DEFERRED PAYMENT SCHEME

DEFERRED PAYMENT SCHEME:

(Impact of withdrawal): 3.

Mdm Ho Geok Choo asked the Minister for National Development (a) to provide an update on the impact of the recent withdrawal of the deferred payment scheme to manage the rising property prices; and (b) what other instruments will be considered by the Ministry to constantly review the property market.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, the Deferred Payment Scheme (DPS) was introduced in 1997. If Members will recall, that was at a time when the economy was in recession and the property market was in the doldrums. It is no longer relevant given the strong property market conditions today.

As the DPS was withdrawn only on 26th October 2007 - slightly over two weeks ago - it is too early to ascertain the overall impact of the withdrawal. However, I believe that, over time, the withdrawal of the DPS will encourage home-buyers to be more financially prudent, and dampen some of the speculative

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activities in the market. The withdrawal of the DPS should not unduly affect genuine home-buyers as they should be able to obtain home loans from banks.

In the longer term, the withdrawal of the DPS will encourage the property market to grow in a more healthy and sustained manner.

The Government will continue to closely monitor the property market to ensure that our prices are supported by economic fundamentals. In addition, the Government will ensure that there is sufficient supply to meet the demand for private housing. There is no need and we are not considering any new measure for the property market at the moment.

Mdm Ho Geok Choo (West Coast): Sir, three supplementary questions for the Minister. First, I would like to ask the Minister: through what means would the Ministry be considering the supply of properties to be increased? Second, whether MND would influence other agencies through fiscal policies, such as perhaps raising the reserve ratio or interest rates in response to managing the rising property prices in Singapore? Third, what specific plans does the Ministry have in the next three years to ease the rising property prices in Singapore?

Mr Mah Bow Tan: Sir, first of all, on the supply, there are two ways that supply comes into the market. One, of course, is from the private developers and, two, through Government land sales. Private developers would have to decide based on the land banking that they have undertaken, how much land to release and when. The Government land sales (GLS) programme is conducted twice a year. Every six months, we review the demand/supply situation and we put out a slate of lands for sale under the GLS, on the reserve list as well as on the confirmed list. For example, in the second half 2007 GLS programme that was announced not too long ago, we put up

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20 new sites just for private residential development alone, and these 20 new sites would yield something like 8,000 units, including EC sites. So, if there is a necessity and if demand continues to be strong, we will be prepared to release even more sites in the first half 2008 GLS programme.

Of course, we have to be mindful that we take not just a short term but also a medium and a longer term view of the market. We must therefore be mindful that we do not also create an over supply situation in the longer term.

Let me also remind Singaporeans that the stock of private residential units in the pipeline is not insignificant. As at the end of the third quarter 2007, there was a supply in the pipeline of about 65,000 units and this, in fact, was higher than the supply in the pipeline as at the end of the second quarter of about 56,000 units. Of the 65,000 units that are in the pipeline, either being built or with planning permission to build - in other words, the developers have already applied to build these units - approximately two-thirds of the 65,000 units, or around 40,000 units, are likely to be built and made available over the next three years. If Singaporeans are aware of these figures - and these are the numbers that we put out regularly and constantly - there is really no reason for Singaporeans to panic and to feel that there is a real shortage in the medium term.

Mdm Ho asked what is going to happen in the next three years, whether we are going to ease property prices. First of all, we make known what is the supply situation as far as we can see - what has been committed for building, what is likely to be built. We also put out information like how much land is going to be made available for the private sector to bid for. And, cumulatively, we hope to build up a store of information, of knowledge among the community, so that

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people will make informed decisions about purchases of property, rather than to be swayed by newspaper headlines or by property agents or by friends who are talking around the coffee table.

That is the position that the Government takes. We will provide information on the supply and demand situation. We will put out supply as much as we can, taking into account the medium and long term positions. Our bias is really not to over regulate or to interfere in the market if we have to. We want to make sure that the market grows in a healthy and sustained manner. We monitor the growth rate of the market in relation to the growth of the economy, and we make sure that growth is supported by economic fundamentals. I think that is the right way to go about it, and that is what we intend to do.

Of course, in so far as demand is concerned, if there is excessive speculative demand, then there is really no need for us to encourage it. We may look at ways in which to diminish it, and this is the context in which the decision to withdraw the DPS was taken. The DPS, while necessary 10 years ago in order to encourage people to come into the market, is no longer relevant today.

Mdm Ho also asked whether we will talk to the other agencies, like the MAS, to see how we can influence property prices. The various Government agencies do get together and we monitor the market very closely. And if there is a need for us to act, obviously, we would take the necessary measures. But, as I said in my reply, at this point in time, there is no need and there is no intention for us to take any further action.

Mdm Cynthia Phua (Aljunied): Sir, the Minister has given us very elaborate details of private housing. I would like to

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ask the Minister that in view of the property market now, what is the status of the new supply of HDB flats in the next three years. Because a lot of newly-wed couples are coming to see us and saying that they find difficulty in getting new flats.

Mr Mah Bow Tan: Sir, in the same way that we are monitoring the private housing market, we are also monitoring the public housing market. And we will similarly make sure that there is sufficient supply coming on stream in terms of public housing. But having said that, I must also caution that it is not a good idea for us to be building new HDB flats in order to cater for all the demand that is coming on stream.

Let me explain. Part of the demand that is coming on stream from newly-wed couples, for example, should rightly be met not only by new flats but also by going into the resale market. If we were to build only new flats in order to cater to this demand, then we are building up an over supply situation in the long term. Because, one day, there will be a need for these couples to sell off for whatever reason. Then there would be an over supply situation if we are not careful. So there is a need for us to balance - whether it is private housing or public housing - the supply/demand situation, not just in the immediate term but also in the longer term.

If the Member will recall, when we were building new flats to cater for demand, there was a lot of pressure for us to build new flats as there was a long queue by first-timers as well as second-timers. When we did so, eventually, when the market turned, what happened? The queue disappeared and we ended up with a stock of unsold flats, which took HDB many years to clear. So we have to learn a lesson from this. We have to make sure that when we build new flats, we take into account the longer term demand

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situation, and we also take into account the fact that one day, there will be a turnover of flats. But, just to assure the Member, yes, we are ramping up the new flat building programme. In fact, we have already announced that we are going to ramp up the programme very sharply this year and next year. But, at the same time, we have also made it very clear that this is not going to meet the demand from every single newly-wed couple wanting to own a flat, particularly when they want to own a flat in a desirable location. This is where we have to continue to educate our flat buyers.

Mdm Cynthia Phua: What is the number that will be built?

Mr Mah Bow Tan: For this year, under the BTO programme, we have announced that we are going to add another 4,000 units from now onwards to the middle of next year, which is much higher than the building programme that we have been undertaking up to now.

Mr Yeo Guat Kwang (Aljunied): Sir, I would like to clarify with the Minister. I think the HDB will definitely have the number of newly-weds who are actually waiting for their flats. By meeting their demand, I do not see how the HDB will over build and end up with a demand/supply problem.

Mr Mah Bow Tan: Mr Speaker, if every newly-wed couple bought a flat and stay there for the rest of their life, I do not think that would be an issue. But you and I know that that is not the case. After they have bought it, they would want to sell, they would want to downgrade or upgrade, and when their family grows big, they want to split up, and so on. At the same time, as there are new flats coming on stream under the HDB building programme, there are also resale flats in the market. We have 850,000 HDB flats in Singapore. Every year, some of these 850,000 flats are up for sale in the market. Some of this supply is being

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taken up by new flat owners, not just simply because there are no new flats available. Some of the resale flats are much more attractive partly because of their location, timing, size or for whatever reason.

So there are two ways for us to supply the newly-weds and, also, the second-timers. One is through new flats and the other is through the resale flat market. Our position is that we should continue to provide some new flats for the newly-weds but we should at the same time encourage them to also look at the resale market.