PRIVATE CONDOMINIUMS AND HDB FLATS (Increase in sale prices and impact on affordability)

Mrs Lim Hwee Hua asked the Minister for National Development whether the average compounded increase in (a) private condominium, (b) HDB direct purchase and (c) HDB resale prices over the last (i) 5 years and (ii) 10 years has outstripped the increase in wages over the same periods, and if so, whether the resultant impact on affordability is addressed by the planned land sales.

The Minister of State for National Development (Dr John Chen Seow Phun) (for the Minister for National Development): Mr Speaker, Sir, as at the second quarter of 1999, the increase in monthly wages of workers compared with the price increase for the various categories of housing types over the last 5 and 10 years are in the table (Cols. 397-398) which I shall now ask the Clerk of Parliament to circulate to Members. My staff told me that they have given the table to Parliament. Table - Trends of Wages vs Property Prices (Cols. 397-398)

Mr Speaker: Please continue while we get the table.

Dr John Chen Seow Phun: Sir, as shown in the table, the price increase of new HDB flats is generally in line with wage increases over the same periods. This is because HDB takes into account wage increases when adjusting prices of new flats. In this way, the Government ensures that new HDB flats remain affordable to the majority of Singaporeans.

In the absence of the table, maybe I will just go through the table which is very simple. Let me say that the monthly wage increase over the last five years is about 6% per annum. If it is over the last 10 years, it is about 7% per annum. Whereas for new HDB flat prices, the increase over the last 5 years is about 5% per annum, as opposed to 6% for the increase in monthly wages. And the increase over the last 10 years is 7% per annum, as opposed to 7% per annum increase for the monthly wages.

For resale HDB flat prices, the increase over the last 5 years is 7% per annum, and the increase over the last 10 years is 12% per annum. For private condominium prices, the increase over the last 5 years is 0% per annum, and the increase over the last 10 years is 9% per annum. Sir, as I have said earlier, the Government ensures that new HDB flats remain affordable to the majority of Singaporeans.

On the other hand, prices of resale HDB flats are determined by market forces. Resale flats cater mainly to HDB upgraders who have the benefit of capital gains from the sale of their previous HDB flats. First-timers who wish to purchase resale flats can apply for the CPF Housing Grant Scheme. The grant, which is as much as $40,000 for those applying to live near their parents, can be used to pay for the downpayment of the resale flats. In this way, the Government helps to enhance the affordability of resale flats for first-timers.

As for private condominiums, current prices are at the same level as 5 years ago. Over the last 10 years, as I said, condominium prices have increased at about 9% per annum, which is slightly higher than the corresponding wage increase of 7% per annum.

Prices and affordability of private residential properties are determined by the market. Government cannot set prices for private property, like new HDB flats. However, Government can and will ensure that there is sufficient land set aside for private housing to meet the medium term demand. This is done under the regular Government land sales (GLS) programme. The Government will also ensure regular release of comprehensive and accurate information on the private property market to enable buyers and sellers to make informed decisions. In this way, the Government can contribute to a stable property market, where prices generally move in line with prevailing economic conditions.

Mrs Lim Hwee Hua (Marine Parade): Sir, I have two supplementary questions for the Minister of State. Firstly, what would the Minister of State consider to be entry level housing, and whether the increase in the selling prices of such housing has actually kept pace with the increase in wages for the relevant segment of the population?

Secondly, given the faster increase in prices of resale flats, whether the revision of the income ceiling for eligibility for direct purchase from HDB has taken this into account, and whether these have been made in tandem with the wage increase for first-timers; specifically, whether at least the same percentage of people is eligible with each revision of the income ceiling?

Dr John Chen Seow Phun: Sir, for entry level, if you look at the 4-room flats and with the average income household of, say, $2,700, it would usually take about 4-5 years for the couple to be able to pay the 20% downpayment for the flat, and thereafter paying only about 17% of their household income for the monthly mortgage, and that 17% can be paid fully through their CPF contributions. Therefore, we can say that it is actually very affordable. The entry level is actually quite low.

As for the ceiling, we have revised the ceiling over the years. Let me give the Member some indication of the ceiling revision. In 1989, it was about $5,000 for 3-, 4-, 5-room and Executive flats. For an extended family, it was $8,000, ie, 3-tier family which includes the grandparents. In 1991, we revised it to $6,000; in 1992, $7,000; 1994, $8,000. In 1995, with the introduction of the Executive Condominiums (EC), we raised it to $10,000, for applicants to qualify for EC. In 1996, we had the anti-speculation measures, and followed by the economic crisis. So, since then, there was no revision for the ceiling.

Let me just give the Member some statistics to put the issue in perspective. If you look at applicants who apply for 4-room and 5-room flats, which is in the range of $7,000-$8,000, it is less than 1% of the applicants who apply for 4-and 5-room flats and who are in the monthly income range of $7,000-$8,000. It shows that the large majority are basically up to $5,000 monthly income, which means that the income ceiling is pretty generous. In fact, the $10,000 income ceiling covers 92% of the Singaporean household income. I would say that if you look at the long-term target of the proportion of Singaporeans who own public housing versus private housing, it is 75% versus 25%. So, I would say that at this income ceiling, it is really very generous.