Should executive condominium buyers get government housing grants, when they are assured of a windfall on selling their units?
The real question is: Are ECs serving their purpose to bridge the gap between private and public housing? The answer: No.
THE scene: An executive condominium (EC) is designed at double the size of an average Housing Board (HDB) flat and priced at more than $1 million.
The result: Public outrage. Why are government subsidies going to buyers who can afford such units? Why is HDB not reining in such excesses by developers? Some suggest: Take away those subsidies. Scrap the EC scheme.
In fact, the scenario painted above happened in 1997.
Those unconvinced that history repeats itself need only look at the short story of the perennially controversial EC scheme.
ECs are a form of hybrid housing to cater to the "sandwiched" class who earn too much to qualify for subsidised public housing but find private property prices too high in a buoyant market.
The developments are designed and marketed by private developers and have condo-style fixtures, but come with ownership restrictions imposed by HDB, such as a five-year minimum occupation period that subsidised flats are also subject to.
After five years, they can be sold to Singaporeans and PRs. After another five years, they become fully privatised and can be sold on the open market to foreigners too.
The EC scheme was launched in 1996, amid soaring private property prices. One year later, a $1.09 million EC unit sized at 2,700 sq ft ignited an intense debate on the drawbacks of the scheme.
Fifteen years later, the same scene played out, double in scale. Last December, a $2.05 million EC unit in Tampines, sized at 4,349 sq ft, revived calls to junk ECs once and for all.
Back in 1997, a property market crash truncated the conversation about the raison d'etre for ECs.
Then came the triple whammy of the Asian financial crisis in the late 1990s, terrorist attacks on Sept 11, 2001, and Sars in 2003.
The property market remained in the doldrums for a decade, and the Government stopped selling land to EC developers for a lack of takers.
It was only in 2010, in the midst of the property market's current bull run, that it resumed. So did the conversation on whether ECs should be a permanent part of Singapore's housing landscape.
The EC windfall?
Earlier this month, National Development Minister Khaw Boon Wan told participants at an Our Singapore Conversation dialogue that there is an "inequity" at the heart of the EC scheme.
This is because first-time buyers of ECs still receive HDB grants of $10,000 to $30,000, depending on income.
These are given to all first-time HDB flat applicants, including EC owners who stand to make huge profits when they sell off their fully privatised units 10 years later.
Some have said those grants should be taken away from EC buyers. But that skirts the fundamental question of whether ECs serve a purpose and should exist as a housing type.
Removing the grants would also be misdirected. After all, the assumption that EC buyers are guaranteed a windfall from their units after privatisation is a false one.
This assumption springs from the belief that the property market moves only in one direction - up - a stubborn illusion of property speculators everywhere.
In fact, EC buyers are subject to the risks of a falling market like any other private property buyer.
In addition, they fork out more for their units than the average HDB buyer, and pay more in interest due to bigger mortgages.
In other words, they incur a far higher financial risk than the average HDB flat buyer.
The last property cycle is instructive. Data from the Singapore Real Estate Exchange (SRX) shows that prices for ECs launched in 1997 at a median price per sq ft (psf) of $439, plunged 26.7 per cent during the property slump to a median psf of $322 by 2006.