Alternative Measures to Address Ongoing Concerns on Affordability of BTO and Resale Flats

Mr Yip Hon Weng asked the Minister for National Development (a) whether the Ministry is exploring alternative measures beyond the existing support measures, including reducing the overall cost of HDB BTO flats which may lead to reduced resale flat values, to address ongoing concerns regarding the affordability of BTO and resale flats; and (b) what are the specific risks and concerns related to such an approach.

The Government remains committed to providing affordable public housing for Singaporeans. The COVID-19 crisis disrupted our BTO building programme and led to a supply and demand imbalance, as delayed BTO project completions and longer waiting times drove up demand for resale flats. The demand for flats also increased as more Singaporeans sought to move out to live on their own, a trend accentuated by the pandemic. As a result, resale prices increased. To address the supply and demand imbalance, we have undertaken a series of measures for both the BTO and resale markets to keep prices stable and affordable.

First, we have significantly ramped up housing supply, made progress on delays and secured more shorter waiting time flats. Over the last three years, HDB offered more than 63,000 flats for booking. With the planned launch of about 19,600 BTO flats in 2024, we remain on track to offer 100,000 flats from 2021 to 2025.

In 2023, HDB completed over 21,400 flats across some 23 housing projects – the highest number of projects and flats completed annually in the last six years. We have completed and delivered around 80% of projects delayed due to COVID-19. Barring unforeseen circumstances, HDB aims to complete all pandemic-delayed projects by early 2025.

In 2024, we will launch about 2,800 BTO flats with shorter waiting times of under three years. We are working on having about 75% of new BTO flats with waiting times of four years or less.

Second, we have implemented three rounds of cooling measures since December 2021 to temper housing demand and encourage greater financial prudence among homebuyers. As a result, HDB resale prices increased by 4.9% in 2023, less than half of the increase of 10.4% in 2022. This is the slowest growth since 2019. We expect that the housing market will continue to stabilise in the coming year as a significant supply of new homes comes onstream and as demand moderates in anticipation of expected easing of global economic activity and interest rates remaining relatively high for an extended period of time.

Third, we have also kept BTO prices stable in the past few years, even as we saw a rise in resale prices and construction costs. HDB does not price new flats based on cost. Instead, HDB establishes the market value of flats by looking at prices of comparable resale flats, and then provides significant market discounts to ensure affordability.

Fourth, to ensure that our public housing system continues to meet the needs and aspirations of Singaporeans, we announced a new flat classification framework at the National Day Rally last year. This will come into effect from the BTO launch in October. The new flat classification framework seeks to keep housing affordable for Singaporeans, ensure a good social mix and keep the system of subsidies fair.

On top of the market discounts for Standard flats, Plus and Prime flats come with more subsidies to keep them affordable to Singaporeans from a wider range of income levels. To maintain parity with other BTO flat owners who are not accorded these additional subsidies, owners who bought Prime and Plus flats from HDB must return a percentage of the resale price or the valuation of the flat (whichever is the higher) upon the sale of their flats. These flats also come with tighter restrictions, such as a 10-year minimum occupation period and an income ceiling on resale buyers, to help moderate demand and keep prices affordable.

Fifth, HDB offers substantial grants to offset flat prices. Eligible first-timer buyers can also receive Enhanced CPF Housing Grants (EHG) of up to $80,000, with more help for lower-income buyers. In 2023, HDB increased the CPF Housing Grant for resale flats to $80,000 for 4-room and smaller flats, and $50,000 for larger flat types. Together with the Proximity Housing Grant (PHG) of up to $30,000 to facilitate mutual care and support, eligible first-timer families buying a resale flat to live with/near their parents/child can now enjoy up to $190,000 in housing grants.

Taken together, our various measures have ensured that public housing remains affordable for homebuyers. In 2023, more than eight in 10 first-timer families who collected keys to their new flats or bought resale flats had a mortgage servicing ratio (MSR) of 25% or less upon key collection. This means that they can service their monthly HDB loan instalments with their CPF contributions, with little to no cash outlay.

We will continue to keep a close watch on the affordability of public housing, and adjust our policies where necessary. Households should continue to exercise prudence when taking on new financial commitments, including long-term mortgage debt service obligations.