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SINGAPORE: "Drastically" lowering the prices of Build-to-Order (BTO) flats, to the extent of disregarding land costs, would end up "hurting all Singaporeans, instead of helping them", said Senior Minister of State for National Development Sim Ann on Sunday (Dec 11).
She was responding to a post by NCMP Leong Mun Wai (PSP) on his Facebook page and website that questioned the Government’s subsidies for Housing and Development Board (HDB) flats.
Mr Leong also said that land costs should not be included when pricing HDB flats, and that the Government should only include construction costs and price differences between locations.
Ms Sim said the Government cannot disregard land costs if it accepts that land values vary across locations.
"I conclude that what Mr Leong is really asking for is the Government to price BTOs much lower, whatever the justifications may be," she added.
The Government has been increasing subsidies and grants where necessary to keep BTO prices affordable and stable, despite resale prices surging 28 per cent from 2019 to 2022, Ms Sim said.
Further increasing housing subsidies must be weighed carefully against other urgent spending priorities. It would mean reducing spending on other important things such as education, healthcare and security, the Senior Minister of State said.
“We may well also have to raise taxes to pay for the higher housing subsidies,” she said.
“Mr Leong’s response would be that the Government can charge HDB less for the land.
“By this, he means that we should draw more from our Reserves, though he has avoided saying this explicitly. We have explained a number of times that state land forms part of the nation’s Reserves.
“If HDB does not pay back into the Reserves the fair market value of the land, we would in effect be running down the value of our Reserves, to the detriment of current and future generations.”
Ms Sim added that the Government has kept BTOs affordable for Singaporeans and will continue to do so. For many buyers, the home price to annual income (HPI) ratio is about four to five. This means buyers use about four to five years of total household income to pay for their BTO flats.
In comparison, HPI ratios in global cities range from eight times to more than 20 times, she added.
Many BTO flat owners service their mortgages solely out of their CPF contributions and pay “little or no cash”, Ms Sim noted.
They use about 25 per cent or less of their monthly income to pay for their housing loans, she said, adding that owners in other countries use a larger proportion of their pay.
“Hundreds of thousands of homeowners who bought their flats from Housing and Development Board have sold them for higher prices in the resale market. They know HDB’s pricing of BTO flats is generous,” Ms Sim wrote.
She said concerns about affordability usually focus on larger units, but such flats are already priced at a “very generous discount to the open market”.
There is a limited supply of such units, and pricing them lower would attract more eligible buyers into the queue, making it less likely for those starting families to obtain one.
“This would also be unfair to all the buyers not lucky enough to secure such a flat, and enjoy the large windfall gain,” she said.
https://www.channelnewsasia.com/sin...nd-costs-hurting-singaporeans-sim-ann-3137456
