FIRST-TIME FLAT BUYERS AND FLAT TYPES

FIRST-TIME FLAT BUYERS AND FLAT TYPES: 5.

Dr Lim Wee Kiak asked the Minister for National Development if he will provide a breakdown of the number of first-time HDB flat buyers in 2008 and 2009 who bought (i) a resale flat from the open market; (ii) a new Build-to-Order flat from HDB; and (iii) a resale flat near their parents.

Mr Mah Bow Tan: Mr Speaker, Sir, an average of about 18,000 first-timers a year bought HDB flats in 2008 and 2009. Among them, about 10,000 (55%) booked new flats. The remaining 8,000 (45%) bought resale flats. So, 55% new; 45% resale. Six thousand and eight hundred bought resale flats with the CPF Housing Grant, of whom about 3,000 bought a resale flat near their parents and, hence, enjoyed a higher tier grant of $40,000. The remaining 1,200 bought resale flats without any grants.

The high number of young couples who buy their first flats each year is made possible by our generous housing subsidies. HDB is committed to help Singaporeans, including lower-income households, own their first homes.

Lower- and middle-income families earning up to $5,000 monthly receive additional assistance of up to $40,000 through the Additional Housing Grant (AHG) for the purchase of new or resale flats. A low-income family can therefore enjoy up to $80,000 in grants when buying a new flat.

Dr Lim Wee Kiak (Sembawang): Sir, I thank the Minister for his reply. Encouraging the first-time applicants to buy resale flat has a positive impact of renewing our estates as well. I would like to ask the Minister what measures are being taken by the Ministry, if any, to encourage young first-time home buyers to consider buying resale flats in the open

Column: 30

market, so that they can increase this percentage from 45% to a higher percentage.

Second question: Will the Minister consider increasing the grant to help these first-time buyers who are considering resale flats rather than BTO flats, or even consider some type of financing for the Cash-Over-Value (COV) so that they can consider buying resale flats instead of queuing up for the BTO flats?

Mr Mah Bow Tan: Sir, young, first-timer couples in Singapore have a choice. They can either buy a new flat or a resale flat. There are pros and cons for each decision. If they buy a new flat, the price is lower, because the implicit subsidies are built in. But the disadvantage is that they have to wait. There is another issue and that is most of these new flats are in the non-mature estates. Some couples cannot wait and some couples prefer to have flats in a mature estate, perhaps where their parents are staying. So there is a choice – new flats versus resale flats. But if they buy a resale flat, then they are paying a premium. They have to pay cash upfront because of the COV and they generally have to pay a premium for enjoying the benefits of no waiting time, mature estates, etc.

We do not have a pre-conception of how many first-timers should buy new or resale flats. We do not set a target for this. This is left to the particular situation and preference of the young first-timer couples. This ratio of 55:45 has fluctuated over the years. In some years, when resale flat prices are low, the resale flat proportion goes up, as high as 70%. Now when the resale prices are high, the proportion comes down. We do not have a policy as to whether we should have 40%, 50% or 60% new flat buyers versus resale. Hence, there is no need for us to consider incentives. The most important question is whether overall we have enough flats available for first-timers

Column: 31

to purchase, whether new or resale. The Member assumes that it is better for first-timer couples to buy resale flats. I do not think we want to skew the decision either way. We will let the market take care of it. That leads me to his next question, which is whether we should increase the grant or finance the COV. Doing so will implicitly mean that we would like to have more people buying the resale flats. There is no policy reason why we should be favouring one over the other.

Mdm Ho Geok Choo:

I would like to ask the Minister two questions. Of late, there have been letters to the press of marriage breaking up due to the long waits for HDB's new BTO flats. How does the Ministry address the problem where an allotted flat is not taken up? How are they classified in the Ministry's database?

Second question: How could HDB overcome the anomaly of the current valuation process and high COVs? Would a review of our current HDB valuation process help address the issue of high COVs?

Mr Mah Bow Tan: The Member asked what we do with those flats that are not selected. I did give some figures in this House earlier to show that we have on average about one-third of flats not selected on the first day of selection. HDB would set aside those flats that are not selected and offer them to the next persons down the queue. They would call up about two or three times the number of people than flats available, and ask them to select. If at the end of that selection process, flats are still unsold, they would be kept in a pool and then resold some time down the road. In other words, from time to time, you would see an exercise where HDB sells its balanced flats. What they call, the sale of balanced flats exercise. These include those flats that have not been sold under the

Column: 32

previous BTO exercises. But at the end of the day, rest assured that all these flats will be sold. Some of the not-so-popular flats may take longer time to sell.

The second question is whether we can do something about the valuation. I hope Members would appreciate that we have decided that we would let the market set the prices of resale flats. Government sets the price of new flats to make sure that they are affordable, but we do not set the prices of the resale flats. We want to make sure that there are sufficient new flats to cater for first-time buyers. We also know, as I explained in my reply to Dr Lim, that there are some people who prefer resale flats – so be it. But the resale flat prices must be set by the market and the resale flat prices include the COV. The COV is part and parcel of the resale flat price. To say that we want to control the COV and do something with the COV, essentially means we want to set the price of the resale flats, which I hope and I believe most Members of this House would not agree to.

What can we do with the valuation process? It is a process which is not determined by the HDB. The valuations are set by private sector valuers, and the valuers would then present this valuation price to the HDB. HDB would then use it to determine what is the loan eligibility of the buyer. Then it is up to the seller to determine how much above that valuation he wants to sell the flat. This is part of the market process as it is in the private sector, where there is no COV. So there is nothing unusual about having a COV in the HDB resale market. The fact that the COVs in the resale market are high today, which is causing some anxiety, is a reflection of the demand and supply situation in the market. I recall that last year, we had COVs which were either zero or negative. Again, that reflected the market's situation at that time. I dare say that, as the market cools down or the

Column: 33

supply catches up with demand, the COV prices would start to moderate as well.

Mr Speaker: Last question, Dr Lim.

Dr Lim Wee Kiak: Sir, I would like to ask the Minister: Does he not agree that the renewal of estates is important, in the sense that we would have to consider policies to help to renew our ageing estates? So, encouraging first-timers to consider buying resale flats rather than BTO flats does achieve the impact, and would not a policy to favour that actually helps in terms of national development?

Mr Mah Bow Tan: Yes, I do agree. That is the reason why we do not totally meet the demand from first-timers with new flats. We do not have a 100% new flat, 0% resale flat policy. If that were to happen, then the concern that the Member has expressed would come true. What we would like to do is to have a balance of new and resale flats. What I said in my reply was we do not have a pre-conceived idea what that balance is. But we have monitored the situation and the balance over the last many years has been quite acceptable. There will be people buying resale flats, people who are able to afford resale flats and people who want to buy resale flats for all the various reasons that I have mentioned. The current grant is a very effective way of incentivising and encouraging them to do so. The grants are very generous – you can get a grant of $30,000 or $40,000 from the CPF Housing Grant to buy a resale flat. On top of that, you can get another grant, up to $40,000. You can get up to $80,000 to defray the cost of buying a resale flat. That is encouraging and incentivising many young couples today to buy a resale flat. I do not think the Member needs to worry too much that people will not be buying resale flats. As the numbers show, about 45% of people – or almost half of the young first-timer couples – are buying a resale flat.