Saturday 5 October 2019

Since GE2011, have HDB issues been resolved?

Since the watershed GE2011, issues to address have included housing supply, price and inclusivity. Have these been ticked off?
By Rachel Au-Yong, Housing Correspondent, The Straits Times, 3 Oct 2019

It is a rite of passage for most Singaporeans. No, not getting married, though that is closely tied to it - but owning their first HDB home.

And that has just become easier because of measures announced by National Development Minister Lawrence Wong on Sept 10.

These are: Raising the income ceiling for Housing Board (HDB) flats and executive condominiums (ECs) by $2,000, to $14,000 and $16,000 respectively, and extending a repackaged housing grant to more Singaporeans.

The new Enhanced CPF Housing Grant of up to $80,000 replaces two previous grants. It allows more people to benefit as it has a higher income cap and does not impose any restrictions on the flat size or location.

Some may argue that fine-tuning public housing policy in line with changing demographics is the duty of any responsible government.

However, in the case of public housing, it is not simply one item on the long to-do list that is governance: It is of paramount importance, given that about eight in 10 people in Singapore live in HDB flats.

Home ownership also lays the foundation for the Singaporean identity. It is an asset, one of the four pillars of the social security system - along with the Central Provident Fund (CPF), Workfare and affordable healthcare - and represents a stake in nationhood. And indeed, stability of that nationhood, considering that it is not uncommon that the act of putting names down for a Build-To-Order (BTO) flat sometimes precedes the marriage proposal itself these days.

If not handled properly, public housing can become a major fault line at the polls, which it proved to be in 2011 when, amid runaway housing prices, the People's Action Party (PAP) won with its lowest vote share since independence.

The latest announcements - following a slew of purchaser-friendly measures over the past few years - prompt the question: Has housing as a source of political angst been "settled"?

There are three aspects to look at when trying to answer that.


It is hard to believe now - in an era of carefully calibrated, steady BTO supply - but the supply of newly built units was once such that flats languished unsold for years.

After the Asian financial crisis in 1997, the authorities found themselves with too many flats on their hands. Rather than set the demand and then build to meet it, the HDB back then had used a queue system where new flats in non-mature estates were sold as they were finished to those who had registered to be in line.

But demand had fallen sharply after the woes of 1997. It took about five years to sell the 31,000 built units that were available.

The BTO scheme rolled out in 2002 addressed that. Projects had to meet 70 per cent of demand before they could be built. In 2011, this was changed to 50 per cent. This removed the risk of HDB building new flats with no buyers.

In fact, the reverse happened - so conservative did the HDB building programme become that by 2010, there was a shortage of new HDB flats for buyers.

Many homebuyers turned to resale flats instead and prices for these rose, putting the flats out of reach of many first-time buyers, especially homes in mature estates which tend to be pricier. Since then, resale flat prices have stabilised and application rates for new flats have eased greatly.

From about 5,000 new flats launched in 2007, to a high of 25,000 new flats each year from 2011 to 2013, the supply situation is on track to a tamer 15,000 new units this year.

In the light of the announcements on higher grants and raising the income ceiling, Mr Wong has also said the HDB is likely to increase the BTO supply next year to meet the anticipated demand.

After clearing the supply backlog, the HDB has introduced other ways to help families get their homes more quickly. For example, it rolled out the Re-Offer of Balance Flats scheme in August 2017 to sell flats that did not find buyers through the BTO and subsequent Sale of Balance Flats exercises. This year, select flats are put up for open booking on a rolling basis, which means buyers can book a flat the day after it goes on sale.

The HDB has also committed to shortening the waiting time for some BTOs, to two to three years from the point of application, instead of the usual three to four.

These policies are largely aimed at the traditional family unit consisting of a couple and their parents or children.

But the HDB has also given more singles the chance to buy a subsidised flat - relaxing rules that enable them to purchase two-room flats in non-mature estates and building more of such flats. In 2017, an average of 5.9 single applicants vied for each new two-room HDB flat, down from 57.5 such applicants in June 2013.

It has also become slightly easier for divorcees and their children to get a roof over their heads. In addition, more assistance was given to help rental families own a flat.

But there remain gaps. MPs such as Nee Soon GRC's Mr Louis Ng have asked the authorities to let unwed mothers buy an HDB flat more easily, while some activists say lesbian, gay, bisexual and transgender couples are entitled to subsidised HDB homes too.


HDB resale prices rose a staggering 10.7 per cent in 2011, although in the period leading up to that election year, the Government had tried to rein in the housing market with multiple rounds of cooling measures.

When Mr Khaw Boon Wan took over as Minister for National Development after the May polls, he delinked BTO prices from the resale market by increasing subsidies for new flats, making them less out of reach for young couples.

Just as significantly, he opened up the number of people who could apply for BTOs: At the National Day Rally in August 2011, the income ceiling to buy HDB flats was raised by $2,000 to $10,000 - the first increase in 17 years.

Since then, the income ceiling has been raised more regularly. In August 2015, the income ceiling was raised another $2,000 to $12,000. It was raised again this month - slightly more than four years later - to $14,000.

Another measure by Mr Khaw to help buyers was the 2014 move that did away with cash-over-valuation, the cash premiums that buyers paid on top of the valuation for resale flats. Buyers and sellers would negotiate on price instead.

The Government has also been steadily increasing the amount of handouts to first-timers, lower-income buyers and, more recently, middle-income buyers.


The issue of decaying HDB leases has been on people's minds, following comments in 2017 by Mr Wong cautioning buyers to "do their due diligence and be realistic when buying flats with short leases".

He added that they should not assume that every old HDB flat would come under the Selective En bloc Redevelopment Scheme, a compulsory buyback scheme with generous payouts.

It triggered debate about the value of HDB flats, which have often been viewed as more than a home, but as an asset and a store of value to depend on in old age.

The Government responded to concerns over the declining values of ageing HDB flats last year. In August 2018, Prime Minister Lee Hsien Loong announced a new Voluntary Early Redevelopment Scheme, which gives HDB flat owners the chance to have the Government buy back their flats when these are around 70 years old. He also rolled out the Home Improvement Programme II, a second round of upgrading works when blocks are 60 to 70 years old, announced at the National Day Rally last year.

Although details for these programmes will not be released until much later - the first HDB flats to turn 60 years old will do so only in a decade - observers said the schemes would help public housing retain value as it ages and, in turn, be somewhat marketable, especially with competition from newer buildings.

Rules were also relaxed in May to let HDB flat buyers use more of their CPF savings and get larger HDB loans for ageing flats.

The move, said some observers, has expanded the pool of potential buyers for older flats, which led to a higher-than-normal uptick in transactions in the two months after the changes.

Before that, restrictions on the use of CPF meant owners of older flats found it harder to sell the homes as they inched towards their 40th year.

Taken together, the recent slew of measures goes some way to maintaining the value of ageing HDB flats and restoring confidence - reflected in improved market sentiment, higher transaction volumes and prices holding steady for the last six years or so.


The timing of the most recent announcements has prompted speculation that they are part of early campaigning for the ruling PAP.

The next general election must be held by April 15, 2021, but observers believe it will be held earlier, especially since the Electoral Boundaries Review Committee has been formed. Two windows for the election are December this year and March to May next year, after the Budget - and its attendant goodies - are unveiled.

Many issues that could plague public housing have been addressed and not just at the last minute to shore up some votes, but fairly consistently across eight years or so.

Supply is steady; waiting times are being cut; prices have moderated; housing grants are substantively more generous; and more groups of people are being helped to afford flats.

An objective observer, comparing the situation in the general elections of 2011 and 2015 with today, will have to conclude that this year, it is far easier to buy and get an HDB flat than before.

At least in housing, the PAP Government can be said to be well on track to delivering its promise made during the National Day Rally in 2011, when PM Lee vowed to meet the demand for new flats and keep prices stable and affordable.

Several months before that rally speech, he apologised at the hustings for the mounting bread-and-butter problems in Singapore and vowed to "try and do better the next time".

Eight years later, it looks like the Government has indeed done better.

But whether voters agree - and translate that approval into votes - remains to be seen.

Enhanced CPF Housing Grant: Higher grants, more choice for first-time HDB flat buyers from 11 September 2019

Rules on CPF usage and HDB housing loans updated to ensure homes for life from 10 May 2019

New HDB flats to come with condo-like fittings starting from February 2019 BTO sales exercise

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