SINGAPORE — Changing the way that land is priced to lower the cost of Housing Board flats will risk destabilising the entire property market, said Deputy Prime Minister Lawrence Wong.
He cautioned against artificially resetting the housing market in this manner.
Wong was responding on Friday (Feb 24) to proposals and concerns raised by MPs over housing during the Budget debate.
Some MPs had flagged that the Government's policy on land value appears to be driving up HDB flat prices, leading to increases in subsidies for Build-To-Order (BTO) flats that may not be sustainable.
"The concern arises because of the current cyclical tightness in the public housing market. The situation will be different once the market stabilises or if you have a down market.
"So, rather than look at the ups and downs cyclically, the fact is, the land value will ultimately be based on economic fundamentals," said Wong, who is also Finance Minister.
He noted that there was "a great anxiety that there would be a huge overhang of flats" and Singapore would end up with a price meltdown when HDB resale prices fell for six consecutive years from 2013 to 2019.
But the Covid-19 pandemic disrupted BTO construction, which prompted more people to start applying for flats earlier. Others decided to get a resale flat instead due to the longer waiting time, which drove resale demand, he noted.
"So, we had a confluence of both delayed project delivery and increased demand, contributing to the situation that we are in now."
Adding that there are "no magic solutions" to solve the current housing issues, he said the Government's approach is to tackle the root cause of the problem by ramping up BTO supply to catch up with the delays that had arisen during the pandemic.
The Workers' Party (WP), he said, has eschewed increasing subsidies and making the taxpayer cough out more, and chosen instead to "dip into the reserves by selling state land to HDB at a lower cost".
But land used for public housing is sold directly to HDB at a fair market value determined by the Chief Valuer using established and accepted valuation principles, unlike the Government Land Sales (GLS) programme, where private developers bid for state land, he said.
Noting that Leader of the Opposition Pritam Singh (Aljunied GRC) had alluded during the debate to a discrepancy that state land under the GLS programme can potentially enjoy a 15 per cent discount and the same could be done for public housing land, Wong said that was a "red herring".
What the Government does is set a reserve price pegged at 85 per cent of an estimated market value as determined by the Chief Valuer, which serves as a guide post to assess the bids received before awarding the tender, and is not a discount, he added.
Wong also noted that WP MP Jamus Lim (Sengkang GRC) had, in a Facebook post two days ago, recognised that a lower land valuation will mean those who bought their HDB flats under the current terms "may go underwater" or "have to stomach a loss" if they wish to sell for various reasons.
"Is this what the WP wants to do — to arbitrarily wipe out a significant chunk of the value of Singaporeans' hard-earned properties?" he said.
On Progress Singapore Party Non-Constituency MP Leong Mun Wai's claim that his proposal to reduce BTO flat prices has no impact on the resale market, Wong said: "Cheap BTO prices, high resale prices, home buyers still enjoying enormous capital gains and the Government doesn't have to do anything.
"It seems like magic, but it is really a raid on the reserves."
Whether the WP had proposed cutting BTO supply
Wong also crossed swords with WP MPs over two paragraphs in a 2019 WP working paper on HDB resale prices, with the Deputy Prime Minister saying there is "no shame" in the opposition party admitting that its call to reduce BTO flat supply then was a mistake.
Singh said the People's Action Party (PAP) had raised this point as a "convenient distraction" during the debate over housing affordability, and omitted the broader context in which the paper was written.
In a protracted back-and-forth at the close of the debate, Wong said there would be a "much bigger supply-demand imbalance" today if the Government had heeded WP's 2019 proposal to cut back the annual BTO flat supply to just 9,000 flats at a time when HDB was building between 16,000 and 17,000 BTO flats.
The WP working paper was titled Counting Down To Zero: Are There Alternatives To Vers?.
Responding, Singh said the WP paper looked at a "longer-range forecast of the housing sector", as it was put out in response to the Voluntary Early Redevelopment Scheme (Vers), where owners of flats aged 70 years and older can vote for the Government to buy back their homes before their leases run out.
Wong and PAP MPs did not mention the context of the paper when referencing it, Singh noted. "I have to then come to the irresistible conclusion that it is a convenient distraction because if indeed the point that was raised in the housing paper was critical, then the People's Action Party would have raised it last year, when the WP called for more HDB housing for singles," he said.
In response, Wong said the context then was concern over lease decay and the declining values of flats, amid consecutive years of falling HDB resale prices.
"And the WP is not alone in highlighting that under such an environment, we better consider how many new flats we are putting out. Many experts shared similar concerns. I was under tremendous pressure to cut back BTO flats," said Wong, who was the national development minister from 2015 to 2020.
"There is no shame in acknowledging that you got that wrong because many people did... And we are not here to pass judgment because, with the benefit of hindsight, it is of course very easy to say no one would have predicted that you would have a Covid-19 crisis and what has happened in the last three years."
Leon Perera (Aljunied GRC) then rose to say that the figure of 9,000 flats in the paper did not amount to a call to action to stop or slow down the pace of the construction of BTO flats.
"The first paragraph makes observations about the risk of vacancies in the context of a paper on longer-term housing dynamics that resale prices will inevitably come under pressure at some point... But the call to action comes in the second paragraph, which says, BTO projects should continue," he said.
Replying, Wong said many PAP MPs had also suggested that the Government should calibrate its BTO programme.
"To me, as somebody who was looking at the working paper then, on the receiving end in MND (Ministry of National Development), I think it was clear as daylight what the WP wanted to do. You were not the only one; there were similar concerns expressed by others," he said.
Perera subsequently stressed that the WP paper focused on longer-term housing trends and was not a call to cut down on BTO projects.
"So, I really hope the PAP will stop propagating this falsehood that our 2019 paper called for a cutback to BTO supply in 2019. And if it does not do that, I would really question if the PAP has become a party that propagates falsehoods to gain political mileage," he said.
Wong said in response: "We can just put out what the Workers' Party said, and everyone can be the judge of it."
Concerns over the revised CPF Housing Grant
He noted that the Government had increased the Central Provident Fund (CPF) housing grant for resale flats and given greater priority to families with children and married couples aged 40 and below who apply for flats, as it will take time for the BTO supply to go up.
Addressing concerns that the increased grant will prompt sellers to ask for higher resale prices, he said that is why the measure is targeted at first-timers rather than a broad-based policy move.
"There will always be such a risk when grants are increased. And that is why we considered it very carefully, and we took into account the property cooling measures we had implemented and HDB's progress in ramping up BTO supply before we decided on this move," he said.
Only about one-third of HDB resale flat buyers received the CPF Housing Grant in the last two years, he added.
"So, while the enhanced grant may have some impact on resale prices, overall, first-timers should benefit from the grant and pay less when they buy a resale flat. That is the intent," he said.
"We are confident that it will help first-timer families and singles buying in the resale market, and indirectly also reduce some of the demand for BTO flats."
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This article was first published in The Straits Times. Permission required for reproduction.