Disregarding land costs to drastically lower HDB BTO pricing will 'hurt all Singaporeans': Sim Ann

SINGAPORE — Drastically lowering Build-to-Order (BTO) flat prices, to the extent of disregarding land costs, would "only end up hurting all Singaporeans, instead of helping them", Ms Sim Ann said.

The Senior Minister of State for National Development was responding in a Facebook post on Sunday (Dec 11) to a post by Mr Leong Mun Wai, Non-Constituency Member of Parliament from the Progress Singapore Party. On Dec 8, he called for the removal of land costs from the pricing of Housing and Development Board (HDB) flats.

State land is considered part of Singapore's reserves, so HDB disregarding land costs and not paying back the fair market value of the land would "in effect be running down the value of our reserves" to the detriment of the current and future generations, Ms Sim said.

"Should the Government do what Mr Leong wants? Increasing housing subsidies further must be weighed carefully against other urgent spending priorities," she added, pointing out education, healthcare and security as examples.

"We may well also have to raise taxes to pay for the higher housing subsidies."

DISREGARD LAND COSTS?

In his Dec 8 post, Mr Leong argued that the pricing of HDB flats should only account for construction costs and price differences between locations, and not the cost of the land itself.

"Land costs should be taken out of the picture, because much of the land used for building HDB flats was surrendered by the pioneer generation to the Government for a relatively modest sum under the Land Acquisition Act between the 1970s and the 1980s," he wrote.

He also questioned if government subsidies were enough, noting that the data from a recent joint statement by the Ministry of National Development and HDB showed that land costs accounted for almost 60 per cent of the total cost of building HDB flats today.

Responding to him, Ms Sim said that HDB has kept BTO flats affordable for Singaporeans since a majority of flat buyers use about four to five years of total household income to pay for their BTO flats.

In comparison, global cities pay from eight years to well over 20 years for their homes.

She also noted that most buyers service their housing loans solely out of their Central Provident Fund savings, using 25 per cent or less of their monthly income to service the loans. In other countries, this percentage sits at around 30 per cent to 35 per cent.

Ms Sim, who is also Senior Minister of State for Foreign Affairs, did not name these cities or countries in her post.

"Hundreds of thousands of homeowners who bought their flats from HDB have sold them for higher prices in the resale market. They know HDB’s pricing of BTO flats is generous," she said.

Some people may find Mr Leong's proposal "attractive", but she questioned whether it may truly help homeowners.

Ms Sim noted that concerns over BTO flats' affordability usually focus on larger units in sought-after locations, but such units are already priced at a "very generous discount" to keep them affordable.

"Furthermore, there is a limited supply of such units. Pricing them even lower would only attract more eligible buyers into the queue for them, making it less likely for those starting families to obtain one."

She acknowledged that Mr Leong agreed that BTO pricing should account for location differences.

However, by calling for the removal of land costs as a pricing factor, Ms Sim said that Mr Leong is asking for "the Government to price BTOs much lower, whatever the justifications may be".

On the other hand, HDB has been increasing subsidies and grants where necessary to keep BTO flat prices affordable and stable, she said.

The average price of a four-room BTO flat in non-mature estates was S$341,000 in 2019 and S$348,000 this year — a 2 per cent increase, despite HDB's resale price index rising much faster by 28 per cent over this period.

"Mr Leong alleges that the Government has become less generous with housing subsidies, but the market knows this is not so," she said.

Adding that the Government is sympathetic to the needs and concerns of Singaporean flat buyers, Ms Sim said HDB will make sure that every eligible BTO flat buyer has an affordable housing option.

"We will keep on improving our policies to smoothen the home ownership journey for Singaporeans, especially those starting families," she said.