HOUSING OPTIONS FOR MIDDLE-INCOME GROUP

HOUSING OPTIONS FOR MIDDLE-INCOME GROUP: 8.

Mdm Ho Geok Choo asked the Minister for National Development (a) whether there will be enough Executive Condominiums and flats under the Design, Build and Sell Scheme (DBSS) to cater to the needs of those with a monthly income of $8,000 to $10,000; (b) whether there will be an increase in the prices of DBSS flats; and (c) how will the Ministry ensure that there will be enough DBSS flats and

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their prices are within the means of all those who are eligible.

Mr Mah Bow Tan: We have widened the housing options of first-timer households with monthly incomes between $8,000 and $10,000. In addition to Executive Condominiums (ECs), they can now also buy new flats under the Design, Build and Sell Scheme (DBSS), and they will get a CPF Housing Grant of $30,000.

To cater to the demand from these households, HDB is ramping up the supply of land for DBSS and EC developments. In 2010 and 2011, HDB plans to release land for about 7,000 DBSS flats and 8,000 ECs. Just to put things in perspective, in two years, we will almost triple the current stock of 4,000 DBSS flats and almost double the current stock of 10,000 ECs that have been launched since the inception of these schemes.

The large supply will help ensure that DBSS developers set their prices at reasonable levels. They have to bear in mind that DBSS flat buyers have alternative options such as resale flats, ECs and private condominiums, and even Build-to-Order (BTO) flats for households earning under $8,000. So if they set their prices too high such that the flats are not affordable to the target group, they will face the risk of not being able to sell their flats.

Mr Liang Eng Hwa (Holland-Bukit Timah): Sir, the significant ramp up in the housing supply was only announced recently. I would like to ask the Minister why did the Ministry of National Development (MND) not increase the supply of flats sooner to cater to the increase in immigration in the recent years that has led to this current shortage. Was MND caught by surprise by this surge in immigrants?

Mr Mah Bow Tan: Sir, let me first explain the way MND plans our housing

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supply by taking a long-term as well as a short-term perspective.

MND will first of all take into account the demand. One has to take into account those people who wish not only to buy flats, but also seek to rent. We take into account first-timer households, the upgraders, those who downsize, the private properties' owners who wish to buy HDB flats, the permanent residents (PRs), and even the foreigners because they would be renting. This is the additional demand for HDB flats. At the same time, we also need to take into account the reduction in the demand, due to flats released into the market, emigration and disbarment of existing families. So when we take these two factors into account, we will get the net demand. We reduce this again by the supply that is met by the resale flat market because not everyone buys a new flat. Some of them will go for a resale flat.

If we remove the demand that is met by the resale market, we will get the net new flat supply. That is on an aggregated overall basis, but we all know that from a year-to-year basis, demand can fluctuate and vary very significantly from the long-term projection. One of the reasons is the sentiment-driven nature of the market. In other words, people buy because of sentiment. They may actually bring forward their home-buying if they feel that prices are going up and vice versa . MND also reviews its short-term supply on a regular basis to respond to such year-to-year flunctuations.

To give Members an example, in 2007, we increased the housing supply by building more flats and by releasing more land in the Government Land Sales programme. In 2008, we had to scale back. In the first half of 2009, we scaled back even further because of the economic outlook at that time was very uncertain. Members may recall that many

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economists thought that the world would enter a period of prolonged recession and there was even talk of a depression. Given those circumstances, it would have been foolhardy for us to keep on pushing out flats or land for housing at the same rate.

The Member asked about new immigrants. The influx of new immigrants in recent years has been higher than normal, and they have added to the housing demand. That is only one factor. What is equally, if not, more important in the housing market is the sentiment that is driving other people who also want to buy, and of course the broader economic forces that affect overall demand. In 2009, when things were looking very gloomy, property prices fell even though there were many foreigners and PRs here. The recent appreciation in property prices again is a reflection of improved economic sentiments, low interest rates, a sense that prices are going to go up even further. In Singapore like in many other countries, property prices have moved up sharply. We take a long-term view, but we also need to be cognisant of the short term. Therefore, we have to be very flexible and review our housing supply in a very pragmatic manner. The Government Land Sales (GLS) programme, for example, is done on a six monthly basis. We review the projected demand every six months, for the short, medium and long terms, and we adjust our GLS supply accordingly. Similarly in the HDB market, the number of new flats that are pushed out by HDB must take into account not just the long-term but also the short-term demand. That is the supply side, but of course, as Members are aware, we have recently put in place demand management measures to discourage speculative purchases. These two together – increase in supply and demand management measure – will address the current imbalances in the market and will help to

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restore some stability in the HDB resale market.

Mdm Ho Geok Choo (West Coast): Supplementary questions for the Minister. How would the Ministry handle cases where the applicants' income grew, slightly above the $8,000 income ceiling while waiting for a flat? Are these borderline sandwich class applicants denied HDB concessionary loan? Is it possible to extend HDB concessionary loans to this sandwich class, especially to the young Singaporeans who are first-timers and applying a flat as a family unit?

Mr Mah Bow Tan: Sir, we have the income ceiling of $8,000 to be eligible for HDB flat, grant and loans. In borderline cases which the Member has described, we do take into account when the appeal comes in, the circumstances of the appeals. In some cases that I have seen, where family circumstances are such that members of the household are incurring heavy medical expenses, HDB does exercise flexibility. That is one of the many situations that may arise. HDB will look into each case on an individual basis.

At the same time, like all Government's policies, we need a cut-off somewhere, especially when it comes to the disbursements of grants and subsidies. In the case of the HDB, $8,000 income level is a cut-off mark for the disbursement of such subsidies. Recently, as the Member is aware, we have also raised this $8,000 ceiling to $10,000 and will give subsidies to this sandwich group, not only for ECs, but also for DBSS flats. This is a recognition of the fact that we need to provide more housing options for the sandwich group. For those borderline cases which the Member is talking about, the answer is "yes", we do consider appeals on a case-by-case basis. But it cannot be a blanket approval of granting the CPF Housing Grant to the sandwich group without a proper evaluation of the circumstances.

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Mr Hri Kumar Nair (Bishan-Toa Payoh): Thank you, Sir. A clarification on the change in DBSS policy. Will the Minister confirm that those earning between $8,000 and $10,000 are not eligible to purchase unsold units in DBSS projects launched before August 2010? If it is so, what is the rationale for excluding such units which were launched before August 2010?

Mr Mah Bow Tan: Yes, that is correct. The eligibility for purchase of DBSS will apply only to those units that were launched after that date, and not before. There are no unsold DBSS flats, because the DBSS scheme was launched two years ago, there is a Minimum Occupation Period.

Mr Hri Kumar Nair: If I can clarify, I think there are some allocated under the ethnic quota policy, which have not been taken up.

Mr Mah Bow Tan: If they have not been taken up yet, they will fall under the old rules. Basically the flats were tendered on the basis of the old rules and we ought to make a clear distinction between those that were sold and tendered out under the old rules, compared to the new ones.