CHANGES IN PUBLIC HOUSING REGULATIONS (Objectives)

Mr Leong Horn Kee asked the Minister for National Development what are the objectives of the recent announcements of changes in public housing regulations and whether he intends to introduce further changes in public and private housing policies.

Mr Lim Hng Kiang: Mr Speaker, Sir, in April 1997, the revised mortgage financing policy was announced to bring the mortgage financing policy for HDB flats closer to market practice and to rationalise the subsidies for the purchase of HDB flats. The revised mortgage financing package included measures such as credit assessment which would instil greater financial prudence and discipline among buyers of HDB flats.

In May 1997, new measures were announced to manage the demand for new HDB flats. There are already 150,000 applicants on the HDB queue and the waiting time for new HDB flats is becoming too long. The new measures are necessary to re-prioritise the demand for new HDB flats so that HDB can cater to applicants who are in more urgent need of the HDB flats, especially first-timers who are waiting for the HDB flat to set up their homes.

The recent announcements of changes addressed the two key issues in public housing policies. My Ministry would monitor the situation and would make adjustments to our policies where necessary.

Mr Leong Horn Kee: Sir, the first question I want to ask the Minister is a clarification again. There has been some misconception among the public that the resale levy is also applicable to people who have purchased flats from the resale market. Is that correct or not?

Mr Lim Hng Kiang: Mr Speaker, Sir, although we term it as a "resale levy", the resale levy is only applicable to those who want to buy a second flat from HDB. So the resale levy is not a capital gains tax. It is not a profit-sharing tax. It is not a levy on resale flat. The resale levy is only incurred if somebody has bought a first flat from HDB and wants to buy a second flat. So on the case that the Member has raised of somebody buying a resale flat, when he sells his flat it does not incur a resale levy.

Mr Leong Horn Kee: Sir, I want to ask the Minister a second question. There is a very popular request that this resale levy be modified to base on a reducing time scale method. For example, if an applicant has stayed in the flat for five years, the resale levy can be 20%, but if he has stayed for 10 years, maybe it can be reduced to 10%, and if he has stayed for 15 years, it may be zero percent. Can that suggestion be considered?

Mr Lim Hng Kiang: Mr Speaker, Sir, as I have explained, the resale levy is not a capital gains tax and therefore this idea of varying it depending on the term of the occupation of the flat does not apply. Those who buy a flat from the HDB for the first time enjoys a substantial subsidy. Those who buy a flat for the second time enjoy this same subsidy, which is not fair to all those who have not either enjoyed a subsidy or who have not enjoyed the second subsidy. So to make it more equitable, the second subsidy on the new HDB flat ought to be smaller than the first flat. Hence, the idea of a resale levy so that you will buy the flat from HDB and enjoy the first subsidy. The second time you buy a new flat, your subsidy ought to be smaller than the first subsidy.

Dr S. Vasoo (Tanjong Pagar): I want to ask the Minister why did HDB discontinue the premium scheme?

Mr Lim Hng Kiang: The premium scheme represents a very big loophole for the lessees of big flats. For example, under the resale levy scheme, lessees of a 5-room flat has to pay a 20% levy. But they are allowed to pay, also as an option, a 10% premium on the next flat. So when they buy another 5-room flat, they will only pay a 10% premium of the second flat which will amount to a little over $20,000. This represents a very big loophole and, therefore, owners of big flats will all opt to pay for the premium and, in so doing, pay a very small premium for the second flat. The second subsidy they enjoy, therefore, is not very much smaller than the first subsidy enjoyed by first-timers. To make it more equitable and to rationalise the subsidies for all first-timers and upgraders, we have decided to remove the premium so that lessees of big flats will pay the requisite levy when they upgrade to another flat.

Dr Vasoo: Will the Minister consider allowing those who have selected their flat but have not signed the lease agreement to opt for the premium scheme?

Mr Lim Hng Kiang: HDB has clarified the operational details of the policies and indeed those who have selected their flat but are waiting for the keys to their flat up to this quarter will be allowed to come under the old scheme. This is made known in the press release and HDB will take out a full page advertisement in the Straits Times to explain to Singaporeans that this policy would not affect those who are already waiting for their flat or those who are selecting their flat for the second quarter of this year. So they will not come under the new policies. These new policies will not affect them.