MND looking at measures to reduce high rejection rate for BTO applications: Desmond Lee

HDB is tackling the housing crunch with both supply and demand measures.

Ruth Chai | Keyla Supharta | February 06, 2023, 11:02 PM

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Minister for National Development Desmond Lee said that the government is committed to keep HDB flats affordable and accessible for Singaporeans.

In a marathon session of Parliament, beginning at 12 noon and stretching past 8:00pm at night, Lee laid out the government's approach towards public housing, and its importance in providing all Singaporeans access to affordable homes.

He also spoke of new measures the government is considering to help prospective homeowners.

Supply crunch due to Covid-19 pandemic

In the past 10 years before Covid-19 hit, the market for HDB flats had been fairly stable. HDB supply grew with demand, as household sizes started to fall and more wanted to live alone.

Lee explained that however, during the pandemic, resale prices rose as the HDB building programme suffered supply disruptions, such as the halting of construction work, a shortage of workers, and the shoring up of construction firms all over Singapore.

In 2019, HDB completed some 12,000 flats, contrasted with 2020 when HDB completed fewer than 8,000 flats.

Some saw the disruption in supply and opted to purchase a resale flat instead, which caused the price of resale flats to rise.

Others started queuing for BTOs earlier, as they did not know if they could successfully ballot for flats on time, pushing up the demand for BTO flats.

"Over the last three years of the pandemic, first-time BTO applicants increased by 80 per cent and second-time BTO applicants grew even more, by a whopping 140 per cent, compared to the preceding three years from 2017 to 2019, pre-pandemic," Lee stated.

This was further exacerbated by a shift in social norms, which saw young Singaporeans wanting to move out earlier to live on their own, a trend which was accentuated by the pandemic as many felt fatigued cooped-up in their homes.

Lee said that many young Singaporeans and their parents have shared their anxieties about the sharp increase in resale prices.

What the govt has already done

Building more, keeping prices down: Lee

HDB has completed more than 20,000 homes in 2022 in a bid to catch up to the demand. This year, HDB aims to complete another 20,000 flats.

In 2022, 23,000 new flats were launched, with another 23,000 new flats to be launched this year (2023). HDB aims to launch up to 100,000 new flats between 2021 and 2025 in order to meet higher demand.

Before the pandemic, Shorter Waiting Time (SWT) flats were introduced to ensure that some will get their flats within three years.

Prioritised young couples buying their first flat

The government has also prioritised young couples who are buying their first flat. Since Aug. 2022, the govt has set aside at least 95 per cent of 4-room and larger BTO flats for families who are buying their first flat, for both mature and non-mature estates.

Despite strong demand and rising construction costs in these past two years, Lee said that the government has kept BTO prices almost flat. In that time, construction costs have risen by almost 30 per cent.

HDB studies the household income across different levels in order to establish prices to ensure affordability. Grants are also provided, with more for those with lower incomes.

Visible outcomes

Lee cited several signs of success regarding HDB's measures.

Firstly, for first timers who apply for BTO flats in non-matures estates, "virtually everyone" gets the opportunity to select a flat within three tries.

Secondly, more than eight in 10 buyers who collected their keys to BTO flats or bought resale flats in 2022 can service their monthly mortgage fully from their CPF contributions, with little to no cash outlay.

Thirdly, after two rounds of cooling measures, there is an evident moderation in the rate of increase in resale prices.

"Around 85 per cent of our low-income households own their own homes," Lee stated.

The HPI ratio, or the years of total household income to buy a house in Singapore, is generally around four to five times. Lee contrasted this with other major cities like Los Angeles and London, about eight to 15 times, and Hong Kong, which is 20 times.

What more will the govt do

HDB to launch more flats

Lee encouraged first-timer couples to consider purchasing BTO flat in a non-mature estate so as not to put their family plans on hold. He assured that the ministry is doing its utmost best to improve the accessibility and affordability of HDB flats.

“In terms of supply, we are committed to launch up to 100,000 new flats between 2021 to 2025 if needed,” Lee said.

The ministry also intends to launch more Shorter Waiting Time (SWT) flats from 2024 onwards and intends to reach pre-Covid levels of launching 2,000 to 3,000 SWT flats per year by 2025.

Priority given to first-time home buyers

HDB also aims to make SWT flats form a larger proportion of their supply of new flats to reduce waiting time, encourage homeownership and support marriage and parenthood in Singapore.

“In terms of demand, we will continue to review how we can better allocate flat supply to meet the most urgent housing needs,” Lee said.

First-time home buyers have always been a priority on the list, and support will continue to be given to them-- especially couples who are getting married, or those with young children. 

BTO rejection rate

“We're also looking at measures to reduce (the) high rejection rate for BTO applications, to ensure that BTO flats are prioritised for those with genuine and urgent housing needs,” Lee said.

HDB is also looking into supporting first-time buyers purchasing a resale flat. These new measures will be announced when ready.

Why not make flats in mature estates even cheaper?

Access to flats in mature estates is a cause for concern for young couples. Lee said that as it is a major decision, many couples feel like they cannot compromise on location, and won't settle for second best.

Mature estates tend to be more attractive, but many couples have not been successful in securing a BTO flat in such estates. Unfortunately, mature estates are already built up and available new land is limited.

Large windfall for lucky buyers

Despite the constraints, HDB has been trying to launch more projects in mature estates in the last few years. But more buyers join the queue due to the attractiveness of the BTO subsidy. A successful couple would be able to sell the BTO flat for a large profit after completing the minimum occupancy period, especially in mature estates.

If such flats were priced lower, as some suggest, then the demand for such flats would go up even more, looking for a bigger windfall. This would only make the problem worse.

Mature estate prices are "consciously moderated"

To mitigate this, not only are more flats built in mature estates, but MND has been "consciously moderating" the prices there.

For example, the Prime Location Public Housing (PLH) has been launched to offer additional subsidies for public housing in prime, central locations, to ensure it remains affordable.

However, the bottom line is that flats in desirable mature estates cannot be priced at the same level as other flats.

Public housing to remain accessible and affordable

Lee asserted that despite various improvements in public housing policies, "as a responsible government," it will always ensure that HDB remain accessible and affordable for generations to come.

Given that land is limited in Singapore, support for housing needs is made with a few key principles in mind:

  • Homeownership for families to provide stability is prioritised.
  • Public housing remains inclusive and hence, affordable for those with lower incomes.
  • Public rental housing at a heavily subsidised rate is made available for people who are not ready for home ownership.
  • HDB flats at central and attractive locations will be kept within the reach of the average Singaporean.

Significant resources already going into housing

Lee encouraged individuals have a key role to play in order to meet their own housing needs. In creating and developing the CPF system, public housing becomes even more affordable for the majority of Singaporeans.

"It is easy to ask, why not make flats even cheaper?" Lee said. "As a society, we have to debate and agree on how affordability should be fairly defined, because ultimately, we – the people of Singapore – are all collectively paying for it."

Lee said that HDB already incurred a deficit of S$3.85 billion on its Home Ownership Programme in the last financial year.

"To put this into perspective, the revenue from the 1 per cent GST increase this year is less than half of (this). What about the needs of our citizens for healthcare, education, transport and so on?" Lee asked.

Opposition 'not frank' about the trade-offs

Lee identified a proposal proposed by Leong Mun Wai, a Non-Constituency Member of Parliament from the Progress Singapore Party, and explained the potential problems lurking behind his proposal.

"Mr Leong Mun Wai says that BTO flats can be cheaper if HDB does not have to pay for state land at fair market value," Lee said, possibly referring to a previous Facebook post where Leong suggested taking land costs "out of the picture".

But at the moment, HDB does not set its price based on cost recovery. In fact, BTO flat pricing is independent from BTO development cost.

Furthermore, land is part of the country's reserves. Proceeds from land sales hence do not equate to revenue for spending. The proceeds would return to reserves to maintain the value of the reserves. The reserves are then invested to fund the government's annual budget to support the needs of Singaporeans.

This means if HDB does not pay for state land at a fair market value, the country's reserves will be reduced, compromising Singapore's ability to meet the needs of its people.

This point was previously made by Indranee Rajah, Minister in the Prime Minister's Office.

"Mr Leong deliberately avoids these trade-offs and sugar-coats the tough realities we face. But the government cannot and will not take such an irresponsible approach," Lee said.

"Our public housing system is far from perfect, but it has made housing accessible and affordable for Singaporeans. 90 per cent home ownership in a cosmopolitan city is not something that many other major cities have been able to achieve," Lee said.

Top image via MCI/YouTube and iStock