imbalance. Some of you have heard about million-dollar flats being transacted. In reality, they form only a small minority of all the resale transactions. For the past one and a half years, if you look at all million-dollar resale flats, they make up 2% of all the resale transactions, and million-dollar 4-room flats make up 0.5% of all the transactions, but they actually occupy 100% of our attention. These are typically much larger flats. For example, they are maisonettes, jumbo flats, or flats with very exceptional locational attributes. For example, they may be very well-endowed with amenities, they may be next to MRT and other facilities, they may be of a very high-floor. These command higher market values, they attract more attention, people desire for them, and that is why their resale prices are as such. But with news about record HDB prices, particularly because we have flats coming on stream in very attractive locations, flat sellers across the board reading such news raise their expectations about how much their flat can bring. So it has caused all the sellers to think, I can ask for more than before. Buyers on the other hand, because it is willing buyer-willing seller, become anxious to secure flats even at high prices, because they are worried that prices may get higher if they delay. So, when sellers say, I think I can increase my prices because I see all this news, sellers get a response because buyers say, I am prepared to pay that kind of price because I am worried if it will still go higher. 

If we are not careful, such market dynamics can cause the resale market to run out of line with economic fundamentals and start to cause a property bubble, which will be harmful once the bubble bursts. In fact, history tells us that the property market moves in cycles, and those who buy at higher prices with larger loans are often the hardest hit when the market cools, especially when they find it difficult to service the loan.

That is why, in August this year, we implemented a cooling measure to further lower what we call the Loan-to-Value limit for those taking HDB loans and, at the same time, we increased the grant support for Singaporeans who are lower-to-middle income. So it is a two-step measure. We will continually watch the situation closely as these measures work their way through the market. 

In the private property market, some of you might be looking at private property, there are signs of stabilisation. The flash estimate of the private residential property price index decreased by 1.1% on a quarter-on-quarter basis in the third quarter of this year. This is the most significant decline since 2016. We will continue to release a steady supply of private housing units over the next few years, to give consumers more options while accounting for prevailing economic and property market conditions. We expect that the declining private residential property prices will have a knock-on, stabilising effect on the HDB resale market over time. But let’s watch the direction of the market over the next few quarters, because, as you know, the Fed has also made some moves, and you will see how the market and how individuals respond collectively to these moves.

The fourth thing I am going to talk about is that we are unlocking new areas for public housing. In the coming years, we will be launching BTO projects in areas such as the Greater Southern Waterfront, for example on the former Keppel golf course in front of Sentosa; we will be launching in Pearl’s Hill; we will be launching in Bukit Timah Turf City. For Pearl’s Hill, which is right in the heart of the city, this is the first time in almost 40 years that we are building HDB flats in this area. In the further future, we will be redeveloping the Paya Lebar Airbase after it relocates, as well as the Singapore Racecourse in Kranji, into attractive areas for work and play. 

Some of these areas that we are opening up are already quite built up. Some of them come with very good amenities, very good transport connectivity, some of them are very near to the city, or come with other attractive attributes, for example, waterfront views. There are also exciting redevelopment plans on the horizon, and we want to build HDB flats in such areas, to give Singaporeans – including in time to come, yourselves – more attractive public housing options to consider.

To enable us to build new HDB flats in very attractive areas, we will have to change our public housing policies. Let me explain why we have to do so.

New Flat Classification Framework

Background and Recap Objectives

Since the 1990s, towns were classified as either mature or non-mature estates, and in the past, you could tell the difference between them.

Mature towns were more developed, better connected, and had more amenities and facilities, while non-mature towns were less developed, they probably were further away from where all the action is, less connected, and had fewer amenities.  

But over time, that distinction has really blurred, as we invested heavily in transport and amenities all across the island.

We are also building new flats in very attractive locations, including some that I mentioned earlier.

But therein lies the conundrum. There is a dilemma in wanting to build in very attractive locations.

The flats in attractive locations – like the Greater Southern Waterfront or in the heart of the city – naturally command higher market values. They will be more attractive, there is higher demand, it is a good location. If HDB were to price these flats higher, even with the significant discounts that we currently already give to all BTO flat buyers, they may remain out of reach for many families, even though they are highly discounted.

If you do that, then what happens is our HDB neighbourhoods may become gentrified, because from the get-go, only the better-off Singaporeans can buy those flats. This may erode the social cohesion that we have painstakingly built up over many decades because not only will better-off Singaporeans be the ones able to afford these flats in the first place, on resale, the prices will keep going up.

On the other hand, if HDB were to lower the prices by giving even more subsidies to the buyers of flats in these attractive locations, even more than the subsidies we gave to people who were buying ordinary flats, then obviously more families will be able to afford the flats in attractive locations. But if you don’t have conditions to balance out these additional subsidies that you give, then owners of flats in very good locations will be able to “cash out” on the additional subsidies we give them, and they receive a windfall when they sell their flats on the resale market subsequently, if there are no restrictions whatsoever.

So if we continue to launch flats under the existing framework, without any conditions at all, without changing the way we classify the kinds of flats we sell, then what would happen is that conundrum would be in play. This would worsen the “lottery effect” and would be unfair to those who did not have the opportunity to buy these flats because it would be strange to give more subsidies to places which are already very attractive, which already have high demand, which already demand high market values, and that would be unfair to those who buy in other ordinary areas, and then, to worsen the lottery effect, when they sell, they get double the windfall. Only the lucky few who were able to ballot for these flats or the well-to-do would be able to live in these areas. This would undermine our objectives to encourage social mixing. What is the alternative then? The alternative is not to build HDB flats in these attractive areas at all, leaving it entirely to the private sector, but that outcome is also undesirable. 

From Town-based to Location-based

So, we will have to refine our system, to keep in-step with the changing times. We will roll out the New Flat Classification Framework starting from next week’s October 2024 BTO exercise. Henceforth, we will classify BTO projects into HDB Standard, HDB Plus, and HDB Prime, based on their locational attributes. No longer based on whether your town is mature or non-mature, which is anachronistic. Let us look at the location of the specific project. Each time we launch a new BTO project, we will classify them into Standard, Plus and Prime based on a holistic assessment of three key criteria:

First, proximity to the city centre.

Second, transport connectivity.

Third, availability of amenities, such as social and commercial services that are typically found in town centres.

Many Singaporeans prefer to live in HDB flats that are well-connected and near amenities as well as their workplaces. Plus and Prime projects will fulfil their preferences but these also come with higher market values because they are in better locations with higher demand. So, HDB will provide additional subsidies to keep flats in these locations affordable, but also impose additional restrictions to ensure fairness and to ensure affordability over time.

Standard projects will be the largest category amongst the three. They will be the bulk. In the October BTO exercise, there will be seven Standard projects which account for about 6 in 10 of the flats launched.

Take Costa Riviera I & II in the upcoming October 2024 BTO exercise. They are very near to Pasir Ris MRT, which is a future transport hub. Amenities-wise, they are very close to Downtown East and White Sands.

But they are still quite a distance from the city centre. So, we will classify them as Standard projects. 

Similarly, Standard projects will be classified based on a holistic assessment of their locational attributes. They may have one or two good attributes, while Plus and Prime projects will generally have even more attractive attributes. 

What makes “Prime” different from “Plus” then? In gist, Plus projects will generally be in choicer locations but Prime projects will be in the choicest of locations. Prime projects will tend to be located close to the city centre, have good transport connectivity, and are well-served by comprehensive amenities. They therefore command the highest market values.

Take, for example, Kallang/Whampoa town. We are going to launch three projects in Kallang/Whampoa town in our October 2024 BTO Launch. This is a bumper crop for the town.

Two of these projects in Kallang/Whampoa will be Plus projects – Kallang View, and Towner Breeze. Both are attractive, as they are just a short commute to the city centre, they have good transport options, as well as accessible and developed amenities.

The third project, Crawford Heights, is one notch above because it is just a short 5-minute walk to Lavender MRT station. It is also near Rochor River, Kallang Riverside Park, and the future Kallang Alive precinct, which has new training and sports facilities, community programmes, and a new 18,000-seater indoor stadium. We will therefore classify Crawford Heights as a Prime project. 

As you can see, there are variations in locational attractiveness even within the same town. So, within the same town, you can have two Plus projects and one Prime project. We should therefore expect different projects to have different classifications in any town.

We will make the classifications and conditions of the projects known at launch, so that buyers can make informed decisions before they ballot. There will be no retrospective classification, and all the flats in a project will come under the same classification.

The Prime classification is very similar to the Prime Location Public Housing (PLH) model that we introduced back in 2021. But there is one key difference. Thus far, PLH projects have been launched in the Central Area and HDB towns that are immediately surrounding the city centre, namely Bukit Merah, Queenstown, Kallang/Whampoa. We will continue to launch Prime projects there. But moving forward, we will no longer limit Prime projects to just these four towns. Some Prime projects may be located slightly further than the PLH projects, but they are close enough to the city centre, and have the same good connectivity, and are well served by a comprehensive suite of amenities. They are likely to command very high demand with high market values. For example, some projects in Turf City or slightly further out along the Greater Southern Waterfront, may also be Prime projects when we launch them. 

What I have done is set out the technicalities of how we will classify BTO projects going forward, from next week onwards. Let me now explain how this New Flat Classification Framework ensures a few key objectives: (1) affordable homeownership, (2) maintaining a good social mix across Singapore, and (3) keeping the system fair – because these are critical to ensuring that our society remains cohesive.

As I said before, HDB will provide additional subsidies to those buying Plus and Prime flats, in addition to the generous market discounts that already apply across the board to all flats, as well as the housing grants that lower-to-middle income households enjoy. The additional subsidies will help to ensure that these flats in Prime and Plus locations remain affordable to a wider group of Singaporeans.

To limit the lottery effect and to be fair to buyers who do not receive such additional subsidies, we will also impose tighter restrictions, such as a longer Minimum Occupation Period (MOP) of 10 years, instead of 5 years, for those who buy in Prime and Plus locations, a subsidy recovery from those who are selling the Prime and Plus flat on the resale market for the first time, and tighter restrictions on whole flat rental and on resale. These restrictions are intended to reinforce the concept of owner-occupation in public housing. They seek to reduce the investment value of a BTO flat, and thereby limit speculative gains, or what we call the lottery effect.  

Ultimately, this will allow us to provide home buyers with a wide range of options across flat types, and across the island, to find the one that suits their budget and their needs.

Supporting Singaporeans’ Housing Needs at Every Stage of Life

With a strong supply pipeline, as I talked about at the start, and a new classification framework to achieve our social objectives that I have just articulated, we will continue to update our policies to ensure that we adequately support Singaporeans’ needs at every stage of life.

Securing a flat is important for Singaporeans looking to start a family. So we will continue to set aside a significant majority of our 3R and larger BTO flats for first-timer households.

For those who might stay single or who may marry later in life, we have expanded access for singles to new HDB flats across more locations.

So prior to this, singles can buy in non-mature estates. From next week onwards, singles who are eligible can buy Prime, Plus and Standard location flats. From the upcoming October 2024 BTO exercise, as I have said, first-timer singles can buy new 2-room Flexi flats island-wide, instead of only in non-mature estates previously. Given that we could see strong demand and higher application rates from singles, we have launched a larger supply of some 1,900 2-room Flexi flats across 10 projects in the upcoming October 2024 BTO exercise.

Other than those which are set aside for seniors, the majority of the BTO 2-room Flexi flats are set aside for first-timer singles.

Some have also asked whether we can lower the eligibility age for singles to purchase a BTO flat. Can we also raise the income ceiling? Can we allow them to buy larger flats, such as 3-room, 4-room, or larger flats? We have been studying the issue, but it is hard for us to make any major changes now, because we are still ramping up the supply of new flats to catch up with demand from larger households. But the moves that we are making now will go some way in making it easier for singles to also realise their aspirations for owning a home.

Finally, looking ahead even further, we remain committed to supporting Singaporeans’ housing and retirement needs in their silver years. We are seeing an increasing number of seniors who move to smaller flats as their children grow up and buy homes of their own. We will continue to set aside a significant proportion of our 2-room Flexi flats across the island for our seniors. We will also continue to build more Community Care Apartments, which integrate senior-friendly housing with care services and social activities to provide a good environment for active aging. Community Care Apartments are flats that come packaged with social activities, packaged with senior-friendly care services.

Beyond building more, these priority schemes and quotas will ensure a flat for you at every stage of life.

Conclusion

As the late-Mr Lee Kuan Yew once said, “Home ownership gives every citizen a stake in the country and its future." My colleagues at HDB, and their predecessors, have spent the last 65 years trying to bring this vision to reality. We will not stop here, we will keep improving our policies, keep ensuring that even in our small island, we continue to build flats for people to meet their needs, to give you a home and a future for housing.

Thank you.