Several MPs such as Progress Singapore Party’s Ms Hazel Poa, and Workers’ Party’s Mr Louis Chua and Mr Pritam Singh have suggested the Government had underestimated public housing demand and under-built the supply of HDB flats.
However, National Development Minister Desmond Lee warned about the dangers of oversupply in his roundup speech on the housing motion debate on Feb 7, 2023.
He cited the example of how the 1997 Asian Financial Crisis erased the property boom of the mid 90s, when as many as 150,000 buyers were queuing for public housing with a wait time as long as seven years.
“The queue vanished virtually overnight. HDB ended up with 31,000 or so flats which took more than five years to clear because of the unintended oversupply.”
Homeowners paid a heavy price with flat values staying depressed and the many unsold flats represented a waste of taxpayers’ money–money that could have been well spent on healthcare, education and other areas.
The WP 2019 Working Paper on HDB resale prices
In fact, even the Workers’ Party (WP) is cognizant of the implications of an oversupply, said the Minister.
Case in point: the WP 2019 Working Paper on HDB resale prices.
It stated: “Assuming an average household size of 3.3, this would mean that around 9,000 or so new dwelling units are required annually. Completions within the same time period have far exceeded the resident population growth. Private vacancies have only started to inch down, but there are still around 12,000 private units completing up to 2022. Will the HDB have a vacancy rate problem, compounded by a still steady stream of 16,000 to 17,000 BTO units in the last few years, which will continue to increase supply up to 2022?”
“Even the Workers Party calling for the kind of perfect hindsight that they are calling today, for actions of the years before, indicates the vulnerability,” said Minister Lee.
Hindsight is 20/20
In a nutshell, the WP recommended that HDB should build only 9,000 units annually, and cautioned the PAP Government from building 16,000 – 17,000 HDB units.
In comparison, HDB launched around:
- 16,000 flats in 2018,
- 15,000 flats in 2019, and
- 17,000 flats in 2020
“Had we tapered down on supply to the WP’s levels in 2019 or listened to you and your experts, I think our BTO shortage will be even greater today,” said Minister Lee.
Just like the 1997 Asian Financial Crisis, today’s housing issue was triggered by another crisis — the Covid-19 pandemic. But there’s a difference.
While both are crises, the 1997 Asian Financial Crisis brought down public housing demand but the exact opposite happened when Covid-19 hit Singapore–demand surged.
“And today with perfect hindsight, we still make conjectures as to what we think caused this change in movement,” explained Minister Lee.
This proves how hard it is to accurately predict residential property demand and that the best of models cannot fully account for black swan events.
“So I think it’s very important for us to recognise what we ourselves have said in 2019 as we sit here and try to pontificate about what government had or had not done,” said the Minister.
Image via: MCI/YouTube