Since National Development Minister Khaw Boon Wan took office in May, a raft of changes to housing policy has been announced. Although not fully implemented yet, these ideas mean the slaughtering of some 'sacred cows' that have been the hallmarks of Singapore's public housing market for the past decade. Esther Teo, Cheryl Lim and Jessica Cheam examine the changes.
1: From 'build to order' to 'just build'
ARGUABLY, the most 'sacred of the cows' in public housing being slain is the idea that the flats should no longer be 'built to order'.
This is a key shift from the current system where a construction tender for new HDB flats is called only after there are buyers for at least 70 per cent of the units launched.
Now, the HDB will call for a tender as soon as architectural drawings and tender documents are ready, meaning that the HDB will go ahead and build new flats regardless of the response.
National Development Minister Khaw Boon Wan wrote in one of his famous blog posts: 'I told (HDB) to proceed to build, knowing that the orders will definitely come.'
That statement rolled back one of the most rigid principles the Ministry of National Development (MND) has adhered to for more than a decade.
That principle, of course, resulted from the trauma of dealing with an oversupply of new flats in the 1990s.
Under the former registration for flats system (RFS), HDB built flats according to the number of applicants on its waiting list.
But the agency was caught out when flat demand vanished overnight when the Asian financial crisis struck in 1997.
The number of new flat applicants fell to 22,000 in June 2001 from its peak of 146,000 in 1997, resulting in a surplus of 17,000 unsold flats that year.
That prompted the Auditor-General to express concerns about the high cost of holding vacant flats.
Amid news reports that vacant flats were creating 'ghost towns' in pockets of Singapore, HDB had to take drastic steps to clear its surplus stock.
It reduced prices, converted large flats to smaller ones and held walk-in selections of unsold flats.
Former National Development Minister Mah Bow Tan has since invoked the spectre of these 'ghost towns' many times as a reminder of how homeowners had paid a steep price for the oversupply of flats.
'Members may recall residents in near-empty new HDB blocks in Sembawang, Jurong West and Sengkang expressing their concern about safety and theft,' he told the committee of supply as recently as March this year.
'HDB has to take into account market conditions and sentiments when it plans its building programme,' he added.
'(But) in our desire to meet the strong housing demand today, we should not forget lessons of the past regarding the volatility of demand.'
But viewed as a breathtaking move from the historical context, market watchers say that the change was not surprising given the current political climate.
Recent build-to-order (BTO) launches have all been oversubscribed and the HDB is racing to push out a record 25,000 homes this year.
Mr Khaw has also made clear that building ahead-of-order would onlybe only a temporary measure to clear the demand backlog, and that the HDB will go back to the BTO approach once the situation has stabilised.
Mr Tan Kok Keong, Orange-Tee's head of research and consultancy, said that such a change needs to be watched closely and revisited constantly.
'In the event that prices in the private property market drop and come into reach of HDB buyers, it might lead to an oversupply situation,' he said.
ERA Realty key executive Eugene Lim said, however, that if application rates fall, HDB should be able to react quickly enough to rein in the programme, preventing asupply glut.
He noted that the move was really targeted at first-time buyers, temporarily allowing for HDB to launch more new flats at one go and to quicken the sales process.
'It's a good move but we must note that Mr Khaw has said this will be temporary.The BTO system is still more reliable in determining supply and we'll return to that after this backlog is cleared,' he added.
HDB cut prices to fill the blocks. Existing owners became unhappy that their new neighbours paid less for their homes and some petitioned for a discount.
Low prices also meant that those in mortgage arrears had difficulty selling off their flats, and many more were in negative equity.
2: Income ceiling to be raised
IT MIGHT have taken 17 years and a watershed election to get things moving but the Housing Board's (HDB) income ceiling will finally be raised in a key policy shift that some experts say, while not unexpected, was long overdue.
In a surprising turnaround, the Government committed to review the ceiling for first-timers during the run-up to the May elections - possibly raising it from $8,000 to $10,000 - despite defending it as relevant as recently as March this year.
A couple's combined income now has to be below $8,000 a month for them to qualify to buy a new build-to-order (BTO) flat directly from the HDB, which is typically 20 to 30 per cent cheaper than a resale flat.
While there have been frequent calls to ease the ceiling, which has remained unchanged for the past 17 years even as household incomes increased, the Government maintained that four in five households still qualified for public housing with the cap at $8,000, which it considered generous enough.
Former national development minister Mah Bow Tan had said earlier in Parliament: 'Our budget is not limitless. Our subsidies are targeted to offer more help for the lower-income group.'
Yet, as the property market boomed in recent years and prices rocketed upwards, young couples in the middle-income group felt increasingly squeezed.
Some busted the income ceiling soon after joining the workforce, becoming barred from buying flats from the HDB. Pricier resale flats or private property were also out of their reach.
Industry players say that the review is welcome in the light of the property bull run - with home prices jumping 17.6 per cent last year - but cautioned that the demand for new flats will surge further, worsening the demand backlog that has built up.
This is because the move will likely siphon some demand away from executive condos (ECs) and design, build and sell scheme (DBSS) flats and also from private mass market homes.
This, in turn, means that the Government must continue pushing out new flats at a steady pace to avoid volatility and to ensure that the problem is not aggravated, he added.
They add that with the National Wages Council's recommendation for a rise in wages and a tight labour market, the need to relook the ceiling is now even more pressing.However, market experts say the impact on the private market might be muted, as the sandwiched class - households earning between $8,000 and $10,000 - do not make up a huge part of the market.
Mr Tan Kok Keong, OrangeTee's head of research and consultancy, said that demand for new mass market homes might dip by less than 5 per cent in the initial months of the ceiling hike as the policy shift kicks in.
'Buyers will now have more choices but (public and private homes) are still different products and some will still prefer buying private homes as they are not subject to HDB rules,' he added.
Dennis Wee Group director Chris Koh added that should the income ceiling for BTO flats be raised, the $10,000 ceiling for ECs and DBSS flats are likely to be raised as well.
If not, the increased BTO demand will likely result from the cannibalisation of demand from the other public housing offerings - ECs and DBSS flats.
Mr Colin Tan, research and consultancy director at real estate firm Chesterton Suntec International, said the ceiling hike was 'long overdue'.
OrangeTee's Mr Tan added: 'HDB should take a longer-term perspective in its review and consider - what exactly is the role of HDB and public housing. Is it still to cater to the mid-to lower-income and provide basic housing needs?'
3: Never-seen-before HDB data released
MR KHAW'S blog is only about a month old but it is keenly watched by a large audience including home buyers, sellers and industry analysts.
Since he started 'Housing Matters', as the blog is named, Mr Khaw has made the unprecedented move of releasing HDB data that never used to be so readily available before.
So far, he has released detailed breakdowns of the profile of applicants for new HDB flats and buyers in the HDB resale market.
Mr Khaw has also taken to posting observations about supply numbers and housing policies, and has even given fatherly advice on what factors home buyers should take into account.
This new open style is a radical departure from the past. Chesterton Suntec International research head Colin Tan noted that 'compared to the recent past, HDB has been a lot more open today with the information... and it is also more timely'.
Some in the industry have welcomed it as a breath of fresh air.
Property agency PropNex's chief executive Mohamed Ismail said that this will give consumers 'a more accurate picture of the current demand'.
International Property Advisor chief executive Ku Swee Yong noted that with such 'better quality data', buyers can make decisions with greater clarity.
'I believe Mr Khaw is trying to set the record straight... and hopes to prevent less sophisticated home buyers from making decisions that will bring future regret,' he added.
But even though the revelations can bring more transparency, they can also cause 'murkiness' in the short term because they throw up more questions, warned Mr Ku.
Mr Khaw has announced, for example, that HDB will now build more flats ahead of demand and that it will also offer more flats in mature estates. But experts are asking where the land will come from and whether the frenzied building pace will cause construction costs to escalate. While this type of communication is welcome, the use of a blog is an unusual way of releasing information and has created some level of uncertainty and a dampening effect on the market, especially in the private sector, said Colliers International director of research and advisory Chia Siew Chuin.
Nevertheless, the industry is coming to accept this 'change in the line of communication', she added.
Developers have noted that Mr Khaw is trying to engage Singaporeans and the wider sector, in addition to the developers, academics and other experts usually consulted in the industry.
Chesterton's Mr Tan said that the underlying reason for this new form of communication - also a reflection of Mr Khaw's consultative approach - is that HDB can now illicit more direct feedback from the public from the minister's remarks and figures, which the Board can then use to plan its next move.
Professor Yu Shi Ming, head of the National University of Singapore's real estate department said the information and musings of the minister is 'certainly more expedient and timely'.
Most of this information was available in the past, said Prof Yu, perhaps just slower to surface because of the medium of communication used.
But he also acknowledged that some of the content posted was 'reactionary', such as Mr Khaw's response to a recent uproar on the prices of a recent project under HDB's design, build and sell scheme (DBSS).
Dennis Wee Group director Chris Koh agreed, noting that former National Development Minister Mah Bow Tan had also been looking into the same housing issues, but that his musings were not communicated via the 'blog and social media' medium as explicitly.
4: Flats to be built in mature estates
WITH their more established infrastructure and well-connected transport links, mature HDB estates have always been hot locations in the property market.
So whenever new flats in these estates are offered, many buyers rush to apply for them.
The most recent build-to-order (BTO) exercise garnered an average of three applicants per flat. But flats in the mature estate of Tampines were oversubscribed by seven times.
Yet this is mild compared to previous BTO exercises in mature estates. In one exercise, for example, flats in Telok Blangah were oversubscribed by up to 20 times.
In the past, the HDB has always maintained that building new flats in mature estates would be the exception rather than the norm.
The Straits Times understands that these flats often attract large numbers of applicants, who may include those who do not need a home urgently.
Therefore, the high subscription rates might not accurately reflect the true demand and could alarm the market into thinking there is insufficient supply.
There is also a lack of land on which to build new flats - unless older flats are torn down and their residents resettled.
More importantly, there is a need to ensure that new estates take off.
'New towns like Punggol and Sengkang need the critical mass of people to justify the infrastructure put in place. Otherwise, mall operators will complain about a lack of shoppers and bus companies will have empty buses plying routes in the neighbourhood,' said PropNex chief executive Mohamed Ismail.
But Mr Khaw has given the market renewed optimism with his recent announcement that because such flats are popular, HDB will look at building more new flats in mature estates next year.
International Property Advisor chief executive Ku Swee Yong said this could result in home buyers taking more of a wait-and-see approach.
'Buying a property is a big decision so a lot of people are waiting to see what the next move is going to be, to see if new flats will be coming up in areas of their choice before making a move,' he said.
Dr Chua Yang Liang, head of research at Jones Lang LaSalle, said parcels of land in mature estates have periodically been released for sale over the years and added that the opening up of more housing projects in mature neighbourhoods is part of the urban development cycle.
'Having people want to move back into a mature estate can be a good thing for the community. New households can add to the energy, improve local businesses and enhance the quality of life,' he said.
He pointed to how some neighbourhoods in cities overseas have turned into 'ghost towns' when the population migrates to othernewly established areas.
'This demand can be seen as an opportunity to renew existing transport links and facilities, and grow the population while maximising the infrastructure that is already in place,' said Dr Chua.
Industry analysts said the market needs to be aware about the land limitations in these mature estates.
Many of them also point out that new towns would eventually grow into mature housing estates.
Mr Ku said: 'Perhaps all these newer towns need is time to build up reputable schools and better establish their infrastructure and maybe more people might want to move there.'
5: DBSS could see big change or even be axed
THE inception of the Design, Build and Sell Scheme (DBSS) in 2005 was labelled by the Government as a 'bold experiment' and a signal of a major shift in Singapore's public housing programme.
The scheme allows private developers to tender for state land, then design, build and sell Housing Board flats. Previously, HDB projects were developed solely by HDB.
DBSS homes have bridged the gap between build-to-order flats, the most basic form of public housing, and the more premium executive condominiums, offering buyers a wider choice of flats and better value for money.
Equipped with premium features like floor-to-ceiling wardrobes and teak parquet flooring, these homes may look like private apartments but they are still subject to HDB rules and regulations.
A total of Eight sites have been developed under the DBSS so far, with the latest project being Centrale 8 in Tampines.
Six years since its introduction, the scheme has come under scrutiny after a public outcry over the record $880,000 price tag of five-room flats at the Centrale 8 project.
The project's developer, Sim Lian Group, has since slashed the top price of those flats to $778,000.
The flats were still oversubscribed by two times, but that debacle has only fuelled further public concern over how private developers are given free reignrein onover the pricing of HDB flats.
The Ministry of National Development is now reviewing the scheme as part of a broader review of housing policy.
Property analysts say the review could see drastic changes to the scheme, with some saying it might be better to scrap the scheme altogether.
Others have suggested the HDB establish firmer control over the development of DBSS projects, relegating private developers to the role of contractors instead.
PropNex chief executive Mohamed Ismail said the Centrale 8 debacle exposed the scheme's key weakness.
'The scheme is primarily still dealing with public housing but housing that is awarded to private developers. These developers might be listed and might have to answer to shareholders so they are very much profit-oriented,' he said.
The ministry has said that DBSS units make up a small proportion of public housing with 5,500 DBSS units built and sold to date.
Ideally these units should ideally be priced higher than BTO flats but lower than ECs, said analysts, otherwise they could risk destablising the public housing eco-system, despite their small numbers.
'If one developer can launch at that price and still be oversubscribed by two times, other developers could try to go the same route,' said Mr Nicholas Mak, head of research at SLP International.
'If enough of them succeed, this new elevated price could become the new benchmark.'