Government will do what is necessary to ensure affordable public housing for Singaporeans: Desmond Lee
To address demand, HDB is prepared to launch up to 100,000 flats from 2021 to 2025 if needed, says the Minister for National Development.
SINGAPORE: The Government will intervene and do what is "necessary" to ensure affordable public housing for Singaporeans as well as a stable property market, said Minister for National Development Desmond Lee on Tuesday (Oct 4).
Speaking in Parliament, Mr Lee said this has been the authorities' approach all along.
"We will do so decisively but also carefully, being cognizant of the uncertain global economic outlook and rising interest rate environment, which will affect home prices and contribute to uncertainty in our property market," Mr Lee said.
He added the Government will monitor the market and make policy adjustments, if necessary, on both the demand and supply side, to ensure that housing prices are largely in step with economic fundamentals.
"This Government is committed to the stability of the wider Singapore property market, and to keeping public housing inclusive, affordable, and accessible to Singaporeans," he said.
The minister was responding to questions from MP Yip Hon Weng (PAP-Yio Chu Kang) who had asked what measures are being taken to address the growing sentiment that Singapore's property market is unaffordable for the masses.
Mr Yip had also asked how the recent adjustments to manpower policies will affect property prices; and what else the Government will do to ensure housing remains affordable for Singaporeans if housing market conditions do not improve.
STRONG DEMAND FOR HOUSING
In his reply, Mr Lee listed a number of reasons for "strong, broad-based demand" for housing over the last two years.
He pointed out that there have been more households forming as those who are in their 30s get married, especially with the easing of COVID-19 measures.
In addition, there are also societal trends shifting to smaller households, as young couples, singles and adult children opt to buy their own homes instead of living together with their parents, Mr Lee said.
Due to construction delays caused by COVID-19, more homebuyers have also turned to the resale market because of longer waiting times for Build-to-Order (BTO) flats, Mr Lee explained. Since 2020, the Government has also seen more private property owners and existing HDB owners cash out on their property and enter the resale market, he added.
"These demand factors, alongside the previous low interest rate environment that made it cheaper to service a home loan, have put upward pressure on HDB resale flat prices," he said.
Mr Lee noted that since the Government implemented a package of measures in December 2021, the HDB Resale Price Index increased by 5.3 per cent in the first half of this year.
The cooling measures include raising Additional Buyer’s Stamp Duty (ABSD) rates, tightening the Total Debt Servicing Ratio (TDSR) threshold and lowering the Loan-to-Value (LTV) limit for loans from HDB.
Mr Lee acknowledged concerns about housing affordability, and said that the Government has been "carefully monitoring" the housing market.
"We are committed to keeping public housing affordable and accessible, to meet the housing aspirations of Singaporeans, and to help Singaporeans own their own homes. This is a key, long-standing national priority, and provides the basic foundation for us to raise our families, bring up our children, and build strong communities," he said.
"That is why we continue to build and sell new HDB flats at prices below the market as they come with significant subsidies."
Mr Lee pointed out that the average price for a new four-room flat in a non-mature estate has remained "relatively stable" at S$341,000 in 2019 and $348,000 in the first three quarters of 2022.
To keep new flats affordable, market subsidies have also been increased, Mr Lee said.
"For new flats in prime, central locations, we have introduced the Prime Location Public Housing Model which provides additional subsidies on top of the substantial subsidies already provided for BTO flats. This is to keep flats in such locations affordable for a wide range of Singaporeans," Mr Lee added.
Mr Yip had also asked if the affordability of HDB flats should be pegged to median household incomes or other indicators, given that salaries within the 30th percentile and below are significantly less compared with the median percentile on the salary scale.
"Our affordability benchmarks do not only consider median incomes, as we provide a wide range of BTO flats for first-time homebuyers with different housing needs and budgets," said Mr Lee.
HOME PRICE-TO-INCOME RATIO
He gave the example of a first-timer household earning about S$5,000, slightly less than the 30th percentile of resident household incomes.
"They may buy a four-room flat in any of the three non-mature estate projects in the recent August 2022 BTO exercise, namely in Jurong East, Woodlands and Choa Chu Kang. These projects come with typical prices comparable to or lower than the average price of BTO flats in non-mature estates at about S$348,000," explained Mr Lee.
"After factoring in the S$45,000 in grants they would receive, they will need to use about 23 per cent of their monthly income for their housing loan, which means they will be able to service their mortgages from their monthly CPF contributions with no cash outlay."
This would work out to a home price-to-income ratio of about five for the family, which is to say that the price of their home is about five times their annual household income.
Mr Lee noted that the ratio of the median home price to the median household income in other "comparable" cities such as London, Los Angeles and Sydney was at about eight to 15 times, and more than 20 times in Hong Kong.
In another scenario, a couple - earning a combined S$6,500 a month - would have a home price-to-income ratio of around four, Mr Lee said.
He noted that the ratio of the median home price to the median household income in other "comparable" cities such as London, Los Angeles and Sydney was at about eight to 15 times, and more than 20 times in Hong Kong.
When it comes to resale flats, Mr Lee said that the Government provides "significant" housing grants of up to S$160,000 to ensure resale flats remain affordable for eligible first-timer families. It also reviews grants regularly, he added.
"Generally, the mortgage servicing ratio, which is the proportion of monthly income used to service mortgage instalment payments, has remained below 25 per cent for most new and resale first-timer flat buyers taking on an HDB loan," Mr Lee added.
"This is well below the international benchmark of 30 to 35 per cent. This means that most first-timer buyers can service their housing loans using their monthly CPF contributions, with little or no cash outlay."
Mr Lee also recapped a number of measures announced last week which were aimed at cooling the property market.
These included some private home owners having to now wait 15 months after they sell their property before they can buy an HDB resale flat. In addition, maximum loan quantum limits have been tightened. For HDB loans, the LTV limit has been lowered from 85 per cent to 80 per cent.
"These measures are necessary as property loans are long-term commitments and often a household’s largest liability. The higher floor rates ensure that today’s borrowers take loans that reflect the likelihood of rising interest rates and avoid overstretching themselves," said Mr Lee.
There is "genuine demand" from home buyers, said Mr Lee and the Government has also increased supply in both public and private housing markets.
He pointed out how HDB has ramped up BTO supply and is on track to launch 23,000 flats per year in 2022 and 2023, a 35 per cent increase from 2021.
"We are prepared to launch up to 100,000 flats in total from 2021 to 2025, if needed. We also endeavour to launch more projects with shorter waiting times of less than three years where possible," Mr Lee added.