Govt will do what’s necessary to ensure affordable public housing for S’poreans: Desmond Lee

The PAP Government is keeping public housing inclusive, affordable and accessible to Singaporeans as well as committed to the stability of the wider Singapore property market.

New interventions to the market, therefore, are being introduced. This while existing ones continue.

An increased supply of public and private housing is also coming — up to 100,000 HDB BTO flats from 2021 to 2025 if needed.

Minister for National Development Desmond Lee sent out this firm message in Parliament Tuesday (Oct 4).

“The Government will intervene and do what is necessary to ensure a stable property market, and affordable public housing for Singaporeans,” said Minister Lee.

“This has been our approach all along.”

Intervention 1: Generous subsidies and the Prime Location Public Housing model

How ah?

We need to look no further than the new HDB flats around us. The Government is continuing to build and sell them at below market price.

In fact, those new Central Weave @ AMK BTOs? The Government will lose about $270 million developing them.

“The average price for a new 4-room flat in a non-mature estate has remained relatively stable at S$341,000 in 2019 and S$348,000 in the first three quarters of 2022,” noted the Minister.

Government subsidies aid this pricing.

Eligible first-timer buyers can get Enhanced CPF Housing Grants (EHG) of up to $80,000. Lower-income buyers get even more help.

There’s the Prime Location Public Housing model (PLH) too.

The PLH makes sure that new flats in prime, central areas like the city centre and the Greater Southern Waterfront affordable to Singaporeans  

These flats come priced with additional subsidies, recoverable once the flat is resold.

Intervention 2: Diverse benchmarks = affordability

“Our affordability benchmarks do not only consider median incomes, as we provide a wide range of BTO flats for first-time homebuyers with different housing needs and budgets,” said Minister Lee.

He’s done the math.

He gave two examples here. First, for a first-timer household earning about S$5,000, slightly less than the 30th percentile of resident household incomes. Then for a first-timer couple with a combined starting salary around S$6,500.

The household and the couple can service their mortgage from just their monthly CPF contributions after Government grants — S$45,000 for the household and S$30,000 for the couple.

This is when buying a 4-room flat in a non-mature estate (like Woodlands, Jurong East, and Choa Chu Kang in August 2022’s BTO exercise).

“These projects come with typical prices comparable to or lower than the average price of BTO flats in non-mature estates at about S$348,000,” pointed out Minister Lee.

And this means that houses remain affordable. These options mean home price-to-income ratios around 4 (the couple) to 5 (the family)  

“As a broad comparison, the ratio of the median home price to the median household income in other comparable cities such as London, Los Angeles, and Sydney are much higher, at between 8 to 15 times,” said the Minister.

“In Hong Kong, it is more than 20 times.”

Here, he noted that the 25 per cent mortgage servicing ratio for first-timers taking HDB loans remains well below the international benchmark of 30 – 35 per cent.

Intervention 3: New maximum loan quantums and interest rate floors

Borrowing costs for homebuyers are increasing over the medium term because of rising market interest rates.

So the Government is ensuring prudent borrowing.

This by tightening the maximum amount on home loans.

The Loan-to-Value (LTV) limit for HDB housing loans, in particular, is now 80 per cent (down from 85 per cent).

The medium-term rate floor used to calculate a borrower’s maximum loan quantum for residential property loans granted by private financial institutions is now 4 per cent yearly (previously it was 3.5 per cent).

There’s also a new yearly interest rate of 3 per cent for computing how large a housing loan a borrower can take.

“This is 1 per cent below the MAS (Monetary Authority of Singapore) rate floor for private financial institutions,” said Minister Lee.

“This will reduce the maximum loan quantum for home buyers taking HDB loans but will not increase the monthly instalment borrowers have to pay, as there is no change to the HDB concessionary interest rate of 2.6 per cent.”

All these measures are necessary as property loans are long-term commitments and often a household’s largest liability.

“If we do not move now, households may run into housing difficulties when they find it hard to service their housing obligations,” warned the Minister.

“This is already happening in other countries where we see homeowners defaulting on their mortgage payments and losing their homes.”

More new flats for new #lifegoals  

There is, Minister Lee noted, ongoing strong and broad-based demand over the last two years in the HDB resale market.

This is since more late Millennials (peeps in their 30s) are marrying, household sizes are shrinking (more people are buying their own homes instead of living with their parents) and the pandemic meant BTO construction delays.

So the Government’s ramping up supply of private and public housing units.

“For HDB, we have ramped up our BTO supply and are on track to launch 23,000 flats per year in 2022 and 2023, or a 35 per cent increase from 2021,” said the Minister.

In November, we will launch more than 9,500 BTO flats.”

The HDB, in fact, will launch up to 100,000 flats in total from 2021 to 2025 if needed, with more projects having shorter waiting times of under three years.

And private housing supply may increase further after already increasing 75 per cent from 2021 to 2022.

A national fundamental 

All these interventions and measures point to meeting the housing aspirations of Singaporeans, and to help Singaporeans own their home, as a fundamental project for the Government.

“This is a key national priority, and provides the basic foundation for us to raise our families, bring up our children, and build strong communities,” said Minister Lee.

“We will do so decisively but also carefully, being cognizant of the uncertain global economic outlook and rising interest rates, which will affect home prices and contribute to uncertainty in our property market,” he added about the interventions.

“We will continue to monitor the market closely and adjust our policies as necessary on both housing demand and supply, to ensure that prices move broadly in line with economic fundamentals.”