HOUSING AND DEVELOPMENT BOARD (Review of policy on 3-room flats)

Dr Lily Neo asked the Minister for National Development whether there is a need to review the HDB policy on 3-room flats in view of the demand now for such flats.

The Minister for National Development (Mr Mah Bow Tan): Mr Speaker, Sir, HDB stopped building 3-room flats since 1985 because there was already a sufficient number of 3-room units in the resale market to meet the demand from Singaporeans, who increasingly preferred the larger flat types.

Nevertheless, to meet the housing needs of lower-income families and to ensure that there are smaller flats available to them at affordable prices, HDB has a scheme to buy back 3-room flats. Under this scheme, HDB buys 3-room flats from the open market at market prices and offers them for sale at discounted prices, so that they are affordable to 90% of Singaporean households. On average, about 90 of the 150 units of 3-room flats that HDB offers for sale each month are taken up.

For those who are not eligible for the buy-back scheme and want a 3-room flat, they can opt for one from the open market, where there are more than 200,000 such units available.

There is no shortage of 3-room flats in the market. The volume of resale transactions for 3-room flats has remained healthy and steady in the last few years. Hence, my Ministry does not intend to change HDB's policy on 3-room flats. We will nevertheless continue to monitor the supply and demand for 3-room flats.

Dr Lily Neo (Jalan Besar): The Minister said earlier that HDB stopped building 3-room flats in 1985 as a result of lower demand for smaller flats. Was it not announced then that HDB was ready to build 3-room flats again if demand rose? Is the demand for 3-room flats not escalating as a result of more families downgrading, singles buying 3-room flats and JTC's purchase to house its foreign workers under the SHIFT Scheme?

Mr Mah Bow Tan: We do not detect that there is a major increase in the demand for 3-room flats. As I indicated in my reply just now, in fact, we have more than sufficient 3-room flats in the market, both resale, for those who want to buy a resale flat, as well as new, meaning the buy-back flats. HDB buys back and sells at a discounted price something like 150 such flats a month. Not all of them are taken up. So, I do not agree with the Member that there is a very sharp increase in the demand for 3-room flats.

Dr Lily Neo: Sir, am I right to say that 3-room flats are selling at least $20,000 above valuation, and one was even sold at $50,000 above valuation? Does this not indicate that demand outstrips supply? Is this not causing unhealthy and inflated public housing prices? And will this not affect other types of public housing prices in the end? How would the Minister respond to this?

Mr Mah Bow Tan: HDB does monitor 3-room resale flat prices. So far, the indications are that there is no such sharp increase in 3-room flat prices. The examples that the Member mentioned just now may well be true. But I would suggest that they are probably anecdotal, because we do monitor 3-room flat prices on a regular basis, and they have been steady over the last few quarters, and they have been rising or falling marginally, but in tandem with the rest of the resale market. So, our figures do not suggest that there is this sharp spike in 3-room resale flat prices.

Dr Lily Neo: Sir, may I ask the Minister whether it is not the Government's present policy to encourage Singaporeans not to over-invest in property? Therefore, will this demand for smaller flats be increasing? And why is the Minister not promoting and facilitating this policy, and instead choking the supply of these 3-room flats?

Mr Mah Bow Tan: No, we are not choking the supply. In fact, as I took pains to explain, the supply is there. If one wants a 3-room flat tomorrow, he just walks into an HDB sale office and he would be able to get one. So, there is really no question of a shortage of supply.

Mr Low Thia Khiang (Hougang): Sir, does the Minister agree that whilst the HDB buys back 3-room flats and sells them to eligible applicants, it will mean that applicants cannot apply directly to HDB for new flats? For those who wish to downgrade but do not want to buy a flat from the open market, they cannot apply directly to HDB for a 3-room flat, because HDB is not building any more new 3-room flats. The Minister mentioned that the HDB cannot detect any demand for HDB 3-room flats. Can I suggest that HDB announce its intention to build 3-room flats and open it to applicants? Then, the Minister can see the demand and justify his statement.

Mr Mah Bow Tan: As for the last part of the question, as I said, we have got 200,000 3-room flats in the open market, and we are buying back 3-room flats regularly. Then we re-sell these 3-room flats at discounted prices. So, anybody, as he suggested in the first part of his question, who wants to buy a 3-room flat at a discounted price, not at resale flat price, can go to HDB and apply. And if he is eligible, he can get one. There are many 3-room flats available in the market. So, where is the shortage?

Mr Low Thia Khiang: Sir, I am talking about a new 3-room flat built by the HDB for sale, rather than a flat which was bought back by the HDB from the open market and for sale.

Mr Mah Bow Tan: I really do not see why HDB should build new 3-room flats when there are so many available in the market, whether it is for sale at open market prices or for sale at discounted prices. I think it is quite ridiculous for HDB to start building new flats and then gauge the demand. It does not make economic sense at all. We stopped building in 1985 precisely for that reason. The demand was no longer there. Now that there is a demand for 3-room flats - I am not denying that - there is a way for us to satisfy that demand in a way which is most sensible for the total housing market.

Mr Low Thia Khiang: Is the Minister saying that if the HDB is going to build 3-room flats, the selling price will be the same or higher than the current discounted price that the HDB bought the flat from the open market for sale to applicants?

Mr Mah Bow Tan: Sir, HDB does not build new 3-room flats. So there is no comparison.

Dr Lily Neo: The Minister just said earlier that there is a demand for 3-room flats. May I ask the Minister whether it was not his assurance, announced during the Budget Statement debate, that his Ministry had made it a policy to make housing more responsive to the needs of people and enable Singaporeans to purchase a flat according to their budget? May I now call on this to be fulfilled?

Mr Mah Bow Tan: Yes, we have made that commitment and we fully intend to meet that commitment. We did not say that affordable housing has to be a new 3-room flat. A resale 3-room flat, which is bought back from the open market and sold at an affordable price, will also make such housing available to people who want a 3-room flat. There are other choices, of course. But since the Member is concentrating on 3-room flats, my answer refers to such flats. There are also 4-room and 5-room flats which are affordable. But if a person so chooses and wants to have a 3-room flat for whatever reason, such flats are readily available. So, I do not see what the problem is.

Dr Lily Neo: May I ask the Minister whether he would consider allowing singles to also purchase 4-room HDB flats, instead of just 3-room HDB flats, so as to ease the demand for 3-room flats and, at the same time, giving more choices to singles for purchase of a flat?

Mr Speaker: Dr Neo, I think that is a different question altogether. I do not think you need to answer that question, Mr Mah. It is on 4-room flats. It is not on 3-room flats.

Mr Ang Mong Seng (Hong Kah): Sir, talking about buy-back policy, I just want to confirm with the Minister whether HDB can now buy back any 3-room flat from the market.

Mr Mah Bow Tan: Sir, it is not a new policy. It is a policy which has been in place for quite a while. HDB has been buying back 3-room flats from the open market. So this is not a new policy. It is a policy which HDB has followed consistently. They have actually been selling such flats in the open market for quite some time as well.

Dr Lily Neo: Mr Speaker, can I seek your indulgence? My question earlier was related because I was referring to how to address the shortage of 3-room flats. Therefore, I asked about whether HDB would consider allowing singles to buy 4-room flats as well.

Mr Speaker: I relent this time. She asked a question, Mr Mah.

Mr Mah Bow Tan: I was going to answer the question, Mr Speaker, because I think there is some relation. But, really, the question pertains to our policy on allowing singles to purchase HDB flats, whether it is 3-room, 4-room or 5-room. We do not, at the moment, allow singles to purchase 4-room flats unless they are jointly purchasing with another single under the Joint Singles Scheme. But if they are on their own, they can only purchase a 3-room flat. So, that is the singles policy.

As to the other limb of the Member's question about shortage of 3-room flats, as I tried to explain earlier, I do not believe that there is a shortage of 3-room flats in the market. Of course, if the question is whether there is a shortage of new 3-room flats, the answer, obviously, is yes, because we have not been building 3-room flats.

Dr Lily Neo: Sir, can I seek your patience for one more question? Can the Minister assure this House that the scheme to help the lower-income families to own their 3-room HDB flats will not be further disadvantaged? Can he assure this House on that, and that the prices of the 3-room HDB flats are not increasing?

Mr Mah Bow Tan: Yes, I can assure the Member that we will continue to make 3-room buy-back flats affordable to the lower-income households.

Mr Ong Ah Heng (Nee Soon Central): Sir, in my constituency, there are a lot of 3-room flat residents. When they upgrade to 4-room flats, they find it very difficult to sell their 3-room flats. At the end of the day, HDB buys them back and rents them to Jurong Town Corporation (JTC), and JTC, in turn, rents them to foreign workers. My residents have complained that sometimes there were so many foreign workers staying in their block. All these were unsold 3-room flats. Could certain regulations be imposed on 3-room flats rented to JTC? We should not rent all these flats to foreign workers. Maybe we could rent these flats to those who really need 3-room flats at a further discount.

Mr Mah Bow Tan: I think the Member is referring to the SHIFT programme, which is administered by Jurong Town Corporation. Under this scheme, what JTC does is that it rents, on long lease, a certain number of flats from HDB, and then after that, it subsequently sub-rents these flats to people who come here to work in Singapore, on either work permit or on employment pass. So, who these people are, we leave it to JTC. But whoever they rent the flats to must continue to abide by the rules and regulations of HDB, whether it is in noise standards, keeping of cats, or sub-letting of flats, etc. So I do not see what the problem is. So long as we make sure that the sub-tenants of JTC comply with the HDB rules and regulations, then I do not think that we ought to be unduly worried.