SALE OF HDB FLATS (Advertisement)

Dr Teo Ho Pin asked the Minister for National Development (a) why is the Housing and Development Board (HDB) advertising for the sale of its flats; (b) how many new flats are unsold to date; and (c) whether HDB will further liberalise its rules to allow flat owners more flexibility to sell, rent or use their flats.

Mr Mah Bow Tan: Mr Speaker, Sir, HDB introduced a number of new sales programmes last year, such as the Walk-in Selection for flats in the non-mature estates and the twice-yearly Balloting Exercise for flats in mature estates. It also suspended the Registration for Flat System, and it will switch over to the Build-to-Order system from next year. There is therefore a greater need for HDB to publicise each new launch, to keep the public informed of the availability of flats and the different application procedures for each programme. To do so more effectively, HDB has adopted new publicity measures, such as press advertisements and roadshows, in addition to the Internet and Teletext. This is to make information more accessible to prospective buyers and to minimise confusion to the public.

With the new sales measures and increased marketing efforts, HDB has been quite successful in its efforts to sell its unsold stock. As at 31st December 2002, HDB managed to sell a total of 10,000 flats in the non-mature estates through the various exercises for applicants on the RFS queue and through the monthly Walk-in Selection exercises. Today, it has about 12,000 units in the non-mature as well as the mature estates that are available for sale to the public. HDB will continue to sell them through Walk-in Selection and the twice-yearly balloting exercises. It will continue to assess the response to its on-going sales measures and monitor the demand for flats and the economic conditions, before deciding whether additional measures are necessary as well as finalising its building plans for 2003.

HDB flats are built to meet the housing needs of Singaporean households and are highly subsidised. Therefore, there is a need to have rules and conditions on the resale and subletting of these flats to ensure that they are used for owner occupation, and not for income generation. Nevertheless, we recognise that there is room for HDB to exercise flexibility with flats bought from the open market without any housing grant and with either a bank loan or no outstanding HDB market rate loan. Hence, with effect from 1st January this year, the rules governing the resale and subletting of such flats have been partially relaxed. This will give flat owners greater flexibility and leeway in the use of their flats. We will monitor the impact of these changes on other HDB residents and the social make-up of our public housing estates carefully, before reviewing whether there is scope for further liberalisation.

As for restrictions on the use of HDB flats, they are necessary to ensure that residents do not cause disamenity to their neighbours. Nevertheless, HDB does allow its lessees to conduct small-scale home-based businesses from their flats, subject to certain guidelines. In addition, under the Technopreneur Home Office Scheme, aspiring technopreneurs can use their HDB flats as their registered business address to conduct info-communication technology-related work. We are reviewing the restrictions on the use of HDB flats to ensure that they remain relevant in the current economic and social environment. Even as we do so, we will ensure that the residential nature and the good living environment of our HDB estates is preserved, and that HDB residents are not inadvertently inconvenienced as a result of businesses conducted by their neighbours.

Mr Steve Chia Kiah Hong: Sir, can the Minister explain why the HDB concessionary interest rate is higher than the private-sector bank interest rate, and why is the concessionary rate pegged above the minimum interest rate from the CPF Board at 2.5%, and how can it be considered concessionary when it is higher than the market rate?

Mr Mah Bow Tan: This has got nothing to do with the use of HDB flats, but I will answer the question.

First of all, what is a HDB concessionary interest rate? It is an interest rate which is available to those groups of HDB flat lessees who are first-time buyers, those who are not private property owners, are not breaching the income ceiling and so on. In other words, the HDB concessionary rate is a rate which will allow such buyers to own their first HDB flat or to own a second HDB flat as a result of upgrading, ie, it is meant to facilitate their ownership of a HDB flat.

For many years, the HDB concessionary rate has been below the private-sector rate. HDB's concessionary rate is independent of what the private property charges, and it has always been low. Why? Because it is pegged to the CPF rate. The CPF rate, as the hon. Member may know, is the average of the rates that the various banks charge their customers, but with a floor. In other words, if we take all the bank deposit rates and we average them out, that is the rate which the Government promises to pay to CPF account-holders, with one caveat: if the rate goes below 2.5%, the CPF, will still pay 2.5%. So, if the bank rates go up, CPF will pay a higher interest rate. If the bank rates go down, the CPF will pay a lower interest rate, but with a floor of 2.5%. It is an all-win and no-lose kind of a game, if hon. Members know what I mean, because with the guarantee of 2.5%, the CPF is paying higher than what the banks are able to pay. In this way, we ensure that the CPF savings of our citizens actually yield a good return in order to allow them to have sufficient funds for their retirement.

Why do I explain all this? Because HDB borrows its funds for the concessionary rate from the CPF. Whatever it pays the CPF for this concessionary rate, it will then pass on to flat lessees, plus a small margin of 0.1% for administrative cost. So, if the CPF rate is 2.5%, HDB will borrow from CPF at 2.5%, add 0.1% and charge the HDB lessee 2.6%. That is the reason why HDB cannot lower its concessionary rate, unless CPF also lowers the rate that it pays out to its depositors. I think that is not something that Singaporeans would like to see, because we want to see our CPF money enjoying a good rate of return. And currently it is enjoying a very good rate of return, much higher than what we can get from the banks.

For that reason, although the bank interest rates at the moment are lower than the concessionary rate, I am afraid that HDB is not in a position to be able to match the banks' rates. Indeed, for many years, when the bank rates were very high, the HDB concessionary rate was actually a very attractive rate, way below the banks' interest rate at that time. So we cannot have a situation when the HDB concessionary rates are low and the bank rates are high, to enjoy that concessionary rate and then, when the reverse situation is true, to require the HDB to lower its rates. I think that is not possible, because HDB is not in a position to do that for the reasons that I have cited earlier.

Dr Teo Ho Pin (Holland-Bukit Panjang): Sir, may I ask the Minister whether the HDB can consider adopting a daily walk-in selection system for all the available flats, so that all those eligible flat applicants can have more options and are able to select flats faster?

Mr Mah Bow Tan: Sir, I will ask HDB to consider that. The reason why we have staged various walk-in selection exercises for different estates is to make sure that the sale of the flats in these various estates is conducted in a way which can be properly managed. So, if you notice, for each walk-in selection exercise, HDB will conduct a publicity programme, put up proper tentage, put up all the proper administrative procedures in order to make it convenient for residents to apply for these flats. If we were to adopt the suggestion of the Member that we open up all the estates at once, then one way would be to just simply accept applications, say, in HDB hub. I think we would lose something in that process, but I will ask the HDB to consider that suggestion. So it may be possible for us, at a certain point in time down the road, to adopt that proposal. At this stage, where there are still a significant number of flats available in various estates, it might be better and more convenient to conduct separate exercises.

Mdm Ho Geok Choo: Sir, I would like to ask a question, but it is not related to this question. It is regarding HDB's policy for upgraders.

Mr Speaker: Can I suggest we leave it to some other day because we have got some other questions that we have to deal with?

Mdm Ho Geok Choo: Yes, Sir.