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The article below appends excerpts from Mr. KBW's speech on public housing (there are two articles in this post).
The Straits Times
www.straitstimes.com
Published on Mar 09, 2013
New HDB flats to become cheaper
Khaw vows to make them nearly 30% cheaper to keep homes affordable
By Rachel Chang
THE prices of new flats will become almost 30 per cent cheaper to keep the Singapore dream of home ownership alive, National Development Minister Khaw Boon Wan pledged yesterday.
The ambitious goal makes clear the Government's commitment to "restoring and maintaining" the affordability of flats for first-time home buyers, he told Parliament.
Hinting at a fundamental redesign of public housing, Mr Khaw said that he wants new flat prices in non-mature estates at around "four years of salary" - what they were before the property bull run of the last six years began.
That is, new homes in non-mature estates will be priced at four times the annual median income of flat applicants.
This would mean a sharp drop from current prices, which are about 5.5 years of salary.
Referring to young first-timers, the minister declared that "their Singapore dream of owning their own homes, like their parents', is safe".
He already broke with HDB convention in 2011 by delinking Build-to-Order (BTO) prices from the rising resale market when he took over the housing portfolio.
This meant that while the resale market has risen 12.5 per cent since, prices of new flats launched have stayed stable. Since 2007, when the current property upswing began, the resale price index has spiked 95.8 per cent.
Yesterday, Mr Khaw made clear that he would be going much further than price stabilisation.
Bringing down BTO prices in non-mature estates will be partly through market cooling measures, and "partly by seeing if an alternative housing option can be designed", he said.
He did not elaborate, but analysts said the remark portended major policy changes - perhaps shorter flat leases or different classes of new flats.
In a budget debate speech chock-full of policy announcements, Mr Khaw answered calls from MPs to meet the housing needs of groups that have been on the sidelines in the first half of his term. He had something for everyone, from singles and divorcees to second-timers and young couples waiting for their new flats to be built.
Fulfilling a promise Prime Minister Lee Hsien Loong made in last year's National Day Rally, he announced that singles aged 35 years old and above will be able to buy new two-room flats from July.
The first batch will likely be in Sengkang, but only those earning $5,000 and less a month will be eligible, he said, as they face the most financial difficulty in getting housing.
Lower-income families looking to buy their second new flat will now get double the chance: 30 per cent of two- and three-room flats in non-mature estates will now be for second-timers, up from 15 per cent. Of this 30 per cent, 5 per cent will be reserved for divorcees or the widowed who have young children.
The new scheme for young families waiting for their new flats to rent subsidised flats from the HDB in the interim will also now be extended to young, childless couples. SLP head of research Nicholas Mak said that Mr Khaw's plan to slash BTO prices would reverberate through the entire property market. Demand may drain from the resale market to the new, cheaper flats.
But with construction costs rising and curbs on foreign workers, he feared the Government might fail to meet its promised supply.
Teacher Lim Yan Han, 24, welcomed Mr Khaw's message but said the proof of the pudding was in the eating. She and her engineer boyfriend have failed in four ballots for new flats, three in mature estates, and one in non-mature. "It is already so competitive. I'm worried that lower prices will mean more people competing for flats."
rchang@sph.com.sg
------------------------------
The Straits Times
www.straitstimes.com
Published on Mar 09, 2013
Back to basics for public housing
Past assumptions underpinning housing policies may no longer hold. For example, slowing economic growth means future Housing Board flat-owners may no longer benefit from large capital gains. An ageing population also means fewer young couples getting married and needing new homes. After 50 years, it's time to relook housing policies, said National Development Minister Khaw Boon Wan in Parliament yesterday, assuring Singaporeans that the Government will involve them in re-examining public housing policies. Here are excerpts of his speech to Parliament.
OUR public housing system needs to evolve with the times. Which elements in our current system remain relevant, which require strengthening, and which need overhaul? 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?
It is important that in doing so, we do not forget the needs of the silent majority. We must be mindful not to throw the baby out with the bath water. We must implement these changes judiciously and with heart.
From MPs' speeches and other comments aired during Our Singapore Conversation, I distilled four issues worthy of deeper reflection.
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. 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 first-time applicants of HDB flats. 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.
We enabled this transformation through several important housing policy changes. In 1971, we allowed HDB flats to be resold for a profit. Before that, flats could only be sold to HDB at 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 full owner-occupation. These policy changes have benefited 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.
Looking ahead, as we may no longer get the same kind of returns from reselling an 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?
Second, what kind of housing should the Government provide to support future needs? 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?
Returning to basics?
DOES returning to basics mean that we should focus only on HDB flats? Where should we set the income ceiling for HDB flats? Should we lower it, raise it or remove it altogether? What about the upper middle class? Should we, for example, stop offering executive condominiums (ECs)?
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 the income from subletting or the younger homeowners who use it to help support their lifestyle needs?
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? How will this affect the plans of many Singaporeans who aspire to live in a private condo and use their HDB flat for rental income?
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.
Whilst high prices make homeowners happy, it has caused anxiety amongst young buyers as well as their parents. Some couples look to their parents for help, but this may be at the expense of their parents' retirement savings.
We will do more to reduce BTO (build-to-order) 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 reward parenthood. However, even as we make new HDB flats cheaper, we must continue to encourage prudence and avoid over-spending on housing.
In the earlier days, a three-room flat was acceptable to many. Now, it is a four-room flat or even a five-room flat or 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 or when the economy heads south? As a government, how can we help meet newlyweds' aspirations, while also ensuring they make prudent and sustainable purchases?
Keeping flats affordable
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, we have to be much more proactive and creative in working out options to help elderly Singaporeans unlock and monetise their HDB flats. We have tinkered with the Lease Buyback Scheme, and introduced some right-sizing incentives. What else can we do?
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 high or middle income groups. Low income Singaporeans too have benefited. This is quite unique in the world.
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 four 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 flats, like their parents', is safe.
At the same time, with the ageing population and the bulk of the seniors' savings tied up in their HDB flats, we have to press on with more options for the seniors to unlock their assets.
We should organise several Our Singapore Conversation discussions to explore some of these issues with fellow Singaporeans. 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 ideas so as to better inform our housing policies.
Let us work on the challenges together and shape better housing policies for our future generations.
The Straits Times
www.straitstimes.com
Published on Mar 09, 2013
New HDB flats to become cheaper
Khaw vows to make them nearly 30% cheaper to keep homes affordable
By Rachel Chang
THE prices of new flats will become almost 30 per cent cheaper to keep the Singapore dream of home ownership alive, National Development Minister Khaw Boon Wan pledged yesterday.
The ambitious goal makes clear the Government's commitment to "restoring and maintaining" the affordability of flats for first-time home buyers, he told Parliament.
Hinting at a fundamental redesign of public housing, Mr Khaw said that he wants new flat prices in non-mature estates at around "four years of salary" - what they were before the property bull run of the last six years began.
That is, new homes in non-mature estates will be priced at four times the annual median income of flat applicants.
This would mean a sharp drop from current prices, which are about 5.5 years of salary.
Referring to young first-timers, the minister declared that "their Singapore dream of owning their own homes, like their parents', is safe".
He already broke with HDB convention in 2011 by delinking Build-to-Order (BTO) prices from the rising resale market when he took over the housing portfolio.
This meant that while the resale market has risen 12.5 per cent since, prices of new flats launched have stayed stable. Since 2007, when the current property upswing began, the resale price index has spiked 95.8 per cent.
Yesterday, Mr Khaw made clear that he would be going much further than price stabilisation.
Bringing down BTO prices in non-mature estates will be partly through market cooling measures, and "partly by seeing if an alternative housing option can be designed", he said.
He did not elaborate, but analysts said the remark portended major policy changes - perhaps shorter flat leases or different classes of new flats.
In a budget debate speech chock-full of policy announcements, Mr Khaw answered calls from MPs to meet the housing needs of groups that have been on the sidelines in the first half of his term. He had something for everyone, from singles and divorcees to second-timers and young couples waiting for their new flats to be built.
Fulfilling a promise Prime Minister Lee Hsien Loong made in last year's National Day Rally, he announced that singles aged 35 years old and above will be able to buy new two-room flats from July.
The first batch will likely be in Sengkang, but only those earning $5,000 and less a month will be eligible, he said, as they face the most financial difficulty in getting housing.
Lower-income families looking to buy their second new flat will now get double the chance: 30 per cent of two- and three-room flats in non-mature estates will now be for second-timers, up from 15 per cent. Of this 30 per cent, 5 per cent will be reserved for divorcees or the widowed who have young children.
The new scheme for young families waiting for their new flats to rent subsidised flats from the HDB in the interim will also now be extended to young, childless couples. SLP head of research Nicholas Mak said that Mr Khaw's plan to slash BTO prices would reverberate through the entire property market. Demand may drain from the resale market to the new, cheaper flats.
But with construction costs rising and curbs on foreign workers, he feared the Government might fail to meet its promised supply.
Teacher Lim Yan Han, 24, welcomed Mr Khaw's message but said the proof of the pudding was in the eating. She and her engineer boyfriend have failed in four ballots for new flats, three in mature estates, and one in non-mature. "It is already so competitive. I'm worried that lower prices will mean more people competing for flats."
rchang@sph.com.sg
------------------------------
The Straits Times
www.straitstimes.com
Published on Mar 09, 2013
Back to basics for public housing
Past assumptions underpinning housing policies may no longer hold. For example, slowing economic growth means future Housing Board flat-owners may no longer benefit from large capital gains. An ageing population also means fewer young couples getting married and needing new homes. After 50 years, it's time to relook housing policies, said National Development Minister Khaw Boon Wan in Parliament yesterday, assuring Singaporeans that the Government will involve them in re-examining public housing policies. Here are excerpts of his speech to Parliament.
OUR public housing system needs to evolve with the times. Which elements in our current system remain relevant, which require strengthening, and which need overhaul? 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?
It is important that in doing so, we do not forget the needs of the silent majority. We must be mindful not to throw the baby out with the bath water. We must implement these changes judiciously and with heart.
From MPs' speeches and other comments aired during Our Singapore Conversation, I distilled four issues worthy of deeper reflection.
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. 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 first-time applicants of HDB flats. 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.
We enabled this transformation through several important housing policy changes. In 1971, we allowed HDB flats to be resold for a profit. Before that, flats could only be sold to HDB at 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 full owner-occupation. These policy changes have benefited 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.
Looking ahead, as we may no longer get the same kind of returns from reselling an 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?
Second, what kind of housing should the Government provide to support future needs? 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?
Returning to basics?
DOES returning to basics mean that we should focus only on HDB flats? Where should we set the income ceiling for HDB flats? Should we lower it, raise it or remove it altogether? What about the upper middle class? Should we, for example, stop offering executive condominiums (ECs)?
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 the income from subletting or the younger homeowners who use it to help support their lifestyle needs?
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? How will this affect the plans of many Singaporeans who aspire to live in a private condo and use their HDB flat for rental income?
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.
Whilst high prices make homeowners happy, it has caused anxiety amongst young buyers as well as their parents. Some couples look to their parents for help, but this may be at the expense of their parents' retirement savings.
We will do more to reduce BTO (build-to-order) 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 reward parenthood. However, even as we make new HDB flats cheaper, we must continue to encourage prudence and avoid over-spending on housing.
In the earlier days, a three-room flat was acceptable to many. Now, it is a four-room flat or even a five-room flat or 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 or when the economy heads south? As a government, how can we help meet newlyweds' aspirations, while also ensuring they make prudent and sustainable purchases?
Keeping flats affordable
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, we have to be much more proactive and creative in working out options to help elderly Singaporeans unlock and monetise their HDB flats. We have tinkered with the Lease Buyback Scheme, and introduced some right-sizing incentives. What else can we do?
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 high or middle income groups. Low income Singaporeans too have benefited. This is quite unique in the world.
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 four 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 flats, like their parents', is safe.
At the same time, with the ageing population and the bulk of the seniors' savings tied up in their HDB flats, we have to press on with more options for the seniors to unlock their assets.
We should organise several Our Singapore Conversation discussions to explore some of these issues with fellow Singaporeans. 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 ideas so as to better inform our housing policies.
Let us work on the challenges together and shape better housing policies for our future generations.
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