Has the Home Ownership Scheme really made it affordable?
Dec 15, 2022
By   Internet
  • City News
  • Property supply
  • property subsidies
  • property prices
Abstract: In the beginning, HDB flats were only available to the public when they were built, also known as the Registration for Flats System (RFS).

In 2001, the Singapore government introduced the BTO (Build-To-Order) system, which is a system of pre-purchase of HDB flats.


The HDB will first divide the area for HDB flats and then launch the relevant housing projects in February, May, August and November each year for interested buyers to apply for.


When the demand for the project exceeds 70%, construction will commence.


It normally takes 3 to 4 years from application to delivery of a HDB flat under the BTO system.


After so many years of changes and policy optimisation, most HDB flats now fall under the BTO category.


HDB flats are priced much lower than private houses and condominiums in the same location due to direct government supply, and to actively keep people in good family relationships, HDB has also introduced special subsidy schemes.


For example, there are special financial subsidies for children who apply to live close to their parents, and engaged men and women can reserve a HDB flat before they get married, as long as they show proof of marriage three months after handing over the flat.


Different policies are in place to support different groups of people in need, with the general rule being that the poorer and lower the income, the greater the subsidy.


In addition to meeting a monthly household income below a certain threshold, the applicant must be a Singaporean citizen or must be married to a Singaporean citizen in order to apply, even if they are a single permanent resident.


In addition to this, the purchaser must not have any other property in their name, i.e. the application is their first home purchase, otherwise they will not be able to apply for the purchase.


There are 2, 3, 4 and 5 bedroom homes available for purchase and applicants who meet the criteria can apply for them on the HDB website.


However, after the government has invested heavily, many people still find it expensive and unaffordable, and two MPs even argued about it.


On December 9, MP Leong Boon Hwee tweeted on FB that HDB pre-buy flats in Singapore are really very generously given subsidies?


In his tweet, he put up data from the HDB and said that according to the data, land costs account for nearly 60% of the total cost of building HDB flats today.


The net government subsidy (including CPF rental) is only 12% of the total cost in FY 2021/2022.


This 12% can be explained by the discount on the market price applied by HDB to BTO flats.


The actual subsidy that Singaporeans receive is the CPF Housing Grant, which only accounts for 4.7% of the total cost, much less than 12%.


He also said that he believed that HDB flats should be priced without taking into account the cost of land, as most of the land for BTO flats was given to the government by the HDB generation for a relatively modest amount.


Yet now they are only getting a discount of one-fifth of the land cost to pay the market price for land that should have belonged to the elders of Singapore.


Another MP, Sim Ying, responded to Leong yesterday in a FB post (Dec 12).


In her tweet, she said that from an objective point of view, the Singapore government has indeed made it affordable for more residents to pre-buy HDB flats. For most home buyers the ratio of house price to annual income (HPI) is about 4 to 5 years, but globally the HPI is basically ranging from 8 times to more than 20 times.


She said that if there is a limited number of BTOs, there is a downside if lower prices will result in more people buying, leaving some new families unable to buy.


Also on the issue of land costs she responded that if HDB does not pay the government a market value reserve, the government reserve will become less and less in the future, to the detriment of future times.


It may be true that BTO prices are unacceptable in an era of soaring prices, but the fact is that BTO has not increased much compared to HDB flats/condominium resale prices.


At the same time, new HDB flats are now balancing design aesthetics and practicality, so you can really say that they are good value for money in comparison.