DEMAND FOR HDB FLATS (Effects of retrenchment and reduced CPF contributions)

Dr Koh Lam Son asked the Minister for National Development whether the reduction of 15% of employers' contribution to the Central Provident Fund and the retrenchment problem will lead to a reduction in the demand for Housing and Development Board flats thereby depressing further the construction industry.

Dr Koh Lam Son asked the Minister for National Development whether tenants of Housing and Development Board flats who intend to purchase flats will be affected by the reduction in the Central Provident Fund contribution and the unemployment situation thereby affecting the Government's plan to achieve a 100% home ownership by 1990.

Mr Teh Cheang Wan: Mr Speaker, Sir, since Questions 5 and 6 by the Member for Telok Blangah are related, I will answer them together.

The HDB has already implemented various measures to help existing tenants and prospective home buyers to purchase flats. Tenants buying 3-room and 4-room simplified flats need only pay a 5% downpayment. They can also take up mortgage loans of up to 95% of the selling price and repay the loans over 25 years. Under the Ballooning Repayment Scheme, home buyers need only pay 75% of what the normal monthly repayments would have been in the early years of the loan. As the 15% reduction in employer's contribution translates into a 25% total reduction in CPF available for housing payments, the ballooning scheme will enable new buyers to pay for their flats as if the CPF deduction had not taken place. Thus, the 15% reduction in the employer's contribution to the CPF is likely to have little impact on the demand for public housing.

Sir, we are unable to tell to what extent the demand for public housing will be affected by retrenchment. However, there has been no significant drop in the number of new applications for purchase of HDB flats so far. In the first two months of this year, a total of 7,800 new applicants have registered with the HDB. If this trend con- tinues, the number of new applications for 1986 will be around 45,000.

Our public housing building programme is geared to meet demand. As of today, there are still more than 52,000 applicants waiting to buy HDB flats. The HDB's building programme is already committed in the next two years to meet this demand. There will therefore be no depressing effects on the construction industry in the next two years. Government's objective of achieving 100% home ownership by 1999 is unlikely to be affected.

Mr Yeo Choo Kok (Delta): Mr Speaker, Sir, could the 5% downpayment be further reduced or waived in view of the present economic recession?

Mr Teh Cheang Wan: Sir, the 5% downpayment is a very small sum.

Mr Jeyaretnam: Only to you!

Mr Teh Cheang Wan: Any home buyer who wishes to own a home should make some effort.

Dr Koh Lam Son (Telok Blangah): Sir, my supplementary question relates to Question 5. Is there a good response to the new scheme which was implemented in December 1985 for tenants of HDB rental flats to purchase flats?

Mr Teh Cheang Wan: Mr Speaker, Sir, the answer is yes, there is a good response. I think there are more than 2,000 tenants who have applied under this special scheme to own their flats.

Mr Jeyaretnam: Sir, will the Minister tell us how many persons who purchased flats have now applied to return their flats to the HDB because they are unable to continue with their instalment payments?

Mr Teh Cheang Wan: Sir, I think the number is very small. Offhand, I do not have the exact number with me. If the Member for Anson submits a written question, the answer will be given to him.

Mr Jeyaretnam: Tomorrow.

Mr Chiam See Tong (Potong Pasir): Sir, out of the 7,200 applicants, how many of them are first-time applicants, ie, those who are not upgrading themselves to a better flat?

Mr Teh Cheang Wan: Sir, again, I cannot give the figure offhand. Approximately, I would say 25% of the applicants are upgrading to bigger flats. Another 25% of the applicants are already residents in HDB estates but they are "split families", in other words, the children got married and have applied for new homes as they are moving out of their present homes. There may be another 10% who form their own family nucleus perhaps with their spouse who is not an HDB resident.

Dr Aline K. Wong (Changkat): Sir, could the Minister please clarify these figures for me? Does the projected number of new applicants of 45,000 for 1986 plus the figure of 52,000 applicants on the present waiting list constitute the total waiting list? The HDB has announced that to cater to this wasiting list, it intends to build 160,000 new units by the end of the decade. How did the HDB come to this figure? Has this total waiting list been taken into consideration in HDB's building programme of 160,000 units?

Mr Teh Cheang Wan: Sir, just now I said that there were 7,800 applications in the last two months. The projection is based on this trend. If this present rate of slightly under 4,000 a month continues, then we will reach the figure of 45,000. But we may or may not reach this figure.

Dr Ang Kok Peng (Buona Vista): Mr Speaker, Sir, I would like to ask the Minister whether the 2,000 applicants from the rental flats have indicated that the prices of the flats that they intend to buy are beyond their means?

Mr Teh Cheang Wan: Sir, the answer is no. If the price is beyond their means, they will not apply.

Dr Aline Wong: Sir, I do not think the Minister has answered the second part of my question. It has been announced that HDB will build 160,000 units by the end of the decade. My question was: based on the projection of the required housing need of 45,000 plus the existing waiting list of 52,000, has this total number of units been taken into consideration in the building programme of HDB of 160,000 units?

Mr Teh Cheang Wan: Sir, the proposed HDB's programme between 1986 and 1990 is 160,000. This is the proposed programme. The HDB's policy has always been to build in order to meet demand. The demand, judging from the waiting list, has always been reviewed every six months. If the demand is greater, such as between 1981 and 1985, the HDB in fact had to build more than the programme. If the demand comes down, then HDB will reduce the programme accordingly.