SINGAPORE — People’s Action Party’s Member of Parliament Xie Yao Quan, who tried to nitpick the Workers’ Party’s proposal on affordable housing, was saved from embarrassment by Parliament Speaker Tan Chuan Jin instead when counter-questioned by WP MP Leon Perera on his stance on the boundary of Bulit-To-Order (BTO) housing affordability.
In parliament on Tuesday (7 Feb), Mr Xie from Jurong GRC rose to question Mr Perera, Member of Parliament for Aljunied GRC, whether current HDB Build to order(BTO) flat selling prices are high or affordable according to the formula laid out in Workers’ party’s Manifesto 2020.
MPs from PAP and the opposition debated on the two motions on public housing affordability filed by Progress Singapore Party (PSP) Non-Constituency Members of Parliament and National Development Minister Desmond Lee.
In the WP 2020 manifesto, WP had proposed that HDB BTO selling prices in non-mature estates should be pegged to household incomes and several elements included to control the prices.
“Prices should be based on a 20-year mortgage, 10% down-payment, and monthly repayments of a maximum of 25% of the median monthly household income.”
Mr Xie claimed that he did a “back-of-the-envelop” calculation and developed a ballpark figure of the BTO price is about S$380, 000 under the WP formula.
He said, as Minister Desmond Lee had revealed earlier, the average BTO price in non-mature estates at about S$340, 000.
“So it seems like our non-mature estate BTO are affordable by the Workers Party’s own definition of affordability, ” he said.
In reply, Mr Perera rectified Mr Xie that this is not an “apples to apples comparison” as he is comparing the current median of four-room BTO flats in non-mature estates to a maximum cap in the WP proposal.
Targeting Housing Price Index of 3
“This cap to the debt service ratio applies to all flat types, including five-room BTO flats. There are other elements in the formulation, such as a cap to loan tenure and further discounts for 2 to 3 room flats that (in the WP) manifesto formulation.”
“We believe that it is useful to refocus the conversation on first-timer median income, not national household median income, ” Mr Perera added that WP viewed that Singapore should aim for HPI (Housing Price Index) of three or close to three for non-mature BTO as a function of first-time household income.
While Minister Desmond Lee puts the HPI for BTO flats in non-mature estates now at around 4.5 for three-room and 5.5 for five-foom flat, which is “seriously unaffordable”.
In a subsequent question, Mr Xie said WP’s housing formula was “peg to the median household income” and sought clarification from Mr Perera that whether WP position is that the formula should apply to all flats, including five-room flats.
Mr Perera again reiterated that the 25% debt service ratio formula expressed in WP manifesto in 2020 is a “maximum cap” while it applies to all flats.
“It is not an expression of the target for the average, it is a maximum cap, and our formulation also has other elements in it which differ from typical transaction.”
However, in the subsequent argument, Mr Xie insisted that “Workers Party’s position is basically to peg definition of affordability to median household income even for higher income earners in Singapore.”
Mr Perera responded, “As I mentioned to Mr Xie, that formulation was the maximum cap, not the expression of where the average should be targeted at. So I’m not sure I fully understand his question, but he’s referring to the 2020 manifesto formulation that we gave.”
He had to reiterate again that the formula still includes various elements like 10 per cent down-payment and additional subsidies for two and three-room flats.
Mr Perera counter-questioned Mr Xie’s position on housing affordability
Mr Perera then counter-questioned Mr Xie about his stance on housing affordability.
“We’ve (WP) said that we believe that three or close to three is the right HPI target for BTO in a non-mature state.”
“Also I would like to ask Mr. Xie, what is his view on affordability? Where would you draw the line? At what level of HPI between what is affordable, what’s not affordable?”
Mr Xie explained that he viewed WP’s proposal on pegging the highest flat type of five-room to median income, basically meaning that the cost of a five-room flat for higher income Singaporeans “must come down and that must be funded in some way”.
“I would like to ask Mr Perera, just how exactly does he suggest funding this?” Mr Xie answered by asking another question without replying to Perera’s question.
Seemingly perplexed by Mr Xie’s response, Mr Perera said he had clarified on the WP manifesto several times, ” I’m not sure why this…there seems to be a disconnect here.”
“We have spoken, for example, about the approach to land valuation that can be taken. So I think we have got proposals that address how these things are going to be funded.”
He reminded that Mr Xie has not replied to his question on the boundary between affordable and unaffordable and his stance on suitable HPI for BTO in non-mature estates.
“I have another question for Mr Xie as well. Does Mr Xie acknowledge that if we have a mental model of ever appreciating house prices, and then we have a model of valuing land based on comparables and historical, the tail wagging the dog, you have got escalation of prices going on for a long, long time.”
“That would mean if we want to keep BTO price stable, we have to increase subsidies more and more and more, ” he asked Mr Xie how to fund those subsidies if he believed in this model.
Mr Xie asked questions that had already answered by Perera several times
However, Mr Xie did not reply directly to Mr Perera question, instead, he said he agreed with the Minister that BTO prices for non-mature estates are affordable.
While Mr Perera already stated WP’s position of bring down Singapore HPI to three or lower than three, Mr Xie again asked him regarding the “benchmark of affordability for a non-mature BTO four-room flat”.
“to Mr. Xie, I would reply that I stated the criteria of affordability several times in my speech and several times in my exchange with you. It is an HPI of three of BTO in a non-mature estate, ” he said.
Speaker called two MPs to move on from the heated exchange
Again, Mr Perera had to remind Mr Xie that he was yet to reply to his questions.
“You didn’t answer my other question, which is if we have an ever-appreciating cycle of property prices that lead to higher BTO prices because the land valuation goes up and we still want to keep BTOs affordable, that needs bigger and bigger subsidies on the budget from, I think, S$1.5 billion. It’s going up to close to S$4 billion. It’s going to go up even more. So where does Mr Xie think the money is going to come from?”
However, Mr Xie did not have the chance to answer the question, as Speaker Tan Chuan Jin saved his day by calling two MPs to move on from the exchange.