There is "something wrong somewhere" with the Executive Condominium (EC) scheme, said National Development Minister Khaw Boon Wan on Thursday, and the scheme cannot carry on in its current form.
Speaking to 40 participants at an evening session of the Our Singapore Conversation (OSC) dialogue on housing, Mr Khaw said that there is "a sense of inequity" at the profit that EC buyers can make when reselling their units. First-time buyers of both ECs and Build-to-Order (BTO) flats get grants from Housing Board (HDB) to offset the price of their units, the size of which depends on their income.
But the "upside in the property market" gives EC-owners a far higher profit upon resale than the average three-room flat owner, noted Mr Khaw. This translates into "a sense of inequity, that the lower-income is getting less subsidy". This goes against the principle that HDB's subsidies should be progressive, and that the lower-income should get more, he said.
ECs are marketed and built by private developers, rather than HDB, and the income ceiling is $12,000, rather than $10,000 for a BTO flat. After 10 years, ECs become private property and can be sold to foreigners. Mr Khaw said that he hoped that "clarity and a conclusion" on how to tweak the EC scheme can be found through the ongoing OSC sessions on housing.
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He added that the HDB receives annual grants from the Ministry of Finance to sustain itself. Mr Khaw assured the public that the government will continue to control the supply of flats, and ensure that prices remain affordable.
During the dialogue, Mr Khaw also addressed the issue of cheaper new HDB flats, with prices estimated to be about 30 per cent lower than before.
Mr Khaw said that prices of new flats should be targeted at the equivalent of an average person's four years' salary.
Acknowledging that current home owners who purchased their flats at a higher price will be upset, Mr Khaw said the "transitional problem" is being worked out by the Ministry of National Development and HDB.
He remains confident about finding a solution to Singaporeans' housing issues and housing imbalance within the next few months.