Extract of Parliament Report – 23 November 2009
BUILD-TO-ORDER AND NEW HDB FLATS
(Supply and demand issues)
Er Lee Bee Wah (MP for Ang Mo Kio GRC) asked the Minister for National Development (a) how many new Build-To-Order flats are presently available for selection; and (b) how do the supply and demand factors influence the cost of these flats.
Mdm Cynthia Phua (MP for Aljunid GRC) asked the Minister for National Development (a) what is the projected supply and demand of HDB flats in the next five years; (b) what are the parameters that are taken into account in the projection of the supply and demand of flats; (c) whether the Ministry has considered an annual buffer number of ready flats and, if so, what is the number and the parameters in arriving at that number; and (d) what measures will the Ministry consider in ensuring that first-timers get a new HDB flat within three years.
Dr Muhammad Faishal Ibrahim (MP for Marine Parade GRC) asked the Minister for National Development what is the current waiting time and the number/percentage of couples applying for new HDB flats under the Fiance/Fiancee Scheme
Mr Speaker (MP for East Coast GRC): Yes.
Mr Mah Bow Tan (MP for Tampines GRC): Members have raised concerns in these four questions about the pricing and the supply of public housing. These are valid concerns, so I thank Members for giving me yet another opportunity to address them.
Mdm Cynthia Phua (MP for Aljunid GRC) and Er Lee Bee Wah (MP for Ang Mo Kio GRC) asked about demand and supply of flats. Let me right at the outset repeat or re-assure Members of this House that there are sufficient flats available for first time buyers in Singapore. The Government has been and will remain committed to this.
Er Lee Bee Wah (MP for Ang Mo Kio GRC) asked how many Build-to-Order (BTO) flats are available presently. HDB has increased the BTO supply to 5,000 units in the last quarter of this year. If we include the recent sale of balance flats that was announced in October, HDB will offer over 7,000 flats in three months, and a total of 13,500 flats in 2009. Now, just to put this number into perspective - what this means is, half the number of flats in Bukit Panjang or Pasir Ris town. At this rate, HDB would be offering enough flats to build another Bukit Panjang or another Pasir Ris in just two years.
HDB is able to quickly increase supply when demand is strong. We started the year with a planned flat supply of 6,000, and that was when we were in the midst of a severe recession. The unexpected turnaround in second half of the year caused a strong rebound in demand. HDB was able to swiftly respond with a 50% increase in flat supply. If take-up of BTO flats remains strong, we will continue to push out more flats under BTO next year, at least one every month if necessary.
In response to Mdm Cynthia Phua’s (MP for Aljunid GRC) question about projecting HDB flat demand, HDB projects a supply of new flats based on various demand factors, in particular, new households formed from marriages and immigration. HDB also takes into account resale flat transactions as they form part of the total housing supply to meet demand. In the next five years, HDB estimates that it would need to offer between 10,000 to 12,000 new flats per year to meet demand. But bear in mind that this is only a projection. What actually happens a few years down the road is not known. Demand is also not constant, it varies from year to year depending on economic and other factors. This medium-term projection serves as a guide for our BTO system, which is flexible, transparent and responsive to actual demand.
Under the BTO system, HDB will start a project immediately when a significant number of applicants confirm that they will buy the flats. It does not build ahead of demand, and run the risk of ending up with the large stock of unsold flats which is exactly what happened when the Asian Financial Crisis hit in 1997. The queue was 150,000 and this dissipated overnight, and HDB ended up with 31,000 unsold flats. As a result, there was a lot of concern in this House about the huge number of unsold flats, waste of taxpayers’ money, flat prices being depressed, and so on. I had to repeatedly assure Members that HDB was taking urgent steps to clear the unsold stock.
Today, the stock of unsold flats is largely being sold. Nevertheless, there is no lack of supply for first-time flat buyers. As I said earlier, HDB has ramped up supply, ramped up the number of BTO projects sharply. For BTO projects, first time buyers get double the chances in the ballot, they get two tickets, compared to second timers. And four tickets, four chances, if they live near their parents, or with their parents. I have asked HDB to do even more to help first-time buyers. With effect from the BTO launches in November 2009, HDB has increased the proportion of new flats set aside for first-timers, from 90% to 95%.
Even before this change, first-timers applying for BTO flats in non-mature estates already had a very good chance of selecting a flat within two tries. In BTO exercises in 2007 to this year, 96% of first timer applicants were given a chance to choose a flat within two tries. You have to be unlucky not to be successful after three or four tries in the BTO exercise. And if Members have any such applicants among your residents, I am prepared to look into their case and see how HDB can help.
Dr Muhammad Faishal Ibrahim (MP for Marine Parade GRC) asked about waiting time in the Finace/Finacee Scheme. HDB takes about three years to build its flats, no different from any other flat, including private flats. Flat buyers should not expect to walk into HDB and buy ready-to-move-in flat as soon they get married. However, with some careful planning, they can shorten the waiting time. They can book a new flat ahead of their marriage, under the Fiance/Fiancee Scheme, once they get engaged and move in once they get married. 40% of first time flat buyers make use of this scheme today. For those who do not and want the flat straightaway upon marriage, they can buy a resale with generous Government CPF Housing Grants, but they will be subject to market forces, such as the COV.
Er Lee Bee Wah (MP for Ang Mo Kio GRC): Thank you, Minister. I have seen young couples - first-time flat purchases - and they told me that they are not successful after two tries. I would like to ask Minister, can we assure them that the third time should be 100% successful?
The next question is that for those who need a temporary flat while waiting for the BTO flats, do we have sufficient temporary flats for them?
Mr Mah Bow Tan (MP for Tampines GRC): Well, if 96% of them are given a chance to select the flat after two tries, I think after three tries, it will be pretty close to 100%. If there is anybody who has not been successful after three tries, to be given a chance to select a flat - note that it is a chance to select a flat, not a chance to get a flat of choice, because I have seen many cases of people who have been given chances to select flats, but who reject those chances for whatever reason. So if you are given a chance to select a flat, please think carefully and choose to select that flat. If you have not been given a chance after three or four tries, you let me know.
As to whether there are enough interim flats available, the answer is yes. We have an interim rental housing scheme, where if you have already selected the flat and the flat is not built yet, and you are prepared to come in for interim rental, I think we can consider that. But there are also other flats that are available. For example, we have certain SERS blocks which have not yet been redeveloped, that are being made available through a managing agent. These flats have reasonable rentals and they are also available for such couples.
Mdm Cynthia Phua (MP for Aljunied GRC): Thank you, Sir. I have three supplementary questions. In the planning perimeters that Minister has mentioned, he has not included the new residents coming into Singapore to buy flats. We know that they are buying resale flats, as a result, the demand of resale flat is high. Most of the people who want to buy a HDB flat, will have to buy from HDB, as a result, there will be a further demand for the HDB flats. Will Minister consider the new residents' demand on the resale market?
Second question - can Minister consider setting up a special committee, to work with real estate developers to sharpen your figures in terms of demand and supply. In the 1997 financial crisis, you have a sharp oversupply. Now there is a lot of demand on the ground. Maybe a special committee, with the rest of the Ministries will be able to sharpen your numbers.
Third question - on the buffer of flats. I know Minister's policy is not to have ready flats. Can Minister consider having a 10% out of your projected 10,000 to 12,000 flats per year, built as ready flats? A lot of families are in urgent need of a home over their heads such as pregnancy before marriage.
Mr Mah Bow Tan (MP for Tampines GRC): Although I said that we do not plan for a buffer, in actual fact, there is a buffer of flats over and above the BTO, which is available, and has shorter waiting times.
These are the surplus flats from the other programmes, eg, some flats from SERS and buy-back flats scheme. So, for this year, we have had a surplus of about 2,000 flats which we have sold recently under the sale of balance flats programme. There will be always be surplus flats available. Under the BTO, for example, we will build when the take-up rate is about 70%. So, there will be another 30% of flats in surplus and not taken up. Once the project is ready and launched, we will put this 30% onto the market for sale. The policy is not to deliberately have a buffer but in the scheme of things, we will generally have a small buffer. In fact, it is about the 10% that the Member mentioned.
On the planning parameters for new residents, in fact, we do cater for family formation due to new residents coming in. However, not all the new residents actually buy resale flats. The Member knows, of course, that PRs are not eligible to buy new flats. They can only buy in the resale market. Even in the resale market, not all of them actually buy the flats. Quite a lot of them rent. We do have figures on the purchase of resale flats by PRs and they are under-represented as far as purchases are concerned. The answer to the Member's question is, yes, we are aware of the fact that new immigrants (the PRs) do constitute an additional demand, and we have taken that into account in all our projections.
This brings me to the second part of the Member's question, which is whether we could have a special committee to try to project more accurately. I think a projection is as accurate as what we know today. If you ask me to project what happens five years from now, I can only go by what is known today - projected economic demand, projected immigration numbers, and so on. But these things, as Members are well aware, will change over time. And the changes can be quite dramatic. If you look at the change - from September last year to September this year - in the property market, stock market, and people's sentiments, I do not think any committee made up of anybody in Government or the academia could have predicted that change. So, what do we do? I think we can make a projection based on best estimates and then we must have a system that is responsive when conditions change. And this is what we have done under the BTO system. We must also have a system that does not encourage unnecessary demand. Unfortunately, when we had a system where people were queueing up and we built according to that queue, the cost of joining in the queue was virtually nil. Anybody could have joined the queue. We allowed both first timers and second timers to join the queue. That is the reason why we had 150,000 people in the queue. Because if you can buy a HDB flat even though you are a second timer or third timer, why not?
We have taken steps over the years to try to weed out what is genuine demand from frivolous demand. We have also taken steps to institute a system that is more response to genuine demand. I think, today, we have a more stable system which can be more responsive to demand. But I am open to any idea or suggestion from anybody about how we can more accurately predict demand five years down the road, and I will be happy to take a look at those things.
Mr Speaker (MP for East Coast GRC): Dr Lam, last question.
Dr Lam Pin Min (MP for Ang Mo Kio GRC): I have a supplementary question for the Minister. I have a resident who tried to make good use of the fiance/fiancee scheme but, unfortunately, his marriage plans were three times unlucky. As a result, he suffered significant loss in the deposits. I believe there must be many such cases encountered by HDB. Will the Ministry actively consider refunding the deposits to such cases, at least for those who are assessed to be genuine?
Mr Mah Bow Tan (MP for Tampines GRC): How would the Member definite "genuine"? But, seriously, we will look into it, as we have always done.
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