NEW HDB FLAT PRICES

NEW HDB FLAT PRICES: 15.

Dr Lim Wee Kiak asked the Minister for National Development (a) how much have new HDB flat prices increased over the last five years; (b) whether the current construction boom will result in further escalation of new HDB flat prices; and (c) whether the Ministry is reviewing the $8,000 household income limit for the purchase of new HDB flats.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, property prices in Singapore have increased in recent years, supported by strong economic fundamentals. Prices of private residential property have risen by 23% over the last five years, while HDB resale flat prices have increased by 11% also over the last five years since 2002. In line with the increase in resale flat prices, new flat prices are on average about 8% higher today, compared to 2002.

Notwithstanding the price changes, new HDB flats continue to be sold at subsidised prices. Just as first-time flat buyers of HDB resale flats enjoy a housing grant of $30,000 or $40,000, depending on whether they live near to their families, those who buy new flats from HDB also enjoy a discount off the equivalent market price. The difference between what a buyer pays for his new flat and what it is actually worth in the market is the subsidy provided by HDB to him.

As the selling prices of new HDB flats are pegged to resale prices and not based on costs, the increased activity in the construction industry recently will not directly impact on the prices of new HDB flats.

Sir, the Government remains committed to making home ownership affordable to the vast majority of citizen households, especially first-timers and low-income families. Despite the increase in new flat prices, new HDB flats are still affordable. On average, new flat buyers today use about 20% of their monthly household income to service their mortgage loan. This is below the normally accepted ratio of about 30%-40%. More than 70% of new flat buyers are able to service their housing loans entirely with their CPF contributions.

The MP has also asked if HDB will be reviewing the household income ceiling of $8,000 for the purchase of subsidised new flats.

At the current $8,000 income ceiling, about eight in 10 Singaporean families are eligible to buy subsidised public housing. Higher income households exceeding the income ceiling have many other housing options, including the purchase of resale HDB flats.

First-timer families with household incomes of up to $10,000 can also consider buying new Executive Condominium (EC) units with a housing grant of $30,000. As the vast majority of Singaporean families qualify for subsidised public housing under the current rules, HDB has no plans to raise the income ceiling. However, HDB recognises that there may be cases deserving special consideration and will exercise flexibility accordingly.

HDB will continue to monitor and review its policy on income ceiling, to ensure that the majority of citizen families can continue to enjoy subsidised public housing.

Er Lee Bee Wah (Ang Mo Kio): Mr Speaker, Sir, I have two supplementary questions for the Minister. In relation to the recent increase in the construction cost, will there be a slowdown in the rate of the Lift Upgrading Programme? The other question is this. Recently, I was asked by the consultant to cut down on the provision because the tender returns exceeded the budget. I would like to ask the Minister whether there will be an additional fund provided, rather than to cut down on the provision, as we have already made known to the residents.

Mr Mah Bow Tan: Sir, on the Lift Upgrading Programme, the Government has, as she knows, committed to completing the Lift Upgrading Programme for all eligible flats in Singapore by 2014. At the moment, the programme is on track. Yes, some of the costs have gone up, but I do not envisage that we will need to go past this target date of 2014 that we have committed to.

As for tender prices, I think it is prudent for us, when the tender prices exceed the budget, to go back to the drawing board and see in what way we can cut down on the scope of works. This is not unusual. We do this all the time. But, of course, where the scope of work cannot be pruned or cut down and the budget is still exceeded, then, obviously, we will have to look into making further budget provisions. But I think it would be wise and prudent of us to rework the project to look at ways in which we can save, rather than to automatically accept whatever tender comes up in the tender process.

Mr Zainudin Nordin (Bishan-Toa Payoh): Sir, the Minister has mentioned that in the last five years, HDB prices have gone up by 11%. I just wanted to know whether the measurement is based on the reported resale price or the price which buyers normally buy. There is always an above-valuation value. Are those values captured? Recently, I also heard that the prices above valuation have gone up quite significantly. Is this a common practice or is this considered as normal?

Mr Mah Bow Tan: The 11% figure that I cited, which is the increase in HDB resale flat prices from 2002 to 2007, yes, that is a reflection of the total price which includes the cash over valuation price. So, in other words, it is the actual transacted price and not the valuation price.

The cash over valuation, or what is called the CoV in the market, is not always positive. In fact, in the earlier years, in 2002 and even before that, the CoV was actually negative. Buyers were not prepared to pay the valuation price. They were only going to pay a price below valuation. But, today, it is a seller's market. So, the cash over valuation has turned positive. It is part and parcel of the market process. Valuations are done on a general basis by a panel of valuers. Sometimes, depending on the market situation and depending on the individual preference of buyers, they may be prepared to pay a lot more than the valuation. Hence, you have the phenomenon of a very positive cash over valuation situation today. The CoV actually goes up and down, depending on the state of the HDB resale property market.