Booklet of Mah Bow Tan's thoughts on housing

By UMA SHANKARI

THE Ministry of National Development (MND) is publishing a booklet containing the musings of its minister, Mah Bow Tan, in a bid to reach out to more Singaporeans and explain housing policies.

In response to a query from BT, Mr Mah said that the booklet will contain nine commentaries that encapsulate his thoughts on Singapore's public housing programme over the past five decades.

This should give readers an insight into the thinking behind the policies that shape the system Singapore has today.

Said Mr Mah: 'Today, eight in 10 Singaporeans stay in HDB flats, and nine in 10 of them own the flats they live in. This is the highest home-ownership rate in the world. No other country comes close.

'But, public housing is not just about putting roofs over people's heads. It is also about building inclusive homes and communities.

'This has not been an easy effort. There is a finite budget to work with, and policy trade-offs to be made.

'With this booklet, I hope to reach out to more Singaporeans, to tell them about our ongoing housing story, and to enhance their understanding of the policy considerations behind this success story,' he added.

The booklet will be released in either February or March this year.

MND plans to distribute the booklets to relevant entities such as HDB branch offices, town councils, public libraries, and academic institutions.

In addition, the booklet could be sold in selected bookstores.

It might also be available in a Mandarin version, sources said.

Source: www.businesstimes.com.sg

by Mah Bow Tan
05:55 AM Dec 24, 2010

When Kit Chan performed Home at this year's National Day Parade, she struck a chord with many in the crowd, including me. This is my home. This is where people can "build our dreams together". This is what "will stay within me, wherever I may choose to go".

Over the last few months, in this series of articles, I have explained how the Government strives to foster a sense of home and belonging for all Singaporeans through a massive public housing programme. In this final column, let me sum up how the Housing & Development Board delivers this housing commitment in three ways: Homes for the masses, home ownership and homes for life.



HOUSING FOR HOMEBUYERS

Homes for the masses: The HDB builds and prices flats to achieve home ownership for the masses. Unlike some other countries where public housing caters to the poorest minority, the HDB's mission is to house the masses so that we can build an inclusive nation. But we face two growing challenges.

As we become a nation of home owners, demand from flat buyers - many with existing homes - has grown more volatile and sentiment-driven. Oversupply is as worrying as undersupply. Therefore, the HDB moved to the current Build-To-Order system, so that its new flat supply can respond to demand changes, while keeping a small buffer for contingencies.

As Singapore progresses, the people's aspirations are also rising and becoming more diverse. While standard flats will continue to form the bulk of new flat supply, the HDB has to build different flats for different budgets and aspirations, so that public housing remains an inclusive home for Singaporeans.



Home ownership: This is the second hallmark of our housing system. We provide homes for ownership, rather than for rent, so that Singaporeans have a clear stake in the country's prosperity. But even as flats appreciate in value to the benefit of home owners, housing must remain affordable for first-time buyers. The HDB therefore sets aside new BTO flats for first-timers and prices them at a substantial subsidy relative to market value. The HDB also provides housing grants for first-timers to buy resale flats. This helps to ensure affordability and equity in subsidies.

Today, nine in 10 residents own their HDB flats and about 15,000 young couples become home owners every year. Beyond international measures like the Home Price Index (HPI) and the Debt Service Ratio (DSR), our high ownership rate is the clearest indicator that flats remain affordable for first-timers. Most couples buying new flats use only 20 to 25 per cent of their monthly income through CPF contributions to pay for their housing loans, without any cash.

For the minority who cannot readily afford to own flats, public rental flats represent the final safety net. Even then, the HDB and social agencies strive to help these families improve their situations so that home ownership remains a long-term hope for them.




HOUSING FOR HOME OWNERS

Homes for life: The HDB takes a life-cycle approach to its relationship with residents. It helps young couples buy their first homes. It rejuvenates the homes and estates of the existing 900,000 home owners. It also helps older home owners right-size their homes for retirement while they remain staying within their community. Ultimately, HDB flats are not only homes but also an asset whose value can be unlocked, if needed.



Rejuvenating our homes: By 2015, more than 200,000 flats will be at least 30 years old. For older flats to remain attractive and sustain their value for home owners, the HDB embarked on a massive estate renewal programme since the '90s, focusing on Main Upgrading, Interim Upgrading, and Lift Upgrading (LUP).

Since 2007, estate renewal has taken on a larger dimension under the "Remaking Our Heartland" programme. This goes beyond upgrading works by HDB and pulls together efforts by different agencies to give an entire town a makeover. We will breathe new life into the heartlands by injecting new housing, rejuvenating town centres and developing new amenities and recreational areas. These include park connectors, cycling paths, heritage trails, and Active, Beautiful and Clean Water features.

In addition to enhancing the value of HDB flats, rejuvenation must focus on making towns more sustainable. Sustainability is about being able to use our land, energy and water more effectively as well as reducing waste. Punggol will be developed as our first eco-town. Lessons learnt there will be drawn for use in existing towns.



Right-sizing our homes: By 2030, one in five residents are expected to be aged 65 and above. Our HDB estates and policies must prepare for the different needs of elderly home owners. The HDB has begun to upgrade our physical environment to be more elder-friendly. All estates will be barrier-free by next year. The LUP is also on track to provide 100 per cent lift access to all eligible blocks by 2014.

As our population ages and family sizes shrink, Singaporeans may face less family support in their old age. Some may want to right-size and unlock their housing asset. HDB has put in place various options. Under the Lease Buyback Scheme, elderly home owners can receive a long-term income stream without uprooting from their surroundings. Elderly flat owners can also rent out spare rooms or whole flats for income, as their children grow up and move out. The elderly can also choose to right-size and buy studio apartments that are better equipped for their needs.



Building cohesive communities: Besides looking after individual home buyers and owners, the HDB's larger mission is to build cohesive communities. The HDB experience is an important part of the Singapore story where people of different backgrounds, ethnicities and incomes live harmoniously together as a community.

This is why the HDB spends considerable effort on planning our estates, down to the layout of blocks, precincts and neighbourhoods. HDB void decks, playgrounds and precinct pavilions are just some of the spaces carefully designed for residents to mix and mingle as part of their daily routine.




HOMES WHERE WE BELONG

When the HDB was formed in 1960, its pressing challenge then was to solve the huge housing shortage for Singaporeans. Fifty years on, the HDB has succeeded beyond expectations and received numerous international accolades for its achievements. I am thankful for the selfless contributions of the many men and women in the HDB through the years who have made it possible.

What about the next 50 years and beyond? Clearly, the focus of the HDB's challenge will evolve. Besides providing attractive and affordable flats for new homebuyers, the HDB's greater challenge will be to sustain the quality of life, community bonds and value that HDB flats bring to home owners, even as our estates mature.

While the challenges in the next phase will be different, the HDB's core mission of building homes and bringing hope of a better life for hardworking Singaporean families remains unchanged. With the continued support of other agencies, community leaders, and residents, I am confident that we can build an even better home for all - one where "we'll build our dreams together. Just like we've done before".

To all those who have followed this series of articles and given me comments, feedback and suggestions, let me say a sincere "thank you". I am also grateful to Today for providing me this platform to engage Singaporeans on this very important subject. Finally, I wish everyone season's greetings and a very happy and successful 2011.



The writer is the Minister for National Development. This is the last of nine commentaries that he has written exclusively for Today.

Source: www.todayonline.com

by Joanne Chan
05:55 AM Dec 21, 2010

SINGAPORE - The rising property prices have shown few signs of slowing since Singapore's recovery from the global economic downturn.

This year, a strong economy, low unemployment rate and ample liquidity pushed private property prices past the previous peak in 1996.

In the public housing sector, prices in the resale market hit new highs.

The cash premium buyers pay upfront - also known as cash-over-valuation (COV) - climbed to $30,000.

Faced with the possibility of a property bubble, the Government introduced cooling measures in September last year and February this year. The slew of measures ranged from raising housing supply to clamping down on speculation by tightening existing rules.

However, demand continued unabated.

Mr Nicholas Mak, the executive director of Research and Consultancy at SLP International, said: "The market seemed to take it into its stride and continued to expand; sales were still climbing and so were prices."

So, another round of measures were implemented in August, including raising the effective period of the seller's stamp duty to three years.

The maximum bank loan amount was also reduced to 70 per cent.

Analysts noted that this approach of taking "small steps" to regulate the property market is unlike the previous property run, when a capital gains tax was introduced prior to the market crash in 1996.

In a recent interview with MediaCorp, National Development Minister Mah Bow Tan reiterated this cautious approach of incremental steps is to bring prices down to a sustainable level but not crash the market.

Said Mr Mah: "We are not taking a big bang approach but taking a very calibrated approach to this."

Noting that the measures introduced in August appear to have had more impact on the public housing market, Mr Mah added: "The big change was when we disallowed dual ownership of public and private property within this minimum occupation period, which is now five years. Previously it was three years."



'Sellers should be more realistic'

COV for resale flats has declined gradually, dropping to $22,000 last month.

Observers say COV levels may eventually drop to $10,000 to $20,000, as more housing becoming available.

The Government plans to release 22,000 new public flats next year, depending on the take-up rate. The HDB will also release land sites for another 4,000 flats under the Design, Build and Sell Scheme and 4,000 executive condominium units.

Dennis Wee Group Director Chris Koh said sellers need to be more realistic about their expectations in the current market.

Said Mr Koh: "This isn't like a year ago, when you could ask for COV as high as possible and people may just grab it. But I think buyers are now a lot more wiser. And those who were really in need and desperate would have bought."

The impact of the measures on the private property market remains to be seen.

September saw a frosty reception from buyers, with the number of private homes sold plummeting below the 1,000 unit level.

However, the market rebounded quickly. Last month, some 1,900 units were sold.

The Government has indicated it will introduce more measures if necessary to temper demand.

But for now, it appears no further action will be taken as it monitors the impact of its latest measures.

SLP International's Mak said the next round of measures, if any, would likely come in the middle of next year.

"One possibility is that they could further tighten the loan-to-value for investors, thus making it more expensive or more risky for investors who already own one or two properties and are buying their third or fourth one," said Mr Mak.

A broad measure, such as a capital gains tax which will affect all homebuyers, should only be a last resort, Mr Mak added.

Source: www.todayonline.com

Published December 20, 2010

HDB's one-millionth flat milestone

By JOYCE HOOI


(SINGAPORE) The keys to the Housing and Development Board's (HDB) one- millionth flat were handed to its owners yesterday, at the completion ceremony of Treelodge@Punggol

The development is the first eco-friendly precinct developed under the auspices of the HDB, which celebrated its 50th anniversary in February this year.

'In just 50 years, the HDB has built one million flats to house a nation. This is no mean feat, and few other countries can lay claim to such an outstanding achievement in so short a time,' said Teo Chee Hean, Deputy Prime Minister and Minister for Defence, during his speech as the ceremony's guest-of- honour.

Mr Teo is also an MP for the Pasir Ris-Punggol Group Representation Constituency (GRC).

The Treelodge@Punggol features an eco-deck above the carpark, a playground built from recyclable materials, and a rainwater collection system, among other things.

Residents will also have a car sharing scheme at their disposal, which will include hybrid cars as well.

An additional centralised refuse chute for recyclables has been introduced for each block, in order to promote more waste recycling.

'It's something new. There were no other HDB flats that were indicated as eco-friendly then, and we were quite excited to get it,' said Christina Ng, the owner of the one-millionth flat, a four-room unit.

Ms Ng and her husband, Wang Weiji, balloted for the flat in 2007 and are first-time homeowners. They plan to move in after the Chinese New Year.

The development was launched in 2007 with seven blocks of 709 flat units in total, comprising three-, four-, and five-room flats.

Year-to-date, 3,300 new flats have been launched in Punggol by the HDB and another 1,000 new flats are due to be launched over the next few days.

'If demand remains strong, HDB is on track to complete 35,000 flats by the end of 2015,' said Mr Teo.

Last month, the HDB launched the tender for the first mixed commercial-residential site at Punggol Town Centre, which will be next to the Punggol Waterway and Punggol MRT station.

'The HDB story is also the story of hope and social mobility in Singapore,' said Mr Teo.

'Singaporeans know that if they work hard and budget wisely, they can aspire to upgrade to a better flat and a better life.'

In 2008, the HDB won the United Nations Public Service Award for its Home Ownership Programme.

This was followed by the UN-Habitat Scroll of Honour Award 2010, which was given to the HDB for 'providing one of Asia's and the world's greenest, cleanest, and most socially conscious housing programmes'

Source; www.businesstimes.com.sg

by Mah Bow Tan

05:55 AM Dec 10, 2010

Over the last few months, I have explained in this series of commentaries how the Government provides affordable housing for the majority of Singaporeans, and how these flats are not only a home, but also an asset which grows in value to support social mobility and provide for old age.

Many readers have said they now understand the issues better and agree with the hard choices that the Government has to make. But some others have disagreed with the Government's policy. I welcome this debate on our public housing system. It will help us improve.

But let us do so with an open mind, and a full understanding of the facts. Dr Goh Keng Swee used to quote the Chinese saying, "Seek truth from facts". Let us heed these words of wisdom as we address the people's concerns.



FLAT SUPPLY: HOMES FOR THE MASSES

One of these concerns relates to flat supply: "Why is there a need for the Housing and Development Board (HDB) to build premium flats which are priced higher? Why not just go back to basic flats?"

To answer such questions, let us start with the Government's basic principle, which is to provide affordable public housing for the vast majority of Singaporeans - not just for 10 or 20 per cent, like most countries, but up to 80 per cent of the population.

So the HDB has to build flats that cater to the diverse budgets and aspirations of many - from households earning $1,500 a month at one end to those earning $10,000 a month at the other.

The fact is that demand for premium flats is strong. When the premium project, Waterway Terraces, was launched in Punggol, there were 13 applicants per flat. This was two to three times the application rate seen for standard Build-To-Order (BTO) projects launched in Punggol in the same year.

Nonetheless, premium flats form only a small portion of the flats offered by the HDB. Most of the flats built by the HDB are standard flats, of good quality, and come in a wide variety of sizes and locations. Through the provision of both standard and premium public housing projects, the HDB encourages Singaporeans from a wide spectrum of incomes and backgrounds to live together to form an inclusive community.

FLAT PRICING: AFFORDABILITY IN AN EQUITABLE AND SUSTAINABLE WAY

The next area of concern is on pricing of flats. Some have asked: "Why market-based pricing? Is the HDB making a profit at the expense of affordability?"

To answer this, we must remember that another basic principle of Singapore's public housing is to build homes for our people to own, and not rent. Owning an HDB flat gives Singaporeans an asset that grows in value along with the country's progress. We must allow this value to be realised upon the resale of the flat in the open market.

But to ensure affordability for first-time homebuyers, we price new flats at a subsidy. The HDB also helps first-timers buy resale flats of their choice with the CPF Housing Grant. The subsidy must be set relative to market values so that all flat buyers enjoy comparable levels of subsidy.

In contrast, a cost-based system means that the same price would be charged for different flats in the same project, regardless of their location, floor, direction, and other attributes. It would be unfair for the buyer of a second-floor unit to be charged the same price as a 40th-floor unit with an unblocked view, because the latter would clearly fetch a much higher resale value.

For equity and the efficient allocation of resources, the selling price of flats must therefore be linked to their value, not their cost.

Some have contended that with the market-minus pricing, the HDB is making money from Singaporeans. This is quite wrong. Every year, the HDB publishes its audited financial accounts. In these accounts, the HDB's proceeds from the sale of new flats are shown to be far below what it costs the HDB to build them. Over the last three years, the average loss on the sale and development of HDB flats was about $600 million a year.

For example, for standard BTO projects like Punggol Spectra and Fernvale Crest, the cost subsidy per family averaged $40,000 to $60,000. If we add other housing subsidies such as the CPF Housing Grant and Additional CPF Housing Grant (AHG), the HDB's total subsidy for first-time buyers comes to $1 billion a year. This is a real subsidy which has to be paid by the State.

Besides providing extensive subsidies, the HDB also offers a range of flat options to cater to different budgets. As shown in the table above, buyers at each income level can choose from a wide range of flat types that are affordable to them.

More importantly, what is the reality on the ground? Here are the facts. More than eight in 10 Singaporeans live in HDB flats. Of these, 90 per cent own their flats, and the rest rent. Of those who own, 40 per cent have fully paid for their flats.

An average of 15,000 first-timers buy new or resale HDB flats every year with a Government subsidy. New flat buyers use only 20 per cent to 25 per cent of their income to pay for their loans; and more than 80 per cent rely only on CPF and no cash to finance their loans. Among new BTO flat applicants, about 35 per cent apply under the Fiance/Fiancee scheme, and the median age of these young couples is about 26 years old.

Is there any other major city or country that is doing this for their young people?



NO EASY ANSWERS

I totally understand the concerns about housing supply and affordability, given the recent run-up in property prices. This is a problem of success. Prices have risen because the economy has improved, people have good jobs, and there is confidence in our future.

When flat prices appreciate, homeowners benefit but homebuyers worry. To help first-time homebuyers, the HDB has increased the supply of new flats and given out generous housing subsidies. Can we increase housing subsidies further? And should we? Increased subsidies come at a cost; what would Singaporeans have to give up?

Some have suggested cutting the defence budget. Others say we should under-price the land for public housing. But will these moves have serious repercussions on stability and the security for our children? Given the limited space in Singapore, will artificially under-pricing land encourage excessive consumption and reduce what future generations can enjoy?

As a responsible Government, we must look after Singapore's long-term interests and guard against easy and populist suggestions. If we adopt short-sighted measures, we undermine the fundamentals that have brought us stability, prosperity and progress. This is what we really cannot afford.

The writer is the Minister for National Development.

Source: www.todayonline.com

National Development Minister says the market has not yet felt full impact of cooling measures
by Joanne Chan

Updated 12:32 PM Dec 07, 2010

SINGAPORE - While cash-over-valuation (COV) and the number of transactions in the Housing Board resale market are heading south, National Development Minister Mah Bow Tan believes it will be another one to two months before the full impact of the Government's cooling measures is felt.

In an exclusive interview with MediaCorp, Mr Mah revealed that the median COV last month was $22,000, down $3,000 from that for October. This marks the second month in a row the COV has fallen, a sign property cooling measures set in August are taking effect,

And the number of HDB resale transactions has fallen some 30 per cent in the fourth quarter thus far compared to last quarter.

The COV hit a high of $30,000 for two straight quarters this year, sparking concerns that first-time home-buyers might be priced out of the resale market.

Said Mr Mah: "Now, you are seeing that resale prices and the COV are not only stabilising but are starting to come down. So, I think there's really no need to rush (to buy a flat)."

Transaction numbers from property firm Dennis Wee Group (DWG) also reflect the downward trend of COV and sale volume.

DWG director Chris Koh said he expects the COV to drop to $20,000 this month.

He said: "Things usually slow down (in December) because of Christmas, New Year, school holidays ... So, with the measures in place, (and) with new flats coming up, we should see demand ease off a little."

Mr Mah said the Government was comfortable with the current situation and there was no need for further cooling measures for now. More steps would be taken only if necessary, he added.

While prices appeared to have stabilised, Mr Mah acknowledged housing "would probably be more (of) an issue" at the next General Election.

He said: "It's always been an issue at every election as far as I can remember ... The main thing is that in an election, we have to offer - to the residents (and) voters - our platforms, our polices. Whoever can convince the voters they can do a better job in improving their lives will get and deserves to get the vote."

Source: www.todayonline.com

Housing for the lower income


It's all about giving hope for a better future

by Mah Bow Tan
08:21 PM Nov 26, 2010

Over the last two months, I have shared my thoughts about public housing in Singapore - why we actively promote homeownership, why the Housing and Development Board (HDB) has to build different flats for different buyers, and how flats are made affordable. But the path to homeownership is not always easy for some families, especially if they fall on hard times.

Take the case of Mdm P. She was only 35 when she divorced her husband and was awarded custody of her two young children. She was not working and had no income. Her future seemed bleak.

After assessing Mdm P's case, the HDB helped her with a subsidised rental flat. Seven years on, Mdm P has a good steady job and has moved her family to a 3-room HDB flat in Sengkang. She pays for her housing loan almost entirely out of her CPF contribution. Mdm P is hopeful of the future for her and her family.

This is the heart of the HDB story - hope for a better future for all Singapore families. However, I am sometimes asked: Is homeownership really possible for the lower-income, when they can barely make ends meet? Aren't they better off just staying in a public rental flat, perhaps for the rest of their lives?




SUPPORTING HOME OWNERSHIP

Since its earliest days, the HDB's main objective has been to give families a home and a stake in the country. Homeownership for the lower-income may not be easy, but it is possible with hard work and some additional help from the Government.

The Additional CPF Housing Grant (AHG) was introduced in 2006, and increased in 2007 and 2009, to help flat buyers with lower incomes to own their first homes (see graphic). As the name suggests, the AHG comes in addition to the existing market subsidy for new flats and the CPF Housing Grant for resale flats. The HDB also builds more affordable 2-room and 3-room flats for lower-income families.

Take the case of a first-timer family earning $1,400 a month and buying a 2-room BTO flat. Besides enjoying the market subsidy on their flat, they can also enjoy a $40,000 AHG and obtain a loan from the HDB, if eligible. Their monthly mortgage payment comes to $230, which is 16 per cent of their household income. Even better, their mortgage payment can be paid fully from their CPF.




SAFEGUARDING THE HOUSING SAFETY NET

Despite the extensive subsidies, there may still be some who find it difficult to own a home. They may be unable to work due to old age or physical disabilities. Or they may face temporary setbacks, like Mdm P. The HDB's heavily-subsidised public rental flats are the final safety net for these needy families even as social agencies help them to improve their longer-term incomes. The monthly rent for a 1-room flat is as low as $30.

To speed up the allocation of public rental flats to this group, the HDB has been increasing the supply of rental flats since 2007. Eligibility rules for rental flats have been tightened to safeguard them for the truly needy. For example, those who have substantial savings or enjoyed significant proceeds from the sale of their previous HDB flats do not qualify for rental flats.

In line with our philosophy that family should be the first line of support, the elderly are encouraged to stay with their children as far as possible.

Through these measures, the HDB has reduced the waiting time for rental flats from 21 months in 2008 to about nine months today.




GUARDING AGAINST ABUSE

Should the HDB provide subsidised rental flats to all who come forward for help? About eight out of 10 appeals for rental flats are from those who have previously owned subsidised HDB flats. Many of them have cashed out on their flats and spent their proceeds, sometimes without any clear plan for their next home.

A few elderly applicants also have children who could help to house them. Recently, a Mdm T appealed for a 1-room flat, claiming that she had a hard time living with her married son. She had cash savings and owned a car. She also received a regular allowance from her children. She told the HDB that her children would hire a maid to look after her in the rental flat.

In such cases, is it wise for the State to take over the responsibility of looking after them, because they could not get along with their family?

If the HDB were to do so, would this not encourage such behaviour? Would this be fair to other homeowners who have made responsible choices? Or taxpayers who have to fund the subsidised rental flats?





TACKLING UPSTREAM ISSUES

The problems faced by lower-income families with housing needs are often multi-faceted, extending beyond housing alone. The HDB tries to tackle the problems upstream with other agencies, while maintaining rental housing as the final safety net.

For families in mortgage arrears, the HDB's housing counsellors advise them on their accommodation options, including how to right-size to more affordable flats. To prevent families from selling their flats without considering their next home, the HDB recently introduced a seven-day cooling period for homeowners to think through their decisions carefully. Meanwhile, the new Council for Estate Agencies will act against agents who mislead homeowners into selling their flats.



BUILDING HOMES AND HOPES

Public housing in Singapore goes beyond providing a roof over the heads of lower-income families. Being able to own a home - a valuable asset - helps families to build hope and improve their lives and those of their children. .

The Government is committed and prepared to help lower-income Singaporeans in this journey to homeownership. But citizens must take responsibility for themselves too. Otherwise, our safety net of public rental housing would collapse under pressure.

We recognise that some families may need to rebuild their lives slowly and the path to homeownership may take longer. Mdm P and others like her have shown us that this journey is still very possible, despite the challenges. We must continue to support hardworking families to build the hope of a better future. This HDB story is ultimately part of our Singapore story.

The writer is the Minister for National Development.

Source: www.todayonline.com

Recently, the Housing and Development Board was conferred the UN-Habitat Scroll of Honour Award - the most prestigious human settlements award in the world. In recognising Singapore's achievement, the UN-Habitat Chief of Information Services said: "It's really quite impressive for a country to provide adequate shelter and home ownership for so many."

Ask most housing experts and observers, and they will say that HDB flats remain within reach of the majority of Singaporeans. After all, HDB builds and sells flats at heavily-subsidised prices to ensure affordability. This has made it possible for an average of 15,000 young couples every year to join the ranks of homeowners.

Most of these couples buying new flats use just 20 to 25 per cent of their monthly income to pay for their flats. With their CPF contributions, few have to pay any cash for their mortgage payments. In total, more than 80 per cent of Singaporeans live in 900,000 HDB flats today. Yet, people still worry that HDB flats are not affordable. Why are there such sentiments?

Indeed, housing affordability - whether a flat is within financial reach - is not a straightforward issue. Different people have different notions of what is "within reach". Some argue that a 30-year housing loan is too long for a flat to be considered affordable. Others say that flat prices are much higher compared to their parents' time. The debate is further complicated by rising aspirations - whether housing is "within reach" also depends on what we aspire towards.

For a meaningful discussion on affordability, we need objective and commonly accepted yardsticks. So, what are the measures of affordability? How does HDB ensure that flats remain within reach of Singaporeans?



MEASURES TO ENSURE AFFORDABILITY

Focus on first-timers. To ensure that first-time buyers have access to affordable housing, we do several things. First, HDB prices its new flats below market value, taking into account the income of homebuyers. Hence, first-timers enjoy a substantial subsidy when they buy new flats from HDB.

Next, for first-timers who cannot wait for a new flat or wish to buy a specific flat in a specific location, HDB provides a CPF Housing Grant of $30,000 (or $40,000 if they stay near their parents) to buy a resale flat. Beyond that, new and resale flat buyers can apply for a concessionary loan. For a $200,000 loan over 30 years, the interest subsidy amounts to about $30,000.

Help according to income. For households earning $5,000 or less a month, an Additional CPF Housing Grant of up to $40,000 is provided for their purchase of new or resale flats. In other words, a family earning $1,500 can get as much as $80,000 in housing grants. Families earning more, between $8,000 and $10,000, can now buy new flats under the Design, Build and Sell Scheme (DBSS), in addition to Executive Condominiums, and enjoy a CPF Housing Grant of $30,000.



MEASURES OF AFFORDABILITY

I have been discussing affordability in layman's terms. Let me now get into the technical stuff. In particular, how do experts determine housing affordability? There are a few generally accepted benchmarks.

Income affordability. One is the housing price-to-income ratio (or HPI), which compares median house price to annual household income.

In a Straits Times article in February 2010, two NUS professors, Tu Yong and Yu Shi Ming, noted that Singapore's HPI for resale flats in non-mature estates is 5.8, compared to Hong Kong's 19.8 and London's 7.1. That means Singaporeans generally need 5.8 times of their annual household income to buy a resale flat in non-mature estates, whereas a Hong Kong resident needs more than three times that amount.

If we take Department of Statistics 2009 data on the median income of younger households - those aged between 25 and 35 years old - who are likely to be first-timers, their HPI is even lower, at 4.5 for resale flats and 3.8 for new flats. This is because they have higher incomes than average households.

Financing affordability. While the HPI is relatively easy to understand, it does not consider factors like loan availability and financing costs, which are important for many deciding to buy a flat. Therefore, another widely-accepted measure is the debt-service-ratio (DSR), which looks at the proportion of the monthly income used to pay mortgages.

The DSR for new HDB flats in non-mature estates, based on an industry norm of a 30-year loan, averaged 23 per cent this year. This is well within the 30-35 per cent international benchmark for affordable expenditure on housing.

Depending on flat type, the DSR ranged from 11 per cent for standard flats to 29 per cent for premium projects like the Punggol Waterway Terraces, which cater to higher income households.

We must also remember that CPF savings can be used for the initial downpayment and monthly instalments. Hence, more than 80 per cent of new flat buyers pay for their housing loans entirely out of CPF, without having to touch their take-home pay.

Whichever objective measure we choose, it is clear that there are enough HDB flats within reach of today's homebuyers. They range from smaller, no-frills flats in non-mature estates to premium flats in mature estates, catering for different aspirations and budgets (see table above). I hope buyers choose carefully, taking into account their budgets and aspirations. Housing affordability is decided not just by the options offered by HDB but also the choices of homebuyers.


BALANCING HOMEBUYER AND TAXPAYER INTERESTS

I can understand the anxiety among young couples wanting to buy a flat of their choice, within their budget, and as soon as possible. HDB has ramped up supply significantly and recently introduced more measures to temper excessive exuberance in the market and to moderate prices.

HDB also regularly reviews its subsidies to ensure affordability. But I must caution that there are limits to how much we can increase subsidies, without compromising other interests.

In other words, we must also consider affordability from a national standpoint. If we increase housing subsidies, what would we have to give up? The quality of education for our children? Healthcare services for our parents? Or do we impose a higher tax burden on Singaporeans?

There are no easy answers. Ultimately, we need to balance the interests of affordability for homebuyers and the burden on taxpayers.

by Mah Bow Tan
05:55 AM Nov 12, 2010


The writer is the

Minister for National Development.


Source: www.todayonline.com

Updated 03:50 PM Oct 01, 2010
by Mah Bow Tan

The property market has a history of repeating itself. I guess that is why they call it the property cycle. There is a huge clamour for flats today, and we can't seem to build flats fast enough to satisfy demand. Yet, when I became Minister for National Development in 1999, one of my first challenges was to deal with an overhang of more than 31,000 unsold flats.

Almost every year, until 2006, Members of Parliament expressed their concerns in Parliament about the unsold stock, and asked what steps the Housing and Development Board (HDB) was taking to clear it. The Auditor-General's Office, too, urged the HDB to reduce its unsold stock, highlighting the high cost of holding vacant flats. The HDB had to come up with all sorts of ways to clear the flats - converting five-room and executive flats into smaller two- and three-room ones, organising roadshows, implementing walk-in selection of the ready flats, and engaging managing agents to rent out unsold flats temporarily.

One may argue that the Singapore of today is very different. But the huge oversupply experience not so long ago taught us many valuable lessons - that oversupply is as bad as undersupply, and that we need to manage the building programme carefully, including allocating new flats in a fair, cost-effective and efficient way.

There are essentially three ways to allocate a scarce resource like housing: By price (that is, highest bidder gets it), by queue (that is, first-come first-served), or by ballot (that is, draw lots). Allocating by price is basically the way resale flats are bought and sold in the free market. The buyer who offers the highest price gets the flat.

While this is most efficient, the drawback is that prices can be volatile and the lower income may lose out. So, for new flats, the HDB has adopted either a queue system or ballot system.



QUEUE SYSTEM

In the past, the HDB allocated flats on a first-come first-served basis. The HDB built flats assuming that everyone in the queue was a serious buyer who would book a flat eventually when his turn came. This was a reasonable assumption in earlier years, as there was a great housing shortage. The resale market was relatively undeveloped and the HDB was the predominant source of housing.

However, as we progressed from a nation of home-seekers to home-owners, the situation changed. Demand became more volatile. Many, even those with existing roofs over their heads, could now easily join or exit the queue. At the height of the property boom in the mid-90s, there were as many as 150,000 buyers in the queue, and the wait for a flat was as long as seven years. However, when the Asian Financial Crisis struck in 1997, the queue vanished, literally overnight. The HDB ended up with 31,000 unsold flats, which took more than five years to clear.

Because of the unintended oversupply, home buyers could walk in to buy ready flats in the early 2000s. However, home owners paid a heavy price, with flat prices staying depressed. Some who bought flats just before the crisis ended up with negative equity and even lost their homes and hard-earned savings. The many unsold flats represented a waste of taxpayers' money. The holding cost incurred was money that could have been spent on healthcare, education, or other areas.



BUILD-TO-ORDER (BTO) SYSTEM

In 2002, the HDB switched to the BTO system to better respond to demand that was becoming more sentiment-driven. Under this system, buyers ballot for the chance to select a flat. Certain groups, such as first-timers and those applying to live near their parents, are given extra tickets in the ballot to increase their chances of getting a flat. Ninety-five per cent of the flat supply is set aside for first-timers (corrected at 3:40PM, Oct 1). Buyers have to pay a downpayment to secure a booking. Each booking represents a committed buyer. The HDB proceeds to build when the majority of flats are booked. Flats are ready for occupation within three years of booking. Next year, this will be reduced to two-and-a-half years for a typical project. Couples who wish to shorten the waiting time further can apply under the Fiance-Fiancee scheme.

With better matching of supply and demand, the BTO system prevents a major supply overhang. It also allows the HDB to retain a small rolling buffer of a few thousand balance flats, which minimises holding cost to taxpayers. When demand is high, as it is now, the number of BTO projects is stepped up. Today, over nine in 10 first-timers get to select new flats within three tries.

Nonetheless, there may be a small number who are unlucky in balloting exercises. I understand their frustration. I have therefore asked the HDB to look into increasing the chances further for those with multiple unsuccessful applications.

However, many of the cases I see are not as "unlucky" as they claim to be. Recently, a Mr Ng wrote to me saying that he had balloted unsuccessfully more than six times. "Unlucky couples like me will never ever have a chance to purchase a flat under the BTO system", he said. When I asked the HDB to check, I was told that Mr Ng had in fact been given four chances to select a flat but did not do so. When this was highlighted to him, Mr Ng acknowledged that he had not selected "due to unavailability of suitable units". When I probed further, the HDB told me that on most occasions, there were many units available for him to choose from.

While Mr Ng has every right not to select and wait for his ideal flat, I hope he understands that the HDB cannot accede to his appeal to be given priority in future BTO exercises. Indeed, to be fair to those who genuinely need a flat, the HDB has since 2008 removed for one year, the first-timer status of those who have rejected two chances to book a flat.



BALANCING DIFFERENT INTERESTS

Each method of allocating flats has its pros and cons, and may be right for different circumstances. No one system will please everybody. The BTO system is by no means perfect but it is the most appropriate system for the moment, balancing the need for fairness, prudence and efficiency. We will continue to monitor and tweak it as we go along.

We remain committed to our mission of supplying enough flats, of good quality and at affordable prices, as quickly as possible to home buyers. But, we must do so in a way that does not create problems of oversupply for home owners and taxpayers down the road. We must remember the lessons of the past even as we address the housing needs of today.

The writer is the Minister for National Development.

Mah Bow Tan
The writer is the Minister for National Development

Source: http://www.todayonline.com

Published September 23, 2010
By UMA SHANKARI

WHAT is next for Singapore's property market? No one - neither developers, analysts nor homebuyers - can answer the question with any certainty right now.

After subdued sales through all of 2008, the residential market here took off in February last year. And the buying volume and price growth continued into 2010 - despite a slew of government measures announced over the past 12 months to dampen demand for both private homes and HDB flats, and boost supply.

But the latest round of cooling measures, announced by National Development Minister Mah Bow Tan on Aug 30, are considered to be harsher than the previous policy changes and could have a greater impact.

Developers trust that the measures - which include the decision to disallow concurrent ownership of HDB flats and private residential properties within the specified minimum occupation period - are not likely to keep away genuine buyers. They are also hoping that the flux in the market will settle in a few months and that buying interest will continue apace.

Over the next few pages, we examine the key aspects of Singapore's property market, taking an in-depth look at the residential market and the commercial sector as well as key overseas markets.

We ask experts for their views on the impact of the latest round of government measures and look at where the next wave of activity will come from after the market, investors and homebuyers digest the latest news.

There is no denying the importance of Singapore's property sector. How the market fares will impact not only developers, investors and 'regular Joe' homeowners, but also related sectors. These include banks which have been enjoying brisk business dishing out housing loans over the last two years.

Source: http://www.businesstimes.com.sg

05:55 AM Sep 17, 2010
by Mah Bow Tan

Recently, I received an appeal from a young couple who had applied for the first waterfront BTO project at Punggol Waterway Terraces. Seeing the high application rates, they were worried that the Housing and Development Board (HDB) was not building enough new flats and that prices would shoot up beyond their reach.

The couple commented: "We read in the papers that the number of new flats completed each year by the HDB has been lower than the number of marriages in recent years. This means that the HDB is not building enough flats for the new households."

This couple's concern may be shared by many Singaporeans. Let me explain why things are not so straightforward, and how the HDB plans its housing supply to fulfil both short- and long-term needs of the people.



PROVIDING AFFORDABLE HOUSING TO THE MASSES

Meeting first-timer needs. The Government's commitment remains clear and constant - to provide affordable housing to the masses. Today, eight in 10 Singaporeans stay in HDB flats.

To keep our commitment to future generations, the HDB must focus on helping young couples buy their first flats.

Supporting resale flat purchases. But this does not mean that we need to build a new flat for every new household. Why?

Because some households may buy resale flats instead of new flats for various reasons, such as location and flat type. The HDB supports them by providing a CPF grant of $30,000 to $40,000 and a loan subsidy. Those with lower income can also qualify for an additional grant of up to $40,000. Among first-timers, 30 to 55 per cent of them took up resale rather than new flats each year over the past decade.

Supplying new flats. After accounting for what is met through the resale market, the HDB then builds new flats to meet the housing needs, with more flats set aside for first-timers. In planning the housing supply, the HDB takes a comprehensive approach. It examines not just the marriage rate, but also factors like the inflow of permanent residents and foreigners, flats released into the resale market through deaths or emigration, and upgrading or downgrading by existing home owners.

Over the past 10 years, the HDB built and sold more than 100,000 new flats. This was equivalent to adding three new Toa Payoh towns. The resale market was even more active in the same period, supplying over 300,000 or three times more flats. Together, new and resale flats have met the long-term housing needs of Singaporeans.



MANAGING DEMAND FLUCTUATIONS

Fluctuating short-term demand. However, things are never so simple. While supply over the medium term is roughly aligned with projections, housing demand in the short term can be much more volatile. Home buyers will adjust their purchases, depending on the economic outlook and market sentiments. When prices are low, buyers hold back, hoping it will go down further. Conversely, when prices are high, more buyers may come forward, worried that they may miss the boat.

So, while marriages among Singaporeans eligible for public housing stayed largely unchanged over the past decade at about 16,000 per year, demand for subsidised housing from first timers fluctuated between 12,000 and 19,000 per year over the last decade. Total transactions in the HDB market varied even more sharply during this period, ranging from about 37,000 to 58,000 transactions annually.

Avoiding an over-supply. If the HDB were to fly on auto-pilot and supply a fixed number of flats every year, regardless of market conditions, there would be the risk of an over-supply in some years. For example, between 2002 and 2006, resale flat prices had remained largely flat.

If the HDB had pressed on with housing supply based on long term projections, then flat prices for the over-800,000 existing home owners could have been depressed further.



RESPONDING TO RISING VOLATILITY

Managing unprecedented changes. The market changes over the past year or so have been especially challenging to anticipate. As late as May last year, the International Monetary Fund was predicting a "long, severe recession" for Asia.

Surprisingly, the number of new immigrants to Singapore actually increased during the downturn, as economic activities recovered quickly.

Equally important was the impact of sentiment. Property prices tapered off in the first half of last year, even though there were many foreigners here. But prices picked up sharply not only in Singapore but also in the region, when the outlook improved dramatically in the second half of last year amid low interest rates globally.

Responding swiftly. In response to the sharp recovery, the HDB rapidly increased the offer of new flats from the earlier plan of 6,000 to 9,000 in the second half of last year.

For 2010, the HDB recently raised its planned output by more than 30 per cent, from 12,000 to more than 16,000 new flats. It is also prepared to launch up to 22,000 next year. At this rate, in just two years, we will offer more flats than what is currently available in Toa Payoh.



MAINTAINING A BALANCE

Determining the right housing supply for the short term will always be a difficult call, and we have to strike a delicate balance. Economic conditions and sentiments can change much faster than any building plan.

So, while we plan our housing supply to broadly meet longer term needs, we also build in some buffer to deal with short-term fluctuations.

Some might suggest that the HDB could go further and build a much larger buffer or build ahead of demand to deal with market fluctuations.

But this would then create the problems of high holding costs and a potential supply-demand mismatch, which I will deal with in my next article.

Ultimately, whatever the system of flat application, trade-offs have to be made between supplying too little to meet home buyers' needs and supplying too much to the detriment of existing home owners or taxpayers. These are trade-offs that we must balance carefully in the overall interests of all Singaporeans.

The writer is the Minister for National Development.

Source: http://www.todayonline.com

Instead, says Mah Bow Tan, Govt making things more equitable for both them and HDB flat owners, alike

05:55 AM Sep 16, 2010
by Esther Ng

SINGAPORE - The recent cooling measures have resulted in an "anomaly", Non-Constituency MP Sylvia Lim told Parliament yesterday, noting that while a Housing and Development Board (HDB) flat owner can own private property after the Minimum Occupation Period (MOP), but a private property owner has to sell his property within six months of buying an HDB flat.

In response, Minister for National Development Mah Bow Tan said the Government was not penalising private property owners but making it more "equitable" for both HDB and private property owners.

He pointed out that in the past, subsidised HDB flat owners could not buy private property until after five years, whereas a private property owner could own both private and HDB properties at the same time.

Mr Lim Biow Chuan, MP for Marine Parade GRC, wanted to know why private property owners who bought HDB flats, after the new rules kicked in, would have to dispose their private property when they intended to live in their HDB flats during the MOP of five years.

Mr Mah said there were people who wanted to "have the best of both worlds" - keeping their private property and renting it out while living in an HDB flat. However, he added that there was "a genuine need from first-timer couples for HDB resale flats and I think we should let them have first crack at it".

About 3 per cent of HDB flat owners - or 24,000 flat owners - own both private property and HDB flats.

Mr Mah added: "If you already own private property, please don't, at this point in time, compete with the others to buy HDB resale unless you are genuinely downgrading."

The Minister said many flat owners caught up in the "upgrading fever" in the nineties were hit by the financial crisis.

Mr Mah reiterated that the new measures did not disadvantage upgraders or investors as there was ample public and private housing supply in the pipeline. The measures were timely to encourage them to exercise greater financial prudence and think carefully about their purchases, he said.

As for MP for West Coast GRC Ho Geok Choo's question on whether there would be enough executive condominiums (ECs) and flats under the Design, Build and Sell Scheme (DBSS) to cater to the needs of those with a monthly income of $8,000 to $10,000, Mr Mah said HDB was ramping up the supply of land sites for DBSS and ECs.

HDB plans to release land sites for about 7,000 DBSS flats and 8,000 ECs in 2010 and 2011.

In two years, HDB will triple the current stock of 4,000 DBSS flats and double the current stock of 10,000 ECs that have been launched for public sale since the start of the scheme.

Source: http://www.todayonline.com