POLICE OPERATING PROCEDURES (Review in transportation of suspects)

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POLICE OPERATING PROCEDURES:

(Review in transportation of suspects): 13.

Ms Indranee Rajah asked the Minister for Home Affairs what is the outcome of the police review of its operating procedures in relation to the transportation of suspects which was conducted after the escape from custody of the two suspects, Tok Poh Oon and Thangavelu Velu.

The Senior Minister of State for Home Affairs (Assoc. Prof. Ho Peng Kee) (for the Minister for Home Affairs): Sir, first, let me assure Ms Indranee Rajah that the Ministry of Home Affairs takes the safe and secure custody of accused persons very seriously. Police and the other enforcement agencies have thoroughly reviewed each incident and have improved their operating procedures to prevent recurrences of such incidents.

The two incidents involved Thangavelu Velu and Tok Pok Oon. In the case of Thangavelu Velu, he was an illegal immigrant who was, together with 30 other accused persons, being escorted on 8th June to the Subordinate Courts. The escorting officer had released Thangavelu's handcuffs when another accused person, who was in a chain handcuff with nine other persons, requested to switch positions to facilitate the carrying of that other person's bulky luggage. After making the switch, the ICA officer unfortunately did not put the handcuff back on Thangavelu. After Thangavelu alighted from the vehicle, which was parked in front of the ramp leading to the basement lock-up at the Subordinate Courts, he fled.

As for Tok Pok Oon, he was a remandee at the Queenstown Remand

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Prison, who on 10th June, managed to escape from Police's custody after his return from the Subordinate Courts. He was brought to the Subordinate Courts to answer to a charge against him by the National Environment Agency. I am unable to say more on the circumstances of his escape as the case against Tok for escape from legal custody is still pending.

But, Sir, in reviewing these cases, we have identified some weaknesses in our standard operating procedures. Police and the other enforcement agencies have already taken steps to rectify them. A key weakness was that different categories of persons in custody wore the same attire, regardless of their status. To rectify this, Prisons has implemented a colour coding scheme, so that those who are charged with a capital offence as well as those who are required to return to Queenstown Remand Prison after their court appearance would be clearly differentiated by their attire. In this way, the escorting officers will be able to quickly and easily identify the different classes of persons in their custody and take the necessary security measures to prevent escapes.

In the case of Thangavelu, the bus that ferried him and other accused persons that day was not able to enter the secured area of the Subordinate Courts due to infrastructural constraints. Police has since tightened this procedure. Now, enforcement agencies transporting persons in custody to the Subordinate Courts are required to use smaller vehicles that would enable the unloading of accused persons to take place within the secured area.

Sir, our investigations have revealed that human error was a key contributing factor that led to the escape of Thangavelu and Tok. The officers concerned are currently under investigation. If the officers are found to be

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negligent, they could face internal disciplinary action or prosecution in Court.

Other than plugging the weaknesses that these two cases have surfaced, MHA and the Home Team agencies will continue to study how the process of moving persons in custody can be further strengthened in areas such as operational procedures, equipment, training and supervision.

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DROWNINGS OF YOUTHS: 14.

Mr Alexander Chan Meng Wah asked the Minister for Community Development, Youth and Sports given the recent reported drownings of youths during recreational swimming activities, (a) whether the Minister can provide statistics of deaths by accidental drownings for the past several years; and (b) whether there is a trend towards more such drownings.

The Minister for Community Development, Youth and Sports (Dr Vivian Balakrishnan): Sir, there was an average of 17 cases of drowning per year between 2001 and 2004. 41% of these drowning incidents occurred at the sea or near beaches. A further 13% occurred in rivers while swimming pools and reservoirs accounting for 10% each. Every single death by drowning is one too many. What is especially tragic is that each one is potentially preventable.

Therefore, a holistic and comprehensive approach is needed to address this problem. MCYS and the Singapore Sports Council (SSC) are working with the relevant agencies which include MOE and the Ministry of Health to do three things. First, to enhance public education about the danger of swimming in inappropriate locations. Second, to increase the safety of swimming facilities. And third, to encourage more young people to learn how to swim.

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A childhood injury prevention programme under the Health Promotion Board of the Ministry of Health has been emphasising water safety in its preventive and public education outreach programmes. Some of you may have seen the advertisements carried in the newspapers over the past couple of weeks.

For 2005, the theme is "safety-at-play". This is aimed at disseminating swimming safety tips to parents, caregivers and children through direct public educational programmes, such as road shows, exhibitions, educational public shows, seminars, talks, interactive exhibits and games activities. The Health Promotion Board has also published advertisements.

The SSC has implemented various water safety measures at its public pool facilities. For instance, it displays safety regulations prominently and advises pool users to exercise proper care. We also have in place emergency rescue plans, daily inspection of the pools and the safety equipment, rules on the ratio of students to swimming instructors as well as ensuring that there are adequate trained lifeguards on duty at all times.

By the end of August, every swimming pool will have a defibrillator and staff would have been trained on how to use it. I have also asked the SSC to work with the relevant agencies and partners, including the Singapore Lifesaving Society to consider other measures to improve swimming safety in private pools and other water bodies.

At the same time, SSC is also looking at encouraging more youths to learn how to swim. If a person is able to swim, the chances of him drowning are that much less. The SSC is working closely with the MOE to encourage schools to make greater use of the SSC's pools for swimming lessons and we will also be

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working closely with the Singapore Swimming Association to encourage more Singaporeans to take up swimming.

My Ministry and SSC will work with all the relevant stakeholders, both in the Government and people sector, to adopt a holistic and comprehensive approach to prevent this needless tragic death.

3.00 pm

Mr Speaker: Order. End of Question time.

[Pursuant to Standing Order No. 22, Written Answers to Question Nos. 15, 17, 21 and 27 on the Order Paper are reproduced in the Appendix*. Question Nos. 16, 18-20, 22-26 and 28-33 have been postponed to the sitting of Parliament on 20th July 2005.]

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POLICY CHANGES AFFECTING THE PROPERTY MARKET:

(Statement by the Minister for National Development) Mr Mah Bow Tan: Mr Speaker, Sir, over the past few years, the Government has implemented several key policy changes related to the property market. These included adjustments to the CPF Ordinary Account contribution rates and cash downpayment requirements, and limiting the amount of bank financing for the purchase of private residential properties. We also capped the amount of CPF that could be withdrawn to purchase properties using bank loans.

Such re-tuning of policies from time to time is necessary to ensure their continued relevance to broader social and economic objectives. These objectives include enhancing Singapore's cost competitiveness, ensuring retirement

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adequacy for an ageing population, and maintaining a healthy financial sector.

These changes in CPF policies, mortgage financing rules, and policies relating to home ownership affect the property market, in one way or another. As such, we need to ensure that the rules set will foster the free and undistorted functioning of the property market. It is in our interest to ensure that the property market is stable and that it is consistent with economic fundamentals, as it affects home ownership, asset values, retirement savings and the health of the banking sector.

So far, the various CPF, home ownership and mortgage rules have been introduced at different times to fulfil various objectives. Hitherto, we have not comprehensively reviewed all of them together. We have thus decided to do a holistic review of various property-related policies, and implement them as a package. This way, we can provide stakeholders in the market with a complete picture, and ensure that the measures are consistent with one another.

The review has covered three major areas, namely, first of all, caps on bank financing for residential properties; secondly, limits on the use of CPF for property purchases; and, thirdly, restrictions on foreign ownership of lands and properties.

Let me stress that the purpose of the changes is neither to boost nor depress the property market. Rather, the review is to improve structural rules in the above areas to improve the functioning of the property market, and to better achieve broader economic and social objectives in today's context. Some of the measures introduced will have a positive effect on the property market, while others may have a dampening effect. The net effect will depend on many factors, many of which are beyond these measures. We

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believe that with prudent and realistic decisions, the market will find a new equilibrium that will be based on economic fundamentals.

The Government Ministries and agencies involved in the review include the Ministries of Law, Manpower, Trade and Industry, and National Development, as well as the Central Provident Fund Board, Monetary Authority of Singapore, Economic Development Board, Singapore Land Authority, Housing and Development Board, and Urban Redevelopment Authority.

I will now proceed to elaborate on the measures that will be put in place in the next few months. Details of these policy measures will be provided by the respective Government agencies separately.

** Mortgage and Financing Policies **

Raise LTV limit for housing loans from 80% to 90%

Sir, let me first deal with our mortgage and financing policies. The first of these measures is the raising of the Loan-to-Value (LTV) limit for housing loans. MAS introduced the 80% LTV limit for bank-originated housing loans in 1996, together with the Government's package of measures to cool the private property market. The 80% LTV limit was intended not only to counter the market overheating at that time, but also to ensure sound bank lending practices across property market cycles. The 20% payment by borrowers provided a buffer for banks in the event of a property downturn. This was particularly important as bank loans at that time ranked second behind borrowers' own CPF claims on mortgaged properties.

In 2002, the priority of claims over properties was changed so that banks now held the first charge for the property ahead of CPF. It has been three years

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since, and the market has had sufficient time to adjust to this change. Currently, over two-thirds of banks' outstanding housing loans are secured by first claims over properties. MAS is now ready to increase the housing financing limit to 90% of the property value. The remaining 10% which the purchaser has to pay will continue to deter over-borrowing by purchasers and minimise potential losses by banks arising from borrower default. However, to mitigate the increased risk that banks will take, MAS will require banks to hold more capital against housing loans which exceed 80% of the property value. MAS will also expect banks to apply rigorous internal credit evaluation criteria before extending high LTV loans.

In some countries, mortgage insurance is available to insure lenders against the risks of high LTV loans. MAS is prepared in-principle to consider mortgage insurance as an alternative to the capital charge to mitigate the risks of high LTV loans. However, mortgage insurance is not yet available in Singapore. MAS will be studying its viability here and how best to regulate mortgage insurers.

HDB will similarly raise the loan limit for its flat buyers from 80% to 90%. The actual loans to be granted will be subject to the banks' and HDB's credit assessment and mortgage financing policies.

Limit minimum cash payment required for residential properties at 5%

Sir, another revision to the housing loan rules in 2002 was the reduction of the cash payment for private residential properties to 10% of its value, down from 20% previously. The Government will now lower the cash payment for private residential properties from 10% to 5%. This means that a purchaser who is granted a 90% loan for his housing unit can pay his remaining 10% through a combination of at least 5% of the

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property value in cash, and the remaining with CPF.

For HDB flats financed with bank loans, the payment to be paid in cash is currently 4% and it is slated to increase gradually to reach 10% by the year 2008. In line with the reduction in the cash payment for private residential properties to 5%, the Government will adjust the cash requirement for HDB flats financed with bank loans to 5%, instead of to 10% that was initially planned.

The raising of the LTV limit will take immediate effect and will apply to all properties purchased from today. The 5% cash requirement for private properties will take immediate effect, while that for HDB will apply to flats purchased from 1st January 2006.

These changes will give consumers a wider choice of financing options when purchasing a property. However, I urge property buyers to continue to exercise prudence in their home purchase and financing decisions, and to ensure that they can comfortably afford the expenses involved.

Central Provident Fund Policies

Sir, I will next deal with Central Provident Fund policies. The CPF Board will streamline its policies to increase flexibility for the use of CPF savings to purchase property, while ensuring that adequate sums are put aside for retirement needs.

Reduce Minimum Lease Period (MLP) for use of CPF savings

The first policy change is to allow the use of CPF savings to purchase private residential properties with shorter leases. Currently, CPF members are allowed to use their CPF savings to purchase private

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residential properties only if these properties have remaining leases of at least 60 years. This is to ensure that the lease can last the average life expectancy of buyers. This policy intent is still valid, but older members can also meet this objective when they choose to buy properties with shorter leases. The Government has therefore decided to allow CPF members to use their CPF savings to purchase private residential properties with remaining leases of 30 to 60 years. CPF withdrawal limits for the purchase of such properties will be pegged to the age of the purchaser as well as the remaining lease of the property. CPF will provide further details shortly. This policy change will take immediate effect.

Allow non-related members to jointly purchase private residential properties using CPF savings

The second change pertains to the purchase of private residential properties by non-related members. Currently, CPF Board does not allow non-related CPF members to use their CPF savings to jointly purchase private residential properties. However, non-related singles have been allowed to use their CPF savings to jointly purchase HDB flats. To align the treatment of private residential properties with HDB flats, the Government has decided to allow non-related singles to use their CPF savings to jointly purchase private residential properties.

This policy, which will take immediate effect, is expected to benefit singles who have been hitherto constrained by CPF regulations to share purchases of private residential properties.

Simplify the Available Housing Withdrawal Limit (AHWL)

The third change to CPF policies is to simplify the Available Housing Withdrawal

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Limit (AHWL). The AHWL limits the amount of CPF savings that CPF members can withdraw for housing purchases. Currently, for CPF members below the age of 55 years of age, the AHWL is set at either 80% of the gross CPF savings in the Ordinary Account and Special Account in excess of the prevailing Minimum Sum, or the available Ordinary Account balance after setting aside the Minimum Sum cash component, whichever is lower. However, the current AHWL is complex and difficult for members to understand. Therefore, the CPF Board has simplified the requirement to set the AHWL only to the available OA balance after setting aside the Minimum Sum cash component. This will raise the AHWL for a small number of CPF members. This policy change will take immediate effect. Government's plans to reduce the CPF withdrawal limit for housing expenditure to 120% of the property's valuation limit by 2008 will remain unchanged.

Transfer Medisave Account (MA) overflows to Special Account (SA) or Retirement Account (RA) instead of to Ordinary Account (OA)

Sir, the fourth change relates to Medisave Account overflows. Currently, Medisave Account (MA) contributions which are in excess of the Medisave Contribution Ceiling, or the so-called "MA overflows", are automatically transferred to CPF members' Ordinary Accounts (OA), and these funds can be used for property purchases and other investments. To improve retirement adequacy for CPF members, the Government has decided to transfer MA overflows into the Special Account (SA) for members aged below 55 and into the Retirement Account (RA) for members aged 55 and above, instead of to the Ordinary Account. The interest rate for the Special Account and the Retirement Account, as Members know, is higher than that for the OA. This will benefit members and better

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ensure adequate retirement savings for members.

However, as the savings in the SA and RA

cannot be used for property purchases, this could affect a small number of members who currently rely on their MA overflows to finance their mortgages in properties. CPF Board will allow existing mortgagors who have difficulty servicing their loans as a result of this measure to use their MA overflows to do so upon appeal, subject to conditions. This change will require the CPF Act to be amended and the effective date is set as 1st July 2006.

Impose restrictions on the use of CPF savings for multiple property purchases

The fifth CPF change concerns the use of CPF savings to purchase multiple properties. Currently, CPF members can use their CPF savings to purchase more than one property. To ensure that retirement needs are not compromised, the Government has decided that only the CPF savings in the OA in excess of the Minimum Sum cash component can be used for the purchase of second and subsequent properties. Members with inadequate Minimum Sum cash components will be allowed to use their CPF funds for the purchase of second and subsequent properties if they undertake to sell their existing property within six months from the purchase of the second property. For the second and subsequent properties, the amount of CPF savings that can be used for their purchase will be capped at 100% of the valuation limit of the property. This measure will take effect on 1st July 2006.

Phase out the Non-Residential Properties Scheme (NRPS)

The final change to CPF policies pertains to CPF Board's Non-Residential Properties Scheme (NRPS). Currently, the NRPS allows CPF members to invest their

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CPF savings in non-residential properties such as office space, shops, factories and warehouses. Since members who wish to invest their CPF savings in properties can now do so by investing in property funds, instead of physical properties, the Government has decided to phase out the NRPS by 1st July 2006. Existing NRPS users will be allowed to continue to use their CPF savings to pay their mortgage instalments for non-residential properties.

CPF Board will release the details of the above six changes to CPF policies shortly.

Foreign purchases and ownership of residential properties

Sir, let me now turn to changes affecting foreign purchase and ownership of private residential properties and lands in Singapore.

Allow investment in private residential properties to qualify for PR status under EDB's Global Investor Programme (GIP)

Currently, under the Global Investor Programme (GIP) administered by the Economic Development Board (EDB), foreigners can be considered for Permanent Resident (PR) status if they invest a certain minimum sum in business set-ups and/or other investment vehicles such as venture capital funds, foundations or trusts that focus on economic development. Private residential properties, which had been allowed under the GIP, were removed from the list of allowable investment instruments under the scheme in 1996. The Government has now decided to re-allow investment in private residential properties. Under a new option to the current GIP, a foreigner can now be considered for PR status if he invests at least $2 million in business set-ups, other investment vehicles such as venture capital funds, foundations or

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trusts, and/or private residential properties. Up to 50% of the investment can be in private residential properties, subject to foreign ownership restrictions under the Residential Property Act (RPA). This additional option will complement our efforts to attract and anchor foreign talent in Singapore. This policy change will take immediate effect.

Foreign ownership of residential properties under the RPA

Under the Residential Property Act (RPA), foreigners can buy restricted properties in Singapore only with approval. Restricted properties are landed properties or apartments in non-condominium developments of less than six levels.

The Government has reviewed the RPA rules and has decided to fine-tune the RPA rules in three aspects.

First, with immediate effect, foreigners can purchase apartments in non-condominium developments of less than six levels without the need to obtain prior approval. For landed properties, prior approval is still needed if they wish to buy. Landed properties is a special class of residential property that Singaporeans aspire to own, and therefore should remain restricted.

The second change concerns the exemption granted to some foreign companies from applying for a Qualifying Certificate (QC) when they purchase residential land for development. Under the RPA, foreign companies are required to apply for a QC. To obtain the QC, they must provide a Banker's Guarantee for 50% of the purchase price of the land as well as commit to the completion of the development in three to four years. The purpose of these requirements is to ensure that foreign companies do not hoard land or do not buy land for speculation.

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Currently, a small group of foreign companies are exempted from these QC requirements. To level the playing field, the Government has decided to revoke the exemption status of currently-exempted foreign companies and subject all foreign companies to the QC requirements, with immediate effect. The existing land stock held by currently-exempted foreign companies will be given grandfather rights.

The third change concerns the requirements attached to the grant of a QC. We recognise that the QC requirements impose costs on businesses. To lower these costs, the Government has decided to reduce the required Banker's Guarantee from 50% to 10% of the land price. In addition, to allow foreign developers some flexibility to ride out unexpected changes in market conditions, the period allowed for completing developments is extended from the three to four years currently to six years. The Ministry of Law will release further information on these changes and their implementation dates separately.

Conclusion

Mr Speaker, Sir, let me reiterate that the policy changes proposed above are not intended to steer the property market in any direction. Some of the policy changes will have a positive effect on the property market, while others may have a dampening effect. The overall impact of these measures on the market may be positive or negative, but that is not the purpose of our review.

Rather the changes should be seen in their totality as a package, a package that will enable the property market to work better, and that will enable it to find its own equilibrium based on firm economic fundamentals. Some changes are refinements of rules put in place in earlier reviews. Others are to remove provisions or controls that are no longer relevant, or

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to introduce new opportunities. Where necessary, we have put in place adequate, but not excessive, safeguards. We will continue to review our rules and policies from time to time, and to change them if conditions change or unexpected situations arise. But I believe that these new policies, which lay the foundation for us to achieve longer term objectives, will be relevant through the ups and downs of the property cycle.

Mr Speaker, Sir, I will be pleased to answer any questions from Members, together with my colleagues from the relevant Ministries.

Mr Speaker: Order. I propose to take the break now. I suspend the sitting and will take the Chair again at 3.50 pm.

Sitting accordingly suspended

at 3.28 pm until 3.50 pm.

Sitting resumed at 3.50 pm

[Mr Speaker in the Chair]

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POLICY CHANGES AFFECTING THE PROPERTY MARKET: Debate resumed.

Dr Amy Khor Lean Suan: Sir, I would like to ask the Minister three questions. Sir, with your indulgence, first, I would like to thank the Minister for announcing this package of changes with the aim, as he noted, of streamlining many of the policies in the public and private housing markets, as well as help to lead to more efficient functioning of the property market. This would come as a very pleasant surprise to many property market players as well as potential investors. I think it would be a shot in the arm for the property market in general. But, Sir, I would like to ask the Minister why now. What is the rationale for implementing

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these changes, and why now, especially at a time when some analysts believe that worldwide, except in Singapore, the property market is experiencing a bubble built-up and heading for a crash? Some of these changes seem to me to be a reversal of the Government's policy to ensure prudence in property investments. Does the Government believe that the property market is grossly underperforming here and this has a negative impact on consumption?

Sir, another question would be, why not implement these changes in phases? Why all at once? Sir, I would also like to ask the Minister, as the property market is already showing some signs of being on the mend and many of these changes are likely to boost demand, is the Ministry not concerned that these changes coming now may cause a more than desirable or unwarranted upsurge in property prices, thus impacting affordability in the medium and long-term and the cost of living, something we are all still very concerned with?

Sir, my final question relates to the non-residential property scheme. I would like to ask the Minister what is the rationale for doing away with the NRPS, since there are not many of such purchases. We should, in line with the current thinking, allow as many investment options and choices as possible and in effect, this may have a negative impact on the Government's encouragement for people to set up business because many of these people may have purchased the shops and office space for their own use.

Mr Mah Bow Tan: Mr Speaker, Sir, first of all, let me thank Dr Khor for her remarks and support of the measures. She asked why now. As I explained in my Statement, these policy changes are as a result of several policy reviews made by

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different agencies. They all are property-related policies. They have been introduced at various times to meet long-term social as well as economic objectives. If I may cite the CPF policy changes, the CPF policy changes have been introduced to meet the overall long-term objective which is to increase the flexibility for use of CPF but, at the same time, ensuring that the retirement funds are adequate.

The changes to the LTV limit and also the consequent lowering of the cash downpayment are also part of a broader review of the measures that were introduced earlier in 2002. The Residential Properties Act (RPA) changes are basically fine-tuning of some of the policies that are relating to the ownership of private and residential properties in Singapore. They are not meant to influence the property market one way or the other individually. But each of them would have some impact. They would have some influence on the market and that is the reason why the Government has decided that we will present this as one package, as a holistic package, to make sure that stakeholders, investors, buyers and property owners look at the whole picture and understand what are the various changes that we are making, and also, for us, as Government, to make sure that our policies are consistent with one another.

We will let the market adjust to these changes. All else being equal, perhaps the current set of policy changes on that basis would be positive. But the market depends on many other factors over and above these measures - the economic conditions, the supply and demand situation out there, the market sentiments, interest rates, people's own assessment of where they are heading as far as their jobs are concerned. So how all these will pan out will really depend on how individuals perceive their own situation. I have, in the Statement, also cautioned that individuals should continue to exercise prudence, to make sure that they

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make purchases that are consistent with their own situation. But, collectively, as a result of all these policy changes, and as a result of all the individual decisions that arise from these changes, the market will find its new equilibrium.

Is it a reversal of the policy or philosophy of prudence that we have had? The answer is no. Even for those policies where there is a relaxation of some of the rules, like the LTV limit, the requirement for prudence is still there. Take, for example, the raising of the LTV limit from 80-90% for both bank and HDB loans. The banks and the HDB will continue to be required to exercise extreme care and prudence when they are assessing individual loans. They have to continue to impose credit assessment on their customers. They have to make sure that their customers are able to afford these loans, are able to afford the property and are able to repay the loans. In the case of HDB, over and above the credit assessment, buyers of HDB flats will be required to totally use up their CPF savings towards the purchase before they are able to get a HDB loan.

So, again, I stress that these measures are not a relaxation of our philosophy of prudence. We still require our banks and institutions to exercise prudence. But this is not inconsistent with what has worked, what we have done and, also, not inconsistent with what institutions in other countries are doing. And of course, MAS, as I said in the Statement, will be requiring the banks to have additional capital for the additional loan and will look into the issue of mortgage insurance.

On the market underperforming, again, I stress that the package contains a mix of measures which will be positive for the market and measures which will have a dampening effect. You could say that the raising of the LTV limit, the lowering of the cash downpayment, the relaxation of the restrictions on foreign purchases, all

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these would be positive. But there are other changes as well that will have a dampening effect, such as the restriction on the use of CPF for multiple property purchases, or the NRPS, or the transfer of MA overflows into the Special Account or Retirement Account, instead of to the Ordinary Account. So we do not intend for these measures to move the market in one direction or another, neither do we have a position on what the final outcome of the market would be. We will leave it to the market to adjust to these factors and to find its own level.

Why not implement in phases? We have, at various times, implemented some of these measures for various purposes. We have decided that, since they are all property-related, we should present them in a package. The individual measures will be implemented as and when the consequential amendments to the legislation are made. Those that can be implemented immediately, of course, we have to, because these are market sensitive measures and we cannot wait.

But let me assure the hon. Member that, in so far as the whole package is concerned, these are put together as one holistic package in order to give property buyers, investors and the market a total picture of what the various measures should be.

Am I concerned about upsurge in prices which affect affordability? Whether there will be an upsurge in prices and to what extent, again, I am not in a position at this stage to predict. Again I stress, we do not intervene in the market to dampen or boost prices unnecessarily. But there are certain situations - and I think the hon. Member would know - for example, in 1996 when prices were running away, when the market was overheating and there was excessive speculation, the Government had to move in to dampen property prices. But that was an exceptional situation. As a general rule, we would not intervene in the

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market. But, if the situation calls for it, then of course we will not hesitate to reintroduce some of the anti-speculative measures.

As to why are we doing away with the NRPS, perhaps I could ask my colleague, Dr Ng Eng Hen, to address this issue.

The Minister for Manpower (Dr Ng Eng Hen): Sir, as the Minister for National Development says, this is a package of policy changes and not to move the market in any particular direction. There are a number of things we wanted to achieve.

First, we did want to facilitate home ownership and yet, at the same time, we wanted to facilitate for members to put aside enough for their retirement adequacy. For the non-residential property scheme, this does not really fit into our overall scheme of home ownership. These are commercial properties. The fact that there were a few participants made it easier for us to align this policy with our wishes and, therefore, we have decided to phase this out.

Also, there are other options for members, if they do want to invest in property-related stocks. We take that investment options are available and the framework of investments for OA and SA funds in the NRPS scheme does not feature greatly in terms of achieving our objectives.

Mr Leong Horn Kee: Sir, I want to thank the Minister for this set of new measures. I support these measures, because I think they lead to liberalisation and a more fluid functioning of the market. I believe it will have some positive impact on the sector. In particular, I would like to mention that the change of the bank financing allowance from 80% to 90% is beneficial for our young

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couples. Our young couples would now need to find less money. They need to raise only 5% of the required cash fund, instead of 10%, to be able to buy a property. I think that this is very commendable and I would like to support these changes.

I have a few questions for the Minister.

Firstly, the change to allow people buying HDB flats, with the cash portion to be reduced from 10% to 5%, the Minister said it will only be implemented on 1st January 2006 for HDB flats, whereas for private residential properties, it is to be implemented with immediate effect, why is there a difference in the time gap in their implementation?

Secondly, a point which I asked in Parliament before, why did the Minister not also review the resale levy for HDB flats? In the past, the resale levy worked well because the market had been continuously on the rise. But the market has been going through ups and downs, and the resale levy does impact on a purchaser. When he buys a second property, he has to pay a resale levy for the first property, and there may well be a mismatch between his ability to pay and the timing of the purchase. So, why did the Minister not review - at the same time while reviewing this set of policies - the resale levy for HDB flats?

Thirdly, the Minister mentioned about the liberalisation of purchases by two singles for private residential property. In the case of HDB, now it is also allowed for private residential property for two singles, but I think the limit is only for 3-room flats. Why does the Minister not allow 4-, 5-room and even Executive flats now to be liberalised for two singles to be able to buy them together and use their CPF to pay?

Finally, for foreigners being allowed to buy flats rather than landed property,

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would cluster housing be included as those that allow foreigners to buy without seeking approval?

Mr Mah Bow Tan: Mr Speaker, Sir, first of all, why do we not change the cash payment for HDB flats to 5% straightaway? Currently, they are paying 4%. It is scheduled to go up to 6% by 1st January 2006. This was part of the original plan when the goal was to go up to 10% by 2008. So, since the next stage is 1st January 2006, 6%, we have decided to stick to that timetable, but instead of making it 6%, we will cap it at 5%, same as for private property.

As for resale levy review, as I have explained in this House many times, the purpose of the resale levy is not to tax the individual. It is really a mechanism to claw back some of the subsidy that the Government is handing out for the second flat. Our current policy is a straightforward one. We will make sure that every Singaporean who is eligible is entitled to one subsidised HDB flat. It is heavily subsidised. He is free to cash out anytime he wants and keep the proceeds. However, if after doing so he wants to purchase a second subsidised flat, which also comes with a heavy subsidy, that is where we impose a resale levy. It is a mechanism, as I have said, to make sure that the distribution of the levy is equitable across-the-board. If he decides to buy a resale flat at market value, he keeps it. He does not have to pay a resale levy. So, the resale levy is not automatic upon the sale of a HDB flat. I think some Members may have this misunderstanding. So, why do we have a resale levy? We need to make sure that we claw back some of the subsidy for the second flat and, as a result of that, allow us to provide flats for genuine first-timers rather than those who are going for their second flat.

Purchase by two singles, why limit to 3-room flats? I believe we have actually

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relaxed this, so that the joint singles scheme is no longer limited to the 3-room flats.

As for foreigners, yes, we have, because of the RPA changes, now allowed flats below six storeys to become unrestricted. But strata landed cluster housing will continue to remain restricted.

Dr Wang Kai Yuen: Mr Speaker, Sir, I heard the Minister said he does not want to comment on the impact of his package of measures on the market. But, being the decision maker, did he not anticipate the impact of this package of measures? Did he take a look at the market during the break? If he did, he would have found that the market has responded very positively. Did he not realise that all the heavyweights of the property counter have actually gone up substantially? In fact, I think the Straits Times Index has gone up by 33 points.

My concern is actually not so much on how the market responds, but the link between the price of commercial property and private property. Sir, do we recall that in the past, during the industrial recession that Singapore encountered, one of the factors of the cost of doing business is the cost of commercial properties? So, did the Government not anticipate that, with this adjustment, with this package of measures, the increase in property prices would render us, in this economic restructuring, even more difficult in view of globalisation?

Mr Mah Bow Tan: Thank you, Dr Wang, for informing the House that the market has gone up. I am very happy for those who are involved in the market. But, as I said earlier, this package of measures was never intended to move the market in any particular direction.

The policy measures that we have announced today are derived from the

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policy reviews made by many different Government agencies and Ministries. They all have their own rationale and reason behind it. The CPF review policies, as I explained, are not just to free up on the one hand the use of CPF for housing, but also to make sure that at the same time there is retirement adequacy. The LTV changes by MAS, there is a rationale for them in their own right. But we put them all together in one package today because we want to present this holistic picture.

Will the market for commercial properties go up? Indeed, if Members follow the market closely, you will realise that although there is a link theoretically between the two, the pace and the rate at which changes take place in different markets really depends ultimately on more fundamental issues like supply and demand. And so we see that, in the case of the commercial property market, when supply was very high, demand was low, the commercial property market was very weak. Vacancy rates were running very high in the Central Business District at a time when the other markets were not so weak, such as the retail market.

Similarly, in the current situation or in the last few quarters, you would have noticed that the commercial property market has actually strengthened, but the private property market has not. Why? Because, fundamentally, there is still a large overhang in the private property market. So, there is a theoretical link between the two in so far as both of them respond to the same economic fundamentals, the economic situation, growth, etc. But, ultimately, it will depend on the supply and demand for the supply that is available in the market.

In so far as competitiveness is concerned, yes, I have informed this House that the Government does monitor

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the property market closely and make sure that we remain competitive. To that extent, we have a long-term reservoir of land that allows us to provide not just for housing but also for development, factories and so on, and we release these lands at a pace which the market can absorb. So, we do ensure that there is a sufficient supply of land for residential, commercial and industrial developments through the GLS programme.

But having said that, I think we also must realise that we cannot compete just on land price that is as cheap as what is available in our neighbouring countries, for example, with larger land masses. It is not for us to either boost or depress prices for whatever reason, because there would be implications on our economy. So, for the supply of land for commercial as well as for industrial purposes, we do monitor carefully and we do make sure that there is a sufficient and adequate supply, and we set policies to make sure that our property market is a stable one, and ensure that these policies are relevant, both through the ups as well as the downs of the cycle.

Dr Teo Ho Pin (Holland-Bukit Panjang): Sir, I welcome the measures as announced by the Minister, which I believe will have a positive impact on the property market, the construction sector and also the finance and investment sectors. I just wonder whether the Ministry has done any analysis on the positive and negative impact on these sectors which will create any new jobs for Singaporeans, because this is one critical area which we are looking at.

My second question is: what is the likely take-up rate of the available flats in HDB and also the private sector with this set of measures? The Ministry must have done some forecast on that.

Mr Mah Bow Tan: I think the Member may not have heard me when I said,

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maybe the umpteenth time, in this House that we have not actually taken a position on whether the market is going to go up and, if so, by how much. So, what is the likely take-up rate? I honestly do not know. How many jobs will it create? I think if the market does go up and it generates demand and if there is additional construction activity going on, yes, certainly the construction industry will benefit from it and I would be the first person to cheer that. I think the construction industry has gone through a very protracted period of poor performance, partly as a result of excesses in the industry itself, and partly also because the market has been hit by so many problems over the last six or seven years. So, if there is any upturn in the market and if there can be new jobs created for the construction industry and gives it a boost, then I certainly welcome it.

Mr Gan Kim Yong (Holland-Bukit Panjang): Mr Speaker, I would like to ask the Minister whether he has considered that this proposed reduction in the minimum cash limit and the change in the LTV policy would lead to Singaporeans buying bigger units of housing, because theoretically, with the same amount of cash, they can now borrow twice the amount from the bank. Also, would this lead to more commitments in real estate by Singaporeans and therefore adversely affect the adequacy for retirement savings?

The second question is a related one. With this change, it would seem that we are now relying very much on the bank's prudency to exercise care in granting the loans. But with the recent change in the ranking of security, now the banks rank ahead of CPF, would it not encourage the banks to be more liberal in granting loans? And if something does go wrong, the banks would rank ahead and the person who suffers would be the CPF member and his savings. Would there be any

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safeguards against this eventuality from happening?

Mr Tharman Shanmugaratnam: Mr Speaker, Sir, Minister Mah has suggested that I take this question on behalf of the Senior Minister.

From the MAS' perspective, we are now lowering our standards of prudence that we are expecting of banks. Essentially, what we are doing is evolving our methods. This is not new. In fact, the first change was in 2002. We are moving in a step-wise fashion, from a focus on regulation of banks towards increasing reliance on supervision of banks. Housing loan rules are a good example. We are moving from micro regulation, where each and every housing loan is subjected to MAS' regulation, towards allowing the banks to exercise more assessments of their own on the risks of the loan, the interest rate they should charge and how much they should give. But MAS would have to shift its methods and play its part of supervising the banks more actively on their housing loan books, looking at their internal credit appraisal criteria and looking at the overall risks of their housing loan portfolio. If it should be that because of economic conditions or property market conditions, we feel that their housing loan portfolios are getting too risky, we might require them to put in more capital. I think this is a more refined approach. We will be moving in steps towards this. If we had done it all in 2002, the market would have had difficulties digesting it. So the first major step was in 2002, when we changed the order of charges between CPF and banks, and also made the first move on reducing the cash requirement. We have now had three years. We are confident that the banks are now in a position to take the next step.

We expect banks to be alert, and MAS will be alert in ensuring that the banks do not go overboard, ie, ensuring that a competitive marketplace does not lead to

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a lowering of standards. I am confident that the banks will exercise discipline. We will be having discussions with them to make sure that it would not be an arbitrary set of rules that they would apply to borrowers, whether it is for larger flats or the usual flats that they have been getting for a particular age group or income group. We have got to have a certain discipline within banks. There should be certain guidelines. We are not being prescriptive and we are not going to impose a common rule on every bank. But we will go in to inspect, have discussions with them and we want to be satisfied that they are not lowering their guard.

Ms Irene Ng Phek Hoong (Tampines): Sir, I would like to thank the Minister for the change affecting singles. It increases the housing options and which would be appreciated. But I notice that this change would benefit mainly the well-to-do high-income singles. Can the Minister consider the long-held appeal of singles to also allow them subsidised housing, in terms of new flats, because this would benefit also the broader range of singles, mainly the low income and the lower-middle income?

My next question also relates to the lower-income. The changes of lower cash payment and higher loan limit would be a boon to those who are cash-strapped and who need to buy flats. I worry about the impact, like my colleague, Mr Gan Kim Yong, on those who are in a dire situation and have to downgrade, because of all their debts, they cannot pay their S&C charges, and the lawyers are after them. But if you put yourself in the position of a downgrader now, or somebody who is cash-strapped, you would upgrade because of the new changes. Also, it does not make sense for them to downgrade now to a three-room resale flat because they have to pay the resale

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levy. If you upgrade, you get a grant for upgrading.

I would ask the Minister to review the whole complex range of levies, subsidies and grants to make it sensible to the average HDB person to make the wise choice and decisions, because I am worried that those who are cash-strapped would see upgrading as a way out of their cash problems rather than to the right size and to move down.

Mr Mah Bow Tan: Mr Speaker, Sir, first of all, on the issue of whether these measures benefit the high income singles more than the low-income singles, to the extent that we are rationalising our rules, as part of the review, one of the anomalies concerns the use of CPF by singles to purchase properties. In the case of HDB, under the Joint Singles Scheme, they can, but in the case of private properties, they cannot. So CPF Board relooked at it and decided that this anomaly is not tenable and, therefore, they made the change.

Does it benefit the high income more than the low income? I think the overall point to be made is this. Each person must make his own decision based on what he feels is the correct one, ie, he has to make a decision based on what he can afford and what he is able to obtain, in terms of loans, and the banks and HDB would have to make another decision based on whether such a person is able to afford the loan before it is going to disburse the loan.

When the LTV is raised from 80% to 90%, it does not automatically mean that every single person who goes to HDB or to a bank would now be able to get a 90% loan. Credit assessment will still be in place. And if you are not working or if you do not have adequate income, if your expenses are high and your disposable income is low, for whatever reason, if you are not able to service that loan, you will not get that 90% loan. This move does

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not, in any way, shape or form, suggest that all the rules of financial prudence have been thrown away. No. But it does allow the banks and the HDB to grant that higher loan if that person is able to afford it. So there is no change in the philosophy that we are currently practising that each person should buy a flat or a property commensurate with his or her own means. That is still the primary consideration. HDB, for one, will be instructed that credit assessment rules would still apply. The rules requiring individuals to make full use of their CPF, so that their loan will be low, will still be there. This move may tempt a person to get a larger flat, but if he is not able to afford that larger flat, that will not happen.

But if he can afford, then it is for him to make that decision, to see whether he is over-investing or not. And there are many singles who can afford larger flats and we have actually relaxed the rules recently to allow singles to buy larger flats. That has enabled the singles to widen their housing options.

Do we encourage upgrading as opposed to downgrading? As a philosophy, the Government has always facilitated people to upgrade. But again, upgrading within their means. I do not remember us having an upgrading grant. As far as subsidies are concerned, singles do enjoy some form of subsidy which is the housing grant. Two singles can combine together to buy a flat and it would almost be equal to the grant that we give to families. But we do not have an upgrading grant. We have a grant that we give to eligible singles, in the same way that we have a grant that we give to eligible families to buy their first flat. But we do not have another grant that says, "Ok, if you upgrade, I am going to give you some more money." No.

Dr Ahmad Mohd Magad (Pasir Ris-Punggol): Mr Speaker, Sir, I think it is a

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no-brainer to figure out that many of the measures announced by the Minister earlier would inject a greater degree of vibrancy to the property market and shore up prices.

However, Sir, my concern here, and my heart goes out to the new, young prospective property buyer, who has been contemplating on getting a property and now suddenly finding it more expensive and a little more far-fetched to own a property as a result of increased property prices. I would like the Minister to comment on this.

Second, with regard to the measures just announced, how would this affect current property prices directly from HDB, in other words, prices for properties that are going to be sold directly by the HDB to the public?

Mr Mah Bow Tan: Sir, it may be a no-brainer to the Member but it is very hard for us to predict how the market is going to be in the next three to six months, which I would consider to be short-term, because it depends on many other factors. But, as I have said earlier, we think this is the right thing for us to do in today's situation and this is still relevant, even as the market moves in whichever direction in the future.

Would it make it more difficult for new property buyers? Some of the measures will actually make it easier for them because the cash downpayment, for example, will be reduced. And if they qualify, they will be able to get a higher loan. To that extent, affordability would be increased. Yes, if the market does go up, and if prices move, of course, it would make it more expensive for the new property buyer.

What will that do as a net result? It is very difficult for me to say. It depends on individual situations. But I can assure the

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Member that for HDB prices, we have always priced new HDB flats on the basis of affordability and we will continue to do so and monitor prices and make sure HDB new flats will be affordable to the target groups, in other words, those who are eligible for subsidised housing.

Mr Ang Mong Seng (Hong Kah): Mr Speaker, Sir, the Minister said that HDB flat buyers will be allowed to take a loan of up to 90%. But under HDB's current policy, when a buyer wants to take a loan from HDB, he has to use up his CPF money first before he can get a loan from HDB. I would like to ask the Minister why HDB has this policy to use up the CPF money first before allowing him to take a loan. Otherwise, the buyer has no way of taking a 90% loan. Also, the CPF money may not be used solely for housing matters. It can be used for investment or other purpose.

Mr Mah Bow Tan: Sir, that is one of the reasons why we have decided to keep this requirement for HDB property buyers to make use of their CPF money in the Ordinary Account before getting the HDB loan. It is part and parcel of our exercise to make sure that HDB buyers buy properties or flats in areas that they can afford and, as a result, take as small a loan as possible

which they would have to service in future.

Mdm Ho Geok Choo: Sir, I just want to raise a social implication here. With regard to the joint purchase of a flat by unrelated singles, I am just wondering how this easier access for non-related singles to come together to purchase a flat will really promote homogeneous or heterogeneous gender to come together, which is actually against our pro-family policy. How do we intend to go about minimising some of the negative consequences that may arise?

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Mr Mah Bow Tan: Sir, I offered my colleague, Dr Ng Eng Hen, to answer this question but he very kindly arrowed it back to me.

It is very difficult for us to make any judgment on the people who are going to buy these flats. We already have in place a HDB policy that allows two singles to purchase a flat. We do not check their gender. We do not check anything else. So long as they are two singles, they can purchase a flat. This is simply a rationalisation of a rule in the private property market that is currently available in the HDB market - nothing more, nothing less.

Mr Steve Chia Kiah Hong (Non-Constituency Member): Sir, the announced measures are generally agreed by all Members in the House to be positive for the market and, as what Dr Magad said, it is a no-brainer.

Sir, we also know that the stock market has actually gone up a lot over the last few months and, in particular, this morning before the announcement. My question is whether there is a leak in the policy planning team resulting in insider trading. Will the relevant Ministry or MAS do an investigation on the equity trades done before this announcement?

Mr Mah Bow Tan: Sir, we had to publicise the fact that we would be making a statement today and that it would be telecast. The reason for publicising the notice is to make sure that everybody has equal access to information. I do not want a situation where I make a statement in the House which has an impact on the market to be available only to a few privileged people. Of course, I do not expect Members in this House to take advantage of such a situation, including NMPs. But the point is that we had to give that notice after 5 o'clock yesterday, and I expect that there will be people who will speculate. They will take

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a chance and speculate as to whether the announcement will be this, that or the other. If they are wrong, they will be burnt. If they are right, I think they will make money. That is the working of the market.

As to whether there is any leak, I am not able to say. Honestly, in our own establishment, I make sure that such sensitive matters are handled adequately. If Mr Chia has any evidence of any leak, I will be very happy to investigate.

Ms Irene Ng Phek Hoong: Sir, with your indulgence, first of all, can I just mention about the point that my colleague, Mdm Ho Geok Choo, said. I think a happy scenario would be the golden girl scenario where we have singles staying and growing old together if for some reason they cannot and do not want to get married. It is not a negative social implication. At least, they have company when they grow old and they can rely on each other if for some reason they cannot get married or they do not want to get married, and I think it should be their choice.

Sir, may I clarify the Minister's reply to a point that I made earlier? Maybe I was not clear. I was concerned for the cash strapped. Even now, at the meet-the-people sessions, we do see residents coming. They have no choice but to sell their flats to get some cash to pay up their loans. Therefore, especially for those in 4-room flats, they have two options: one, to downgrade, either to a rental flat or a 3-room flat. If they go for a 3-room flat, they have to purchase from the resale market which means that they have to pay a resale levy. That is a disincentive. If they buy a resale flat, from listening to my residents, my understanding is that they have to pay a resale levy. That is my understanding if they buy from the resale market. If I am wrong, perhaps the Minister can correct me.

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Some of my residents have this perception that if they upgrade, they believe that with the cash they can at least pay up the downpayment and they can use their CPF to pay the rest. I tried to advise them against it. But I worry that with these changes, the option for them to move to a bigger flat when they cannot afford it will be there. I would like to ask the Minister to review the range of subsidies, grants and resale levy to see whether it would be sensible today - given that many Singaporeans are hit by economic restructuring and that many are on contract work, which means irregular income - for them to opt to sell their flats. What are their options given this scenario?

Mr Mah Bow Tan: Sir, first of all, let me reiterate again the explanation I gave about the resale levy. If a person downgrades or upgrades and he buys a second flat which is a resale flat - in other words, it is bought in the open market and it is non-subsidised - then he need not pay a resale levy. The only reason why a person has to pay a resale levy is because he is coming back to the Government to take another subsidised flat. So long as you come back to buy a second subsidised flat, we have to impose a resale levy. Why? Because if we do not, then there will be many people who will be coming back and say, "Look, let me get another subsidised flat from HDB." In the early 90s, obviously, that distorted the market so much because there were so many people in the queue who already had a flat. They just came back and joined the queue because there was no cost to it. They could get another flat, why not? But with the imposition of the resale levy, that made people stop and think. "Do I really need to buy a second flat? Is it because my family has grown so that I need a bigger flat? Then I come back and get a second flat. Even though I pay the resale levy, it is still worth my while to do so." There is no penalty for those who actually downgrade to a resale flat.

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Yes, I accept the fact that there are many people who are in financial difficulties at the moment. Again, this is the result of the high prices and the free-wheeling days of the early 90s when many of our residents actually bought and sold many flats, and bought at very high prices in the expectation that the prices would only go up and not come down. Yes, we are seeing all these situations now where people are cash strapped. My Minister of State has explained earlier that there are cases of people who downgrade and who either ask for and are given a rental flat in spite of the 30-month debarment, or who come back and ask for a second loan. We review those cases, recognising that the situation is such that these people are not able to buy a second flat. We have, in many instances, granted them waivers of the rules, and we have done so quite generously. Dr Wang asked whether it is 10%. I can tell him that it is more than 10% that we have actually acceded to after appeals from Members of Parliament.

I believe there is nothing in the present set of rules which will encourage people to be less prudent. In fact, we will make sure that from the lender's side, we will continue to exercise all care to make sure that people do not over stretch themselves. I say this once again that while these changes are positive for the market, each individual should continue to exercise utmost care when they make purchases of private property.

What are the rules meant for? The rules are really meant for us to make sure that we have a stable property market. We have to make sure that we have a property market that responds to market signals properly and smoothly and yet, at the same time, make sure that many of our policies are sustainable in the long run. Where we need to fine-tune our policies, we need to continue to make

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sure that they are relevant to the times. We need to make sure that they are sound because, in this way, we will continue to enjoy good and sustainable growth. And, at the same time, we continue to have an efficient property market that allows itself to adjust to the changes in the marketplace. So, I repeat once again, we make all these changes for our longer term interest and not just to adjust to short term market situations.

Miss Penny Low (Pasir Ris-Punggol): Sir, I thank the Minister for coming out with a whole package of changes which is quite comprehensive and easily understood. I must also give praise to the fact sheet on the changes to the CPF property scheme which explains the changes very well and succinctly. My own assessment is that, overall, we will have a positive impact on the property market itself.

I have a few questions. First, the lowering of the MLP from 60 to 30 years will certainly augur quite well, especially for the retirees. How will that also impact on the bank loan policy which currently does not favour properties with remaining leases of 60 years and below?

I really like the change on the transfer of Medisave account overflows to Special Account and Retirement Account instead of Ordinary Account. I think that change itself does give a certain level of safeguard against over investing in property and, at the same time, allows the retiree who does not want to over invest in property to continue to put his money in CPF to enjoy a higher interest rate. I think that is a really good move.

On the impact of the news itself, my own assessment is that it will be overall positive. It will certainly encourage more schemes to be generated by banks, housing agencies, developers and so on and so forth to attract buyers. And the whole kaleidoscope of schemes to attract buyers will certainly, from our previous

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experience, overwhelm the buyers to buy bigger properties than what they need.

Mr Speaker: Miss Low, can you please ask your questions?

Miss Penny Low: Would there be some educational programmes to inform and educate buyers on the mid-term and long-term financial impact of their property purchases? Ultimately, the buyers will have to be responsible for their property purchase. But when the CPF liberalised in the 80s, the housing market went up. In the 90s, the unit trust investment also went up. How would this package impact on their financial prudence? I am advocating more consumer or buyer education.

Last but not least, on the HDB resale levy, in the mid-90s, the HDB flat prices were still holding on even till the late 90s. And a good group of first-time buyers indeed bought HDB flats at a price that was lower than the market price.

Mr Speaker: Miss Low, your question, please?

Miss Penny Low: Sir, I have already asked a few questions. On this part, those who are trapped in the high prices of mid to late 90s, some of them who want to downgrade and apply for a second HDB flat are currently asked to pay a resale levy. They could be suffering from negative equity but the resale levy still applies. Could the Minister consider some measures to help these people?

Mr Mah Bow Tan: Sir, let me respond to the Member's question on the resale levy. Yes, these are the people who have been trapped in the high prices of HDB flats bought at the peak. They now want to downgrade. We have other options available for them which include buying a smaller resale flat

in an area which is not so expensive. Another option is renting of

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flats from the market. Other options include moving in with their friends or relatives. On the HDB option that the Member is suggesting, ie, that we waive the resale levy for these people in difficulty, I think it is an example of a policy which is not sustainable in the long run. Because when the situation changes, and property prices start to go up, I think we are going to see a recurrence of the high demand as a result of people coming back for a second bite. I do not think we want to see that situation again, firstly, because it is not fair to those who are genuine first-timers, and secondly, it will strain our financial resources. So, the resale levy stays. We will continue to finetune it, if necessary, but the principle of having a resale levy must stay because there is a perfect rationale for it.

On consumer education, it goes on all the time. This is something which I hope the Member can also help to do because she is in the business of helping people plan for their future. So financial planners, the media, the banks and HDB will continue to play that role. In fact, I have asked HDB, every time when their officers talk to people who are intending to buy a flat, to take them through the numbers, find out from them why they need the flat, what they are buying it for, can they afford it, what jobs they are doing, and so on. This is part and parcel of consumer education. It is not just a matter of somebody walking in and say, "I want to buy a flat", and that is it. Consumer education is important, I agree. But it is something that has to be undertaken by many people and ultimately the individuals must take responsibility for that purchase. I do not think they can abdicate that responsibility.

I would like to ask Dr Ng to respond to the other questions.

Dr Ng Eng Hen: Let me address the Member's questions about the change in

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the minimum lease period (MLP). The original intent of the MLP is that we wanted to facilitate long-term ownership by members who use their CPF funds. That intent is still preserved. In other words, even as we allow CPF to be used for properties with 30 to 59 years, it will not be for all members. There will be two qualifications. One is that the remaining lease of the property to be purchased must cover the member at least up to the age of 80 years. Put simply, in other words, if the property is 40 years, the lease is 40 years, you must be 40 years or older before you can use your CPF. So that is preserved.

Secondly, on the withdrawal limit, how much you can use your CPF. As Members know, for properties 60 years and above, we said that the withdrawal limit for housing expenditure will be 120% of the valuation limit by 2008, and that remains unchanged. That is a safeguard in terms of prescribing prudence into our system. For properties that are 30 to 59 years, they will have lower CPF withdrawal limits based on the residual value of the property and the member's CPF withdrawal age of 55. What it means is that depending on the buyer's age and the remaining lease, the shorter the lease as we projected to be, the remaining lease at 55, there will be reduced withdrawal limits. Basically, it is a straightline depreciation curve that we will use.

So there are these two additional safeguards to preserve our original intent: one, we should facilitate members to buy properties that will last the average life expectancy; two, we preserve the investment value, and make sure that they do not over-consume in their CPF accounts.

On the point of MA to SA overflows, rather than OA overflows, I thank the

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Member for her concurrence. We think indeed that this is a good prudential measure. In terms of education, let me also add to the Minister for National Development's point, ie, CPF on its own will also educate members. In other words, a lot of members do not realise that when we say 120% withdrawal limits, it may be X number of years beyond which you cannot use your CPF if you reach that amount. Indeed, we do advise members that this is the case, and we will continue to do so.