ANTI-SPECULATION MEASURES FOR PROPERTIES

ANTI-SPECULATION MEASURES FOR PROPERTIES: 7.

Ms Sylvia Lim asked the Minister for National Development (a) if he will explain the basis on which the new anti-speculation measures announced on 30th August 2010 were devised; and (b) whether any assessment was done on their impact on genuine home buyers and Singaporean investors.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, the objective of the property measures that were introduced by the Government on 30th August 2010 this year is to maintain a stable and sustainable property market, where prices move in line with economic fundamentals. There is a danger of a property bubble forming, given the strong momentum of the market, and the likely slowdown in the pace of economic growth, as well as the economic uncertainties ahead.

The measures are aimed at reducing the level of speculative demand in the market and encouraging financial prudence. Genuine buyers, especially first-time buyers, are not unduly affected. The extension of the holding period for the

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Seller's Stamp Duty (SSD), from one to three years, is targeted at short-term speculation. The lowering of the Loan-To-Value (LTV) limit for housing loans from 80% to 70% and the increase of the minimum cash payment from 5% to 10% of the property price are also restricted to home buyers who already have one or more outstanding housing loans. First-time home buyers, who do not have any outstanding housing loan, are not affected by the measures. They can continue to take loans of up to 80% LTV and pay only 5% in cash for their property purchase.

For the HDB market, the changes in the Minimum Occupation Period (MOP) rules reinforce the long-term owner-occupation objective of HDB flats. Genuine home buyers including first-timers who intend to stay in their flats for the long term will not be negatively affected. In fact, they will benefit from reduced competition from those who are not in urgent need of housing.

There will be upgraders or investors who may be deterred from buying at this point because of the new measures. However, given the current state of the market, where there is ample public and private housing supply in the pipeline and the prevailing momentum of prices, these measures will encourage them to exercise greater financial prudence and think carefully about their purchases. In summary, the measures taken seek to pre-empt a property bubble from forming, and the negative consequences to them and to the economy as a whole, when it bursts.

Ms Sylvia Lim: Sir, supplementary questions for the Minister. I received feedback, as I am sure the other Members have, from Singaporeans who are close to retirement age who wish to rent out the private property which is the only asset

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that they have, and to downgrade themselves to live in a resale HDB flat. They are now caught by this rule which requires them to dispose of their private property within six months of buying the resale flat. Does the Minister not agree that the new rules actually would jeopardise such legitimate plans of Singaporeans? The other point, which has been brought up to me, is that there appears to be an anomaly between the rule that allows an owner of an HDB flat to buy private property after five years of the Minimum Occupation Period (MOP), whereas the private property owner has to dispose of his property once he intends or has bought a resale HDB flat. So, would that not lead to a possible situation where permanent residents living in HDB flats are actually able to hold private properties in Singapore after the MOP, while not disposing of their HDB flats? But we may have Singaporeans, in the group which I mentioned earlier, who have to sell off their private property in order to move into a resale flat.

Mr Mah Bow Tan: Sir, yes, I do empathise with the concerns of people who probably were hoping to sell their private property and move into a HDB flat. But the rules do not actually disallow them from doing so. In fact, they are able to move from their private property and downgrade to a HDB flat, provided they do not own both at the same time. So, for those people who wish to downgrade for their retirement, the new rules do not penalise or disadvantage them at all.

However, there are some people who wish to buy a HDB flat and at the same time own a private property. I think those are the people that the Member was talking about. To those people, I would say that at this point in time, we want to reinforce the use of the HDB flat as a flat for long-term owner-occupation, not as a mode of investment. Why? Because we want to make sure that those who are in urgent need of a HDB flat will be able to

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buy a flat, especially those young first-timer couples who may not want to wait three years for a new flat, and who want to buy a resale flat, can do so. So, yes, there would be some who would be inconvenienced, there would be some who would be disadvantaged in a way, but I hope they understand the reasons for this move. We are trying to make sure that our first-timer couples are able to get the flats that they want.

As to whether the Ministry is penalising the private property owner, as opposed to the HDB owner, I think the rules that we have put in place, in actual fact, address this anomaly. Let me explain. In the past, a new subsidised HDB flat owner could not buy a private property until after five years, which is after the Minimum Occupation Period (MOP); whereas a private property owner could do so. In other words, he could have bought a non-subsidised HDB flat, kept his private property and moved into the HDB flat. He could have owned both properties at the same time, whereas a subsidised HDB flat owner could not. So, we have changed the rules to make it equitable, to make it fair for both the HDB flat owner as well as the private property owner, within the MOP which was three years and now five years, rather than saying that we are penalising the private property owner, we are actually making it equitable for both the HDB owner as well as the private property owner. We are also making these rules equitable and fair for all property owners whether permanent residents (PRs) or citizens.

Mr Lim Biow Chuan (Marine Parade): Minister, let me try to understand this better. Why would an HDB flat owner be required to sell his private property if he is going to stay in his own HDB flat during the Minimum Occupation Period? Is the Minister suggesting that Singaporeans should not be encouraged to upgrade or buy HDB flats for their own investment

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during these five years? If they have the money, why can they not use their money to invest in private property, while they are staying in the flat during these five years?

Mr Mah Bow Tan: Sorry, I did not quite understand the Member's question. The Member's is asking, "Why can they not stay in their private property?"

Mr Lim Biow Chuan: If they are staying in their own HDB flat, why are they required to dispose of their private properties during this period that they are staying in the flat? So if a flat owner buys a flat, he is staying in it for the first five years but he is now required to –

Mr Mah Bow Tan: I understand. Well, I think that was the point I was trying to make just now to the other Member, Ms Sylvia Lim. If you already own a private property, then please do not, at this point in time, go and compete with the others to buy an HDB resale flat, unless you are genuinely downgrading. If you are genuinely downgrading, you would buy an HDB resale flat and dispose of your private property. That is all right. In other words, that is still a legitimate way for you to monetise your private property in your retirement.

I do understand that there are people who want to have the best of both worlds. They want to keep their private properties, they want to stay in HDB flats. The private property can be rented out for investment, and so on. As I said, we have a genuine need from first-timer couples for HDB resale flats and I think we should let them have first priority. I think the other group that was complaining or probably feel disadvantaged consists of those who are upgraders, people who want to upgrade from HDB flat to another. Again, let me say that the rules actually do not disadvantage them. In fact, the rules require them to be a bit more prudent in their purchases.

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I have received a lot of feedback and complaints from Members of the House and as well as from other sources that these new rules actually disadvantage people from trying to upgrade or downgrade or use HDB flats as an investment. They said this is a legitimate aspiration, so why am I preventing them from doing so. These are all very genuine concerns but I guess what does worry me is that they are premised on the assumption that the property market will keep going up. They ask why we are denying them this opportunity to upgrade or to buy another flat. That brings me to the situation in the 1990s. I remember, and Members will remember, that we had a property boom in the 1990s. At that time there was an upgrading fever. Everybody was buying newer, bigger flats and getting bigger loans, and so on. Then in 1996, the market peaked. After the financial crisis a year later, the market crashed. As a result of that, many people lost their homes, many ended up in negative equity, and we are still seeing the after effects of that in our Meet-the-People Sessions today. So I hope that we do not get to see that situation again.

The purpose – I wish to reiterate – is that, we introduced these measures to dampen demand from those who already own a home. If you already own a home, then please refrain from competing in this market with those first-timer couples who do not have a home. Let them have a crack at it. But if you own a home, and you want to downgrade, by all means, do so, and the rules do not disallow you from doing that. You just have to dispose of your private property within six months. I hope that these measures will restore some stability in the property market which has become a bit exuberant of late. It will inconvenience some – those who already own a home, or who hope to upgrade, or who hope to downsize. Even then, I think they will not disagree with

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me that they will also benefit from a more stable market. I hope people will understand the reasons behind these measures, especially our desire to make it easier for young couples to own their first home and of course, also, our intention to maintain a more healthy and stable property market.

Ms Audrey Wong Wai Yen (Nominated Member): Thank you, Sir. I would like to ask if the Ministry has any figures on the number of non-subsidised HDB flat owners who concurrently hold private property, because that seems to be one of the key issues to address.

Mr Mah Bow Tan: I do not have figures on the breakdown between subsidised and non-subsidised HDB flat owners who own private properties. A few months ago, the estimate was about 3% of all HDB flat owners own a private property. These are the people who made purchases either after the Minimum Occupation Period, or before we changed the rules. In other words, it could be private property owners who bought HDB flats before we changed the rules, or HDB flat owners who bought private property after the Minimum Occupation Period. Overall, it is about 3%. So if we have about 800,000 flat owners today, those who own private property would be about 24,000 owners. There is no breakdown between subsidised and non-subsidised flats.