SDP proposes a class of 'non-open market' HDB flats

Flats could only be sold back to HDB, with no chance of capital gains

By Rachel Chang & Tessa Wong, The Straits Times, 5 Nov 2012

THE Singapore Democratic Party (SDP) yesterday unveiled a housing policy paper proposing a new class of flats that they say could be priced as low as $70,000.

These "non-open market" (NOM) flats would be priced by the Housing Board only to recover the cost of administration and construction.

That is, the land that the flats are built on should not have to be paid for by flat-buyers, said the paper, launched at an event at the Quality Hotel.

The SDP calculated that NOM flats could be priced at $70,000 for a two-room unit and up to $240,000 for a five-room. It said these prices would allow a family to pay off a housing loan over nine to 15 years, on payments of no more than 20 per cent of gross monthly income.

Currently, an average five-room flat costs about $380,000 and a 30-year loan can be paid off with payments at about a quarter of a median monthly household income of $5,600.

NOM flats could only be sold back to HDB, said the SDP, with no chance of capital gains.

Separately, open-market flats - that is, akin to normal flats now - would continue to be built. These would continue to be priced on the basis of recovering land costs as well, and would be allowed to be bought and sold for capital gains.

The party also said the new system would be phased in slowly so as not to crash the current market. Existing flat-owners would be given the option to convert their flats to NOM ones - and receive cash and CPF reimbursements from HDB on the amount they have paid above the new flat prices.

Aside from NOM flats, the SDP paper also called for the Housing Board to build a buffer stock of flats to meet unanticipated demand, and to give priority in the ballot to families with young children.

The policy paper was written by four SDP volunteers: PhD student Jeremy Chen, 30; doctors Leong Yan Hoi and Toh Beng Chye, both 48; and property consultant and accountant David Goh, who is in his early 50s. They argued that the surge in the housing market over the last half-decade has put it on an unsustainable trajectory in the light of Singapore's rapidly ageing population. Demographically, they said, Singapore is at a point similar to Japan in 1990 at the peak of its housing boom.

Economic Society vice-president Yeoh Lam Keong said the NOM flat proposal would help delink first-time buyers from the market system. "If we continue with the current system, HDB prices will keep increasing... and the Government will have to keep increasing subsidies."

But, he cautioned, the two types of flats could create a "class system" among flat-owners, with some unable to gain from property appreciation.