Uniquely Singapore

Uniquely Singapore

Is the HDB fulfilling the needs of Singaporeans?

Leong Sze Hian

I refer to the report “Government to proceed with HDB estate upgrading” (CNA, Feb 24), where it was reported that:

“On the recent record of more than 10,000 applications received for almost 280 surplus flats in mature estates, Mr Mah said it is not possible for the HDB to build flats on a need basis.”

If the HDB does not build flats to meet the needs of Singaporeans, then to whose needs does it build flats for?

By what criteria should we measure the performance of the HDB – and the Minister for National Development?

As an analogy, if a commercial company manufactures products (like bigger flats) that nobody wants for many years, and then, when demand surges, manufactures grossly insufficient amount of said product (smaller flats), what do you think will happen to its CEO and Chairman of the Board?

If practically all resale flats have substantial cash value over valuation, then isn’t it quite obvious that there is something wrong with our HDB valuation and housing loan policies?

Shouldn’t these policies be reviewed, instead of repeatedly telling Singaporeans to only buy what they can afford?

Why are flats being rented out to PRs and foreigners?

In the news report “Tenants respond well to HDB flats managed by private property agent” (CNA, Dec 23, 2007), it was reported that:

“The HDB had earlier also put up three- and five-room and executive flats for rental through private property agents in areas such as Jurong West, Sengkang, Boon Lay and Hougang”.

As there are thousands of needy Singaporeans queuing up for rental flats, why does the HDB give out so many flats to private property agents to rent out to permanent residents and foreigners for profit?

I would like to suggest that the HDB convert more flats into smaller units for rental to needy Singaporeans, as it has done in some housing estates.

New HDB flat prices will follow resale price?

The HDB, in reply to various letters to the media about the obstacles buyers face in trying to purchase HDB flats, said:

“As resale prices move up, so do new flat prices. Similarly, when resale prices move down, as happened during the property market downturn in recent years, the prices of new HDB flats were also reduced significantly.

By selling new flats with a market subsidy, HDB has been unable to recover the development cost of new flats. HDB has incurred an average deficit of $457 million a year in its home ownership programme in the last five years. These figures are reported in HDB’s audited financial statements, which are available to the public”.

With regards to the HDB’s remarks that new HDB flat prices will follow resale prices, why is it that Telok Blangah Towers is selling new 4-room flats at a record price of up to $402,000 and average price of $355,000 in October, which is an increase of about 60 per cent as compared to HDB’s previous Build-to-Order (BTO) flats at Fernvale (average price $220,000) in September 2007, which in turn is about 28 per cent higher than Fernvale BTO flats in May 07, which in turn is about 40 per cent higher than Fernvale prices two years ago, when HDB resale prices only increased by 11 per cent in the first nine months of the year?

Record prices for HDB flats

With regards to the Straits Times report, “More HDB condo-like flats coming up”, (Dec 27, 07), it said:

“The developer who bags the site will be able to design, build and sell flats there with consultants estimating that four-room flats could sell for $450,000 to $490,000”.

I believe this may set yet another new record for new HDB 4-room flats as the estimated lowest price of $450,000 is 12 per cent more than the last record price of $402,000 for Telok Blangah Towers in October, and the highest estimated price of $490,000 is 12 per cent higher.

Meeting demands of new buyers

In another Straits Times report, “First-time buyers get better shot at executive condos” (Nov 21, 07), and the ST podcast that Singapore is facing a supply crunch in the public housing arena, I find it ironic that the Government has said the HDB cannot keep on building new flats to cater to “all demand that comes onstream” – especially newlyweds looking for their first home.

In response to a question in Parliament, Minister of National development Mah Bow Tan said:

“…. Homebuyers, especially newlyweds, may have to turn to the resale market to widen their options, as the Government cannot continue building new flats to cater to the new demand”.

There is a significance from the risk perspective for bank loan resale flats; from 1 January 2008, CPF utilization for a mortgage is limited to the Housing Withdrawal Limit (HWL), which is only 120 per cent of the purchase price or valuation, whichever is the lower.

Once this HWL is reached, no further CPF can be used to service the mortgage. The owner would have to use cash to do so.

Unlike new flats from the HDB, resale flats bought in the open market with a HDB concessionary loan are also subject to the Valuation Limit (VL), which is the purchase price or valuation, whichever is lower, in the use of CPF.

If the VL is reached, one can only use CPF if you have the Available Housing Withdrawal Limit (AHWL).

The AHWL is the available Ordinary Account balance after setting aside the prevailing Minimum Sum cash component.

HDB ignoring reality

The mission of the HDB is to provide affordable housing for Singaporeans. Instead of focusing too much on building premium HDB flats with record-high prices and having price increases of about 40 per cent over the last two years, it should divert more resources and effort to providing smaller, less frills affordable flats.

Asking people, particularly newlyweds, to buy in the resale market ignores the reality that the prices of resale flats are much higher and require cash top-ups above valuation, which may be an affordability issue for younger or lower-income Singaporeans.

Removing various restrictions for ECs, whilst maintaining the status quo for resale flats, may encourage younger Singaporeans to buy higher priced ECs, and thus take higher risks over the typical 30-year mortgage tenure.

Perpetually-vacant flats

With regards to HDB rental flats, since there are about 3,000 rental flat applicants on the waiting list, and with the waiting time being around 5 to 11 months, why is it that about 5 per cent, or 2,100, rental flats are unoccupied?’

A few years ago, the number of vacant rental flats, according to the HDB, was 3,000 to 4,000.

It would appear that there is always a perpetual few thousand flats that are vacant all the time.

If the HDB rented all its flats to 100 per cent occupancy, then perhaps about 70 per cent of those on the waiting list can get a rental flat immediately.

The fact that they can even get onto the waiting list means that their monthly household incomes do not exceed $1,500.

Thus, the HDB’ statement that “Those who can afford to buy or rent from the open market should not turn to rental flats… and compete with more needy families”, may make little sense, and if I may, is rather insensitive. How can a family earning less than $1,5000 afford a rental flat in the open market, or buy a HDB flat when there are currently no new 2-room flats available?

So, the real question is:

Why is the HDB giving flats to private real estate companies en-bloc to rent out to foreigners and permanent residents, when there are thousands of Singaporeans on the waiting list?

What gives?

Is it not the HDB’s mission to provide affordable housing to meet the housing needs of Singaporeans, especially the lower-income?

Or is it the HDB’s mission to rent out flats to foreigners and PRs to make a profit?


In light of the above, perhaps we should question the performance of the National Development Minister.

The following are quoted from the Straits Times’ reports (see references below):

“It is probably not ideal to pressure those who are very poor to commit to an HDB property (even with the subsidy) as these households should probably not assume the debt burden and may face difficulties servicing the HDB loan”. (1) (Straits Times)

“The phrase ‘getting a home is like striking the lottery’ is used to describe the Singapore housing scheme these days”. (2) (Straits Times)

“Young couples squeezed by rising prices are once again complaining about being unable to land a public flat. The Government will have to deliver”. (3) (Straits Times)

So, how well has our Minister for National Development done in respect of providing affordable housing to meet the needs of Singaporeans?

Are Singaporeans getting value for the high pay of ministers?

In view of the problems being faced by thousands of would-be flat owners, did the National Development Minister deserve the up to 9 months performance bonus plus the up to 8 months of GDP bonus he received last year?

What criteria were used and how were his bonuses derived?

His performance thus far leaves much to be desired.



(1) “Safety net for low-income folk can still be widened” ST, Dec 21.

(2) “HDB demand-supply imbalance a part of property cycle”, ST, Dec 20

(3) “Giving value for high pay”, ST, Dec 15.


NOTE: “Uniquely Singapore” is a new weekly column by Sze Hian on TOC. It will feature every Monday.


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