PRICING OF OLD HDB FLATS (Justification)

Mr Ch'ng Jit Koon asked the Minister for National Development what is the justification for pricing the old Housing and Development Board flats, that are being offered for sale to sitting-tenants, at current market value when the flats were built many years ago at a much lower cost.

Mr Lee Yock Suan (for the Minister for National Development): Mr Speaker, Sir, since the Sale of Flats to Sitting Tenants Scheme started 12 years ago, the Housing and Development Board has sold 20,000 dwelling units to sitting tenants at sale prices prevailing at the time of offer of sale. The HDB will continue to sell flats to sitting tenants at prevailing posted prices because this is a fair practice. Any property owner who sells his property will not sell at his old buying price but will charge the going market rate. There is no reason why the HDB should do otherwise. This is the fundamental difference between renting and owning a flat. If you rent a flat you do not suffer any losses if the flat goes down in value; neither do you enjoy any capital appreciation if the market price goes up.

All HDB flat-owners agree with the principle that the resale of flats should be at market value. This is evident from advertisements in the newspapers offering HDB flats for resale. In every case, the owner's asking price is much higher than the prevailing HDB selling price for a similar flat in the same housing estate. I am quite certain that sitting tenants who now purchase their flats at posted prices will ask for the going market price in five years' time if they should decide subsequently to sell off their flats. In fact, the prevailing posted prices of flats offered to sifting tenants are lower than the present construction cost of such flats. Most tenants know that buying over their existing flats is a good investment.

Sitting tenants who buy over their flats get a 99-year lease effective from the date of sale. In addition, they enjoy the following benefits:

(i) They do not have to pay the 20% downpayment if they have resided in their flats for two years or more;

(ii) They do not have to submit fresh applications for purchase which, in effect, means that they are exempted from the eligibility rules relating to income ceiling; and

(iii) They do not have to wait for their flats, and their flats are in localities which they have been used to.

HDB rental flats are, in fact, highly subsidized. Rentals paid by HDB tenants are not sufficient to cover the financing and maintenance costs and property tax of the fiats, For example, the rental for a 3-room improved flat outside the Central Ares rented to a Singaporean is only $82.50 per month whereas the interest, administrative and maintenance cost and property tax borne by the HDB amount to $142 per month. Not only is there nothing left over to pay for the original cost of the flat, but there is, in fact, a subsidy of about $60 per month per fiat.

Mr Jeyaretnam: Mr Speaker, Sir, as I understand the Minister of State, the justification is that if a private owner of an HDB flat wishes to sell it, he could sell it at the market price. First, is the Minister equating the HDB, which is charged with providing public accommodation at a cost that the citizens are able to bear, with that of a private owner? Secondly, is the Minister aware that the Ministry of Finance has offered for sale old flats in Neptune Court and Lagoon View at their cost prices when they were built, and thirdly, why is his Ministry pursuing a different policy from the Ministry of Finance?

Mr Lee Yock Suan: Mr Speaker, Sir, if the hon. Member had listened carefully to my answer, he would already have got the facts in answer to his, supplementary question. In the case of private owners, for example, if any Member here buys some property and subsequently sells it, he will sell it at the market rate, not at the price he bought it. For example, if the hon. Member himself has property to sell, would he sell it at the old price? Definitely not. So the principle is fair. But the point that I am making really is this. The sitting tenants have, in fact, been enjoying subsidized rentals for many years before buying the flats. Why should they further enjoy the benefit of capital appreciation? This appreciation should really go to the Housing and Development Board for its operations. The HDB is not making a profit overall. In fact, public housing is highly subsidized.

As regards the old flats sold by the Ministry of Finance, the question should properly be directed to the Minister for Finance.