1. Deputy Speaker, my portfolio is not an easy one. But I do enjoy the many cuts inflicted on me and the many speeches. I am not masochistic but this is an important ministry because millions of people’s lives are affected. If I can make a little contribution to make their lives better, I don’t mind a few more cuts. This is my second MND COS. I have been here almost 2 years now, and I think we have achieved a few things.
2. To the many cuts, I have some answers. To many of the questions, I do not have the answers yet. However, I would like to share with you how I think we can go forward on this.
3. Deputy Speaker, we had an intense debate in Parliament last month. Let me share my two takeaways. First, Singaporeans continue to be unhappy with the current infrastructure crunch, including the housing imbalance. We are addressing this aggressively. Second, Singaporeans care deeply about Singapore and its future. They want to help build a vibrant and inclusive Singapore for future generations to come, and we will facilitate such participation. In the area of housing, I will involve fellow Singaporeans in working out some housing policies together. Let me elaborate on these two takeaways.
Current Housing Imbalance
4. First, the current housing imbalance. It is temporary and given sufficient time, can be solved. Of this I’m confident. As I said, I have been in MND for almost 2 years now, I thought I will use this occasion to report to you the progress of these two years.
5. First, we increased supply dramatically. An exceptionally large number of new homes are currently being built. We will begin to feel the impact this year when 30,000 units are completed and families get the keys to their new homes. But the full impact will kick in from next year, when 50,000 units are completed, followed by 54,000 units in 2015 and 63,000 units in 2016.
6. For public housing specifically, the ramped up programme has statistically cleared our backlog of married HDB first-timers. With 15,000 marriages each year, family formation is well within this building programme of 25,000 per year. But some of them have lost out during balloting to couples yet to marry under the Fiancé-Fiancee scheme, who outnumber them in Build-to-Order (BTO) applications. We are correcting this through the Parenthood Priority Scheme (PPS). In the recent exercise for non-mature estates, most of the 600 married HDB first-timers with children who applied will get the chance to select one. Mr Seah Kian Peng proposed that we should now extend PPS to pregnant mothers. I agree and we can do so from the May BTO launch. By the way, Mr Seah was the first who suggested giving housing priority to young couples with children. This was some three years ago. I would like to record his role as the “father” of the PPS. I am just the midwife. After we have cleared this backlog, we will extend the scheme to cover those already married but without children yet. And I hope to be able to do so next year. Mr Gerald Giam asked whether the quota will be amended when we do this extension. Certainly. Otherwise, we will not be able to clear the backlog of the target population. Let me share with you the profile of BTO applicants.
7. More than half of the first-timer applicants are not yet married. They outnumber the already married couples. Those with children form about 20%, and those married without children the remaining 25%. We can easily adjust the quota in order to achieve the purpose of clearing the backlog. I think we should try to give flats to first-timers in the following order - those already married with children, those married without children, and those not yet married. This is the priority which I think is fair.
8. We have complemented the PPS with a Parenthood Provisional Housing Scheme (PPHS). This provides an additional housing option to first-timer married couples with a child who need to rent while they await completion of their new HDB flats. The father of this scheme is Minister Lim Hng Kiang who proposed this to me a couple of years ago. I always remembered that. Now that I have the chance to do so, the baby is delivered. The scheme has attracted 200 plus applications. All the 200 plus families can soon move into their PPHS flats, after they have been retrofitted. Mr Yeo Guat Kwang suggested that we extend the scheme to married HDB first-timers without children. As we still have a few hundred vacant units, I am able to say “yes” to Mr Yeo. In other words, all married HDB first-timers, with or without children, will be eligible for such interim rental flats, while they wait for their new flats to be completed. In the process, if the demand were to exceed supply, we still give priority to those with children.
9. Second, we stabilised BTO prices by de-linking them from the resale market. This is done by increasing subsidy and keeping BTO prices steady even as resale prices go up. We are committed to continuing it until the market stabilises. Mr Giam asked what I meant by stability. We assess it by examining the Resale Price Index. He also asked how we compute market discount. This is not difficult to calculate because the resale prices of most flat types are widely available. In fact, we publish them on the HDB website. Of course, it is not so easy comparing two flats because local characteristics have to be factored in. There is some subjective element. For example, whether it is near an MRT station, which floor it is on, etc. These are adjustments that one needs to make.
10. In the last 2 years, 38,000 HDB first-timer families have benefited from this new pricing policy. The attractiveness of the new BTO prices has been noticed. Almost all HDB first-timers now buy new flats instead of resale flats. This is quite a big change. In the past, more bought resale flats because they were immediately available. Now, almost all get it from us. This has diverted significant demand from the resale market and helped to moderate the rise in resale prices. But we know that this is not enough to tame the resale market because resale flat prices, like that of private properties, are determined by the market and they are heavily influenced by market sentiments.
11. This is where the media plays a role to guide sentiments. Mr Ang Wei Neng mentioned a Channel News Asia (CNA) report last night about a $900,000 resale flat. I was watching the news and I noted it too. This morning, the Straits Times (ST) also reported on the same story, but correctly reported on the main angle of the story – that resale transactions have plunged. Unfortunately, CNA chose to focus on the $900,000 unit, which is an outlier, in the resale market which is beyond my control. I hope the media can help us here. We are all in the same boat together. Nobody wants the property market to escalate further, and create a possible bubble. No one will benefit from this. The way ST reported this story had a calming effect, while CNA’s reporting had an alarming effect. This should not be repeated.
12. Third, we acted to curb speculative demand in our property market. Sub-sales as a proportion of all private housing sale transactions have fallen to 7%. We have gone on to curb investment demand, especially with the recent cooling package. It is still early days, but we observe that some developers have lowered their prices. Most analysts expect the measures to impact both sale volume and prices. These cooling measures are necessary as we do not want Singaporeans to over-stretch and expose themselves to unforeseen changes in the property market. Yesterday, NMP Tan Su Shan gave a good speech when she talked about her worry of a double whammy in the property market. She was worried about a perfect storm, of a global economy slowdown and interest rates going up. What will happen then, to those buying their 2nd or 3rd property now, hoping to make a killing? They may get killed in the process. We are vulnerable to external shocks such as a global economic downturn or a rise in interest rates. Interest rates now are extraordinarily low, both globally and in Singapore. They could return to the norm very quickly. An increase of 2 to 3 percentage points, which is conceivable, could increase mortgage payments by up to 40%. If homeowners fall behind on their mortgage payments, they could lose their homes. This had happened to many Singaporeans not too long ago. We will do all we can to prevent a property bubble because no one benefits and many will get hurt when the property bubble bursts. We continue to watch over the property market and we will harden the cooling measures further, if necessary.
13. Lastly, we increased access to public housing. We raised the BTO and Executive Condominium (EC) income ceilings in 2011. 8 in 10 households now have access to new, affordable flats directly from HDB. As we reduced the first-timer backlog, we tripled the second-timer quota for BTO flats in non-mature estates last year. We share Er Dr Lee Bee Wah and Mr Hri Kumar’s concerns on ECs, and in January, we tightened the EC Housing Scheme, to nudge it back to its original policy intent. And I am every ready to tighten the scheme further if necessary.
14. This is briefly the progress in 2 years. I think the immediate phase of fire-fighting for first-timers is over, but there are still other hotspots to tackle. The temperature has come down a few notches, but it is still uncomfortable. The progress has however gained us some breathing space to take a pause, and review the priorities for the next 2 years. In addition, I am taking the opportunity of this COS to begin the process of a public discussion on our longer term housing policies.
15. Let me first discuss the housing work plan for this financial year, my 3rd year in MND. This year, we will maintain the ramped up construction programme and launch another 25,000 BTO flats. A couple of months ago, HDB announced that they were planning to build about 23,000 flats, I decided to tell them to up the figure because I wanted to decisively clear the backlog of all married HDB first-timers this year. This will allow us to begin to meet the housing needs of other segments of the population, besides the first-timers.
16. First, singles. While families will continue to be our top priority, singles have housing needs too. This we know. Currently, singles aged 35 and above can buy resale flats. Each year, about 4,000 do. However, rising resale prices have made it difficult for them. Er Dr Lee Bee Wah and Mr Lim Biow Chuan spoke about their difficulties, and asked that we allow singles to buy new BTO flats directly from HDB.
17. We will do so. We will allow first-timer singles aged 35 and above to buy new 2-room flats directly from HDB to meet their housing needs. These will be singles earning up to $5,000 per month as they face more financial difficulty owning a home. These new flats will be built in non-mature estates to keep prices down. They will come in 2 sizes, 35 sqm and 45sqm, and we will allow them to choose according to their needs and budget. A couple of other important details are still being finalised. For example, how much should we subsidise the flats, compared to married couples? What should the relative priority be between singles and married couples applying for these flats? We will settle these outstanding issues as quickly as we can, so that the first batch of eligible singles can apply in the July BTO launch, most likely in Sengkang.
18. Second, second-timers. This is a diverse group and most of them already have a home. They are looking for a change, either upwards, downwards or laterally. Their needs vary, and typically buy from the resale market as it should be. But many have sought to get it directly from HDB. In the last two years because of our attractive BTO prices, second-timer applicants have doubled to 30,000 last year. To help more second-timers, we tripled the second-timer quota in non-mature estates from 5% to 15% in March last year. .This has reduced second-timer application rates in non-mature estates significantly, to about 10. Some have difficulties paying the resale levy, as commented by Er Dr Lee Bee Wah and A/P Dr Muhammad Faishal Ibrahim. We try to help, for example, by including the resale levy in the price for the flat, so that it can be paid for as part of the housing loan. This has to be on a case by case basis, so do appeal if you feel that there are genuine cases in difficulty. We will, as always, try to be as compassionate as we can.
19. This year, we will take further steps to help two vulnerable groups of second-timers. We will double the second-timer quota for 2-room and 3-room flats in non-mature estates from 15% to 30%. This will help second-timers needing to downgrade. I will give priority to those who are looking at smaller units, as many presumably are looking to downgrade and may have financial difficulties. In addition, in line with Mr Edwin Tong’s suggestion, we will reserve 5% of this 30% quota for divorcees or the widowed who have children below 16. This will almost guarantee their ability to select a 2-room flat, and significantly increase the chances of those who apply for a 3-room flat. These changes will be implemented from the May BTO launch.
20. We will further help those divorcees who face debarment from subsidised flats, by shortening the debarment period from 5 years to 3 years. I think this will help them move on with their lives, especially those with children. As a further measure of assistance, Dr Teo Ho Pin suggested selling balance flats on a daily basis, as and when they become available. I have some problems with this. We have been actively clearing our stock of “balance flats” through various “Sale of Balance Flats” (SBF) exercises. Currently, there is only a small outstanding stock of about 5,000 flats in various stages of construction. We will put those nearing completion, about 3,000 units, to market soon. There are significant benefits in bunching them for sale under the SBF exercise. Small batches inevitably attract disproportionately large numbers of applicants, resulting in repeated disappointment and intense frustration. I hope Dr Teo accepts this explanation. His suggestion of allocating on a first-come-first-serve basis may not reflect the order of priority. Moreover, when it is your turn to select, and you reject a unit, you will go to the back of a very long queue. That will cause more unhappiness.
Seniors and Retirees
21. Third, seniors and retirees. I agree with Ms Foo Mee Har that many of our seniors have significant assets in their houses. This is a good thing, as it opens up opportunities for them to get some retirement income, for example, by subletting their flats or rooms. This year, we have increased their options by implementing the new Silver Housing Bonus (SHB) scheme to facilitate right-sizing, and the Enhanced Lease Buyback Scheme (LBS) to support ageing-in-place. But many may still not be aware of the schemes or they may not have accurate information. We will step up public outreach and financial counselling to those who may benefit from these options.
22. To support right-sizing, we are building more studio apartments for seniors in various towns. I know many are prepared to right-size, provided they do not have to leave their neighbourhood. We are introducing a new Studio Apartment Priority Scheme (SAPS) and we will reserve half of the supply for seniors who apply for one near their current flat, near their current community or near where their children live. This is a further enhancement to the current Ageing-in-Place Priority Scheme and the Married Child Priority Scheme which award priority through giving the seniors more ballot chances. The new Studio Apartment Priority Scheme will replace these two priority schemes. This will be implemented from the May BTO exercise.
23. But I agree with Dr Teo Ho Pin and Mr Gan Thiam Poh that many multi-generational families prefer to live together or close to one another. Last year, we introduced the Multi-Generation Priority Scheme to allow such families to apply for the same BTO project so that they can live close by. More than 60 pairs of families have benefited from it. This is not many, but those 60 families were happy. Er Dr Lee Bee Wah suggested that we go further to build some multi-generation flats, presumably with 4 bedrooms, to help such families live in the same flat. I heard her. She advanced strong arguments on how multi-generation families could better support the newlyweds financially besides transmitting important cultural values. I agree with her. I believe there is some demand because some of my residents come to me for such flats too. But we do not know how big the demand is. Anyway, I have asked HDB to consider doing so in some BTO developments, to test out their demand. If we can, we will try to do one in Yishun.
24. On a separate point, Ms Foo Mee Har spoke about the growth of foreigner enclaves in some HDB blocks. I agree with her that we should avoid such enclaves. Ms Foo suggested that we cap the number of foreigner tenants at 10% of each block. Let us do some analysis to see if 10% is the appropriate cap. I find it a bit low, but in principle, I agree that we should impose one. While we sort out the implementation details, HDB will immediately cap approvals for all new and renewal of HDB tenancy agreements, involving non-citizens, to one and a half years. Right now it is three years. We will halve it immediately. These changes will not apply to Malaysian tenants as they face less integration challenges.
Re-examining Public Housing Policies
25. For the rest of this speech, let me elaborate on my second takeaway of involving Singaporeans more in designing housing policies. After 50 years of public housing, it is good to re-examine some old assumptions and re-visit some key policies. And I intend to do so, jointly with Singaporeans. For certain, the next 50 years will be different from the last 50 years. First, home ownership has crossed 90%. We have probably reached the limit of what is possible. Second, the days of high economic growth of 7%, 8%, 9%, and hence strong wage growth, are over. As property prices are closely correlated with economic growth, low growth means huge capital gains that our parents’ and our generation made through reselling HDB flats will now become less likely. Third, Singapore’s population was young and rapidly growing in the past, but future growth will severely moderate. Increasing singlehood and declining birth rates may persist though we will continue to persevere to reverse those trends. This has implications on family formation and household size. Fourth, the biological ageing of our population and the physical ageing of HDB towns will become the dominant themes that shape and colour our community life. HDB estate layout and designs will need to keep pace with such major social developments.
26. In short, our public housing system needs to evolve with the times. Which elements in our current system remain relevant, which require enhancement or strengthening, and which need to be overhauled? If some major changes are called for, how do we implement them without adversely affecting the vast majority of Singaporeans who own those valuable assets and are quite comfortable with the status quo? This is especially for the elderly. Ms Lee Bee Wah spoke on how to monetize their assets. I think they will be worried if their assets suddenly shrink because of policies that bring prices down. These are complex issues affecting millions of Singaporeans. While change is necessary, it is important that we do not forget the needs of the silent majority. We should give voice to those in our society who are less well resourced to make their interests, needs and concerns heard. Policies must benefit the larger good. As we make changes, we must be mindful not to throw the baby out with the bath-water. We must implement these changes judiciously and with heart.
27. Er Dr Lee Bee Wah, A/P Dr Faishal Ibrahim, Mr Liang Eng Hwa, Mr Pritam Singh, Mr Hri Kumar and Mr Yeo Guat Kwang have all made thoughtful comments on this important subject. I listened carefully and I thank you all. From their speeches and other comments aired during Our Singapore Conversation, I distilled four issues worthy of deeper reflection. First, at the ideological level, what should be the purpose for building HDB flats? Second, at the practical level, what kind of housing should the government provide to meet future needs? Third, at the individual level, how do we address affordability concerns of HDB flat buyers, living in a global city with a high-end private property segment imposing upward pressure on mass market private home and HDB resale prices? Fourth, at the macroeconomic level, how should public housing respond to upcoming demographic changes and specifically, how can we help elderly Singaporeans better monetise their housing assets? Let me elaborate.
28. First, what should be the purpose of building HDB flats? The HDB flat is first and foremost a home, where couples start their lives together, and build their hopes and dreams. This is fundamental. But it is also an asset, which they can use to build a better life in their prime, and provide security for their retirement needs. In the early years of Singapore’s independence, homelessness and squatter living were the norm. At that time, we were all HDB first-timers. Having basic, no-frills, low-cost homes was top priority. As Singapore progressed from third world to the first, the quality of HDB flats improved dramatically and we have now become a nation of proud homeowners. The majority are HDB second-timers. HDB flats have become significant assets to most Singaporeans. A home is now also an asset. This is a proud achievement which citizens in many other countries could only hope and dream about.
29. We enabled this transformation through several important housing policy changes over the decades. I thought it useful to recount the key milestones. In 1971, we allowed HDB flats to be resold for a profit. Before that, flats could only be sold back to HDB at very low pre-determined prices. In 1989, we allowed flat owners to retain their HDB flats even when they buy a private property. Before that, they would have to sell off their HDB flats. In 1993, we allowed buyers to take loans based on the prevailing market value of the flat, which allowed sellers to maximise the value of their assets. Before that, housing loans were based on HDB’s historical selling prices. In 2003, we allowed flat owners to sublet their flats. Before that, the underlying principle was strict owner-occupation. These policy changes have benefitted many Singaporeans. Many were able to upgrade their homes, and dramatically improved their quality of life. It has also allowed many to accumulate large nest eggs, to fund their retirement needs.
30. Looking ahead, as we may no longer get the same kind of returns from reselling a HDB flat as in the past, how will its role as an asset be affected? If it is likely to diminish, how should we make the adjustments? How will any such adjustments impact different groups of Singaporeans with different aspirations and needs?
31. Second, what kind of housing should the government provide to support future needs and at what size? I heard Mr Pritam Singh talking about this particular aspect earlier. I don’t have an immediate answer. I think we have to search for the answer together. Over the years, we have widened the range of choices, in terms of flat types and designs, to meet a wide range of aspirations. Many are now clamouring for the HDB to return to basics and its original mission of helping Singaporeans own a basic home. But what does “returning to basics” mean?
32. Does returning to basics mean that we should focus only on HDB flats? Then where should we set the income ceiling for HDB flats? Should we lower it, raise it or lift it altogether? What about the upper middle class? Should we for example stop offering ECs, as suggested by Mr Hri Kumar and Er Dr Lee Bee Wah?
33. Does returning to basics mean that we return to pre-2003 days of strict owner-occupation? How will this affect the many retirees who rely on income from subletting or the younger homeowners who use it to help support their lifestyle?
34. Does returning to basics mean that we return to pre-1989 days when we require HDB flat owners to sell off their flats when they buy a private residential property as suggested by Mr Hri Kumar? How will this affect the plans of many Singaporeans who aspire to live in a private condo and use their HDB flat for additional rental income?
35. Third, how do we ensure the affordability of new HDB flats for a new generation of newlyweds? Global liquidity and low interest rates since the global financial crisis of 2009 have caused house prices to appreciate sharply, more than income growth. Affordability has worsened. While high prices make homeowners happy, it has caused anxiety amongst young buyers as well as their parents. Some can look to their parents for help, but this may be at the expense of their parents’ retirement savings.
36. We will do more to reduce BTO flat prices relative to incomes, and reduce the financial burden of housing on our young. One way is to increase housing grants for families with children to partly improve affordability and partly to reward parenthood, as suggested by Mr Gan Thiam Poh. Mr Ang Wei Neng suggested the same thing, but not from the parenthood point of view. There may be other ways. However, even as we make new HDB flats cheaper, we must continue to encourage prudence and avoid over-spending on housing, a point very well emphasised by Ms Penny Low. Hence, I agree with her and Mr Yeo Guat Kwang that more must be done to help Singaporeans buy within their means. Higher housing grants must however not lead to more people buying larger flat types than they can afford. I hope this is a principle that we can have consensus on.
37. In the earlier days, a three-room flat was acceptable to many. Now, it is a four-room flat, for some a five-room flat, and others, maybe an EC. What can a young graduate couple in the workforce for two years reasonably aspire to? What about a lower-income household? Are these aspirations within their means? Will they get into trouble if individual circumstances change suddenly or when the economy heads south? As a government, how can we help meet newlyweds’ aspirations, while also ensuring that they make prudent and sustainable purchases?
38. Fourth, how should public housing respond to the ageing of our population? When our population was young and incomes were rising across the board, public housing was an effective way of sharing the fruits of economic growth. But as our population ages and economic growth moderates, I agree with Ms Foo; we have to be much more proactive and creative in working out options to help our seniors unlock their assets in their HDB flats. We have tinkered with the Lease Buyback Scheme, and introduced some right-sizing incentives. What else can we do?
39. Our public housing policies have been highly successful in enabling the vast majority of Singaporeans to own their homes. The opportunity to own homes has not been confined to those in the higher or middle income groups. Low income Singaporeans too have benefited. This is quite unique in the world and our achievement has been the envy and the subject of many studies by many countries. I know, because I receive these visitors almost every other week.
40. A relook is however necessary in the light of significant demographic and economic changes. The primary mission of HDB to offer an affordable flat for the majority of Singaporeans will remain unchanged. Fortunately this is within our control as we set BTO prices and HDB is the largest housing developer. We have stopped BTO prices from rising by delinking them from resale prices. We can now pause and see what else we can do to bring BTO prices in non-mature estates to say, around 4 years of salary as it was before the current property cycle started. We will do so partly through cooling measures to nudge the property market down; partly by seeing if an alternative housing option can be designed. One thing is clear; we are committed to restoring and maintaining the affordability of new HDB flats to the vast majority of first-timer Singaporean households. Their Singapore Dream of owning their own homes, like their parents’, is safe. We will make sure of that.
41. At the same time, with the ageing population and the bulk of seniors’ savings tied up in their HDB flats, we will press on with more options for the seniors to unlock their assets.
42. I have earlier posed quite a number of questions which we need to find answers to. They are not trivial questions, and forging consensus on what the answers should be will be challenging. But they are useful food for thought. Post-COS, I agree with A/P Dr Faishal Ibrahim that we should organise several Our Singapore Conversation discussions to explore some of these issues with fellow Singaporeans. I hope some Members can join in such sessions. As public housing impacts the lives and well-being of many Singaporeans, we will need to deliberate over these issues carefully. I invite concerned Singaporeans of all ages to mull over these issues with us. Share with us your worries, your fears, your hopes and your dreams. We hope to hear many views and many ideas so as to better inform our housing policies. Let us work on the challenges together. Let us shape our future housing policies together.