Call to re-look pricing of new flats

Oct 18, 2011
parliament

Zainudin also wants Govt to help families, lower-income group


By Kor Kian Beng

GIVING Singaporeans affordable roofs over their heads was uppermost in the mind of Mr Zainudin Nordin (Bishan-Toa Payoh GRC) yesterday, when he called on the Government to re-look the way new HDB flats are priced, with a view to lowering the prices further.

He felt more could be done, especially in imputing the cost of land in the price formula.

Current home prices worry him, he said, because from listening to his residents he finds that Singaporeans are spending a large chunk of their incomes on paying their housing loans.

Beyond new flat buyers, he wants the Government to help two other groups.

One is the low-income.

The Government should restrict the resale of three-room HDB flats to only the low-income, as is the HDB's original intention, he said. Currently, there is no income ceiling for these resale flats unless buyers are applying for government loans or grants.

The other group are families who need cheap, temporary shelter while waiting for longer-term accommodation, like new flats to be built.

In his focus on affordable housing, Mr Zainudin wants the Government to 'seriously consider the pricing formula'.

'I agree that we have to impute a cost for the use of land to build flats, but on what basis? I don't think this question has been adequately debated,' he said.

Though government figures show Singaporeans spend a smaller proportion of their incomes on home loans compared to international benchmarks, he feels more could be done to ease their burden.

It would help increase their retirement savings, he added, noting that they also spend a large chunk on transport and education.

Singapore families who own new flats in non-mature estates spend an average 23per cent of their incomes on paying their 30-year home loans. Internationally, the rate is 30 per cent to 35 per cent.

Mr Zainudin also wants the pricing formula to be as transparent as possible. Doing so will assure Singaporeans that 'the Government is not out to make a profit through the sale of public housing'.

As for the resale prices of three-room flats to the low-income, he suggests prices be pegged to the original sales price plus the annual inflation rate.

Such a move would pave the way for these families to own flats, as well as exclude people who buy them 'as an investment or for speculation'.

kianbeng@sph.com.sg



[Haves and Have-nots. Restricting resale of 3-room flats to low income families would mean that 3-rm flat owners cannot ask for better price. This would be a drag on their attempt to upgrade. E.g. say they bought a 3-rm flat from HDB, after 10 years, they sell the flat back to HDB at a slight appreciation due only to inflation. Currently, they can get a very good market-based price for their flat, which would go towards offsetting their second bite of the cherry for an upgraded 4 or 5 room flat direct from HDB.
This would mean that it would be more difficult for them to upgrade, and they may not in effect upgrade, and they may not even be able to sell the flat because they can't afford to upgrade, and they would be less socio-economically mobile, being stuck in a 3 room flat for a longer time.
The current set up is a good compromise. HDB builds and sells at a discount 3-room flats to eligible low-income families. The flats rise in price and the low income family is able to sell the flat at a gain and buy another subsidised flat from HDB. The 3-rm flat is then released to the open market for higher income buyers to transfer their income to the low income family. This is redistribution of wealth. In a sense the govt has tapped into the private market to "subsidise" the low income family's upgrading.]