Mdm Ho Geok Choo (MP West Coast GRC) asked the Minister for National Development with the HDB Resale Price Index reaching a record level that is not seen since 1990, what can the Government do to assist homebuyers of such flats.

Senior Minister of State for National Development, Ms Grace Fu Hai Yien:  Mr Speaker, the HDB Resale Price Index (RPI) has fluctuated within the range of about plus 1% and minus 1% in the last few quarters.  This suggests that HDB resale prices have stabilised.  Meanwhile, cash-over-valuation (COV) amounts have fallen, from a high of $22,000 in 4Q07 to below $5,000 in 2Q09, thus reducing the up-front cash needed.  With generous housing grants from the Government, first-time homebuyers who purchase a resale flat in non-mature estates currently use, on average, about 25% of their household income to service their housing loans.  This is well below the affordability benchmark of 30%.

 I would like to reiterate that the Government is committed to helping Singaporean families, especially young couples, to set up their first home and enjoy the benefits of home ownership.  Flat buyers can choose to buy subsidised flats, either from HDB or the open market.

 To assist first-timers in their resale flat purchase, the Government provides a generous CPF Housing Grant of $30,000.  Those buying a flat near their parents or married children would get a higher grant of $40,000.  In addition, first-timers whose household income is less than $5,000 per month may get an Additional CPF Housing Grant (AHG) of up to $40,000.  Hence, a first-timer household buying a resale flat can enjoy up to $80,000 in grants.  HDB also offers housing loans at concessionary interest rates to help buyers finance their flat purchase.

 It is important for flat buyers to exercise financial prudence and buy a flat within their means.  To help buyers plan carefully, HDB provides quarterly information on general resale price movements and the new housing supply expected in the next six months.  Transacted prices of individual flats are also available on HDB's website.  With the information, flat buyers can do their research and choose a flat that meets their budget, preferences and needs.
 

HDB will continue to monitor the demand and supply situation closely to ensure that public housing remains adequate and affordable.  If necessary, HDB will increase the supply of new flats under its Build-to-Order (BTO) system to ensure sufficient housing supply.  HDB will also continue to monitor the CPF Housing Grant and the AHG to ensure their effectiveness in meeting the housing needs of first-timers.

Mdm Ho Geok Choo:   I have three questions for the Senior Minister of State.  Granted the stability of the prices.  In the event that the HDB resale flats do reach a price-level equivalent to the price of private property, which obviously goes against public housing being affordable, what can HDB do to ensure that these homes do not get priced out of reach?

 Also, there is in fact a concern that the prices of HDB resale flats have been artificially propped up with inflated valuations, or they are an indication of a resurgent property market ---

Mr Speaker:  Mdm Ho, please be brief.  We do not have much time left.

Mdm Ho Geok Choo :  Yes.  As such, should there be a cap to the increase in the prices of HDB resale flats?  Can the Senior Minister of State clearly address this?

Ms Grace Fu Hai Yien:  First of all, I have mentioned in my answer, the issue of the Housing Grant and AHG.  In fact, Members of the House would remember that it is only in February that we have revised the AHG upwards, both in terms of quantum and the number of would-be eligible Singaporeans.  We have lifted the eligible household income ceiling from $4,000 to $5,000, so that more first-timers are eligible for the AHG.  It is only in February that we have made it effective and, therefore, we should really review its effectiveness later and let it work through the system.

We are also monitoring the affordability and we measure that by the percentage of the income that is used to finance the flats.  As I have mentioned in my answer, at the moment, we are using, on the average, 25% of our income to service the loans, which to us is an indication of its affordability.

The other element that I would like to explain is that we do look at the supply of new HDB flats through our Build-to-Order (BTO) system.  We will be releasing 8,000 units through the BTO system and, if necessary, we will increase the supply if we see that there is indeed some pent-up demand.  But from one of the launches, Punggol Breeze, that we have seen recently in December 2008, we had some 300 units that were left without being subscribed.  Everyone who has applied for a flat under that launch has been called up, and yet, we have 300 units left unsubscribed.  So that shows that there is some demand but, perhaps, we are not seeing a real pent-up demand as the Member has described.

I think there has been some misunderstanding on how valuation has played a role. Valuation is not done by HDB.  It is done by an independent valuer based on transacted price, so this is not an instrument in moving the prices of property one way or another.  It is not realistic to put a cap on prices.  Someone who contributed to The Forum had recently said that it is not a bad thing for prices to be increasing over time because there are Singaporeans who have bought the property in the mid-nineties and they are waiting for the time for prices to reach the level at which they have bought their flats.  We do want to see prices of property, especially HDB houses since 85% of Singaporeans own them, as a reflection of the wealth of Singaporeans and it is not such a bad idea for prices to move steadily over time.  So I do not think it is realistic for us to put a cap to that.