3-ROOM HDB FLATS (Building)

Mr Goh Choon Kang asked the Minister for National Development, in view of the substantial demand for 3-room flats, whether it will be more cost-effective for the Housing and Development Board to build rather than buy back such flats in the open market to sell them to the applicants.

The Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, there are about 242,000 units of 3-room flats, making up 35% of the stock of HDB flats. HDB stopped building 3-room flats since 1985 because of the poor demand. Applicants have continued to show a preference for the bigger flats. With an average of 12,000 to 13,000 units of 3-room flats transacted in the resale market each year and HDB's programme to progressively sell suitable 3-room rental flats to sitting tenants, there is sufficient supply to meet the demand for 3-room flats.

HDB has to be cautious not to create a situation of over-supply of 3-room flats. To build new 3-room flats will increase the already large pool of such flats. This may cause resale prices of 3-room flats to fall.

Mr Goh Choon Kang (Braddell Heights): Sir, does the Minister agree that there is an increase in demand for 3-room flats because more people are eligible to buy these flats, including those who are single and some statutory boards? Because of the strong demand, the resale price of 3-room flats has also increased. Right now, the average resale price of a 3-room unit is around $200,000. In time to come, will it be cheaper to build rather than to buy back such flats?

Mr Lim Hng Kiang: Sir, HDB continues to monitor the resale prices of 3-room flats. Right now, it is still more cost effective for the HDB to buy the units from the resale market and sell them to applicants at a hefty discount, rather than to build new flats, because it costs more to build new flats. HDB will continue to monitor the situation. If it costs us more to buy than to build, then, obviously, we will build. But the objective of making the 3-room flats affordable to Singaporean households will be maintained. The Government is committed to make sure that 90% of Singaporean households will be in a position to afford 3-room flats. I want to assure this House that however high the resale prices of 3-room flats may go, the Government will make sure that 3-room flats will remain affordable to at least 90% of Singaporean households.

Mr Goh Choon Kang: Sir, does it mean that the Government will increase the subsidy if the resale price goes up? At present, the subsidy is $50,000. Does it mean that the Government will revise this amount from time to time if the resale price goes up?

Mr Lim Hng Kiang: The Government will look at several mechanisms to make sure that the 3-room flats will continue to be affordable to at least 90% of Singaporean households. One solution will be to increase the subsidy. Other solutions may well include extending the mortgage loans and having other financial schemes to make sure that 3-room flats remain affordable.