TL;DR – Removing land costs from the pricing of HDB flats will cost more in the long run.
Mr Leong Mun Wai, a Non-Constituency Member of Parliament from the Progress Singapore Party called for the removal of land costs from the pricing of Housing and Development Board (HDB) flats on 8 December.
The rise in rental is not attributed to the rise in HDB flats or vice versa
The rise in rental is caused by the high demand and low supply of rental units in the market.
Delays in the completion of new condos and Build-to-Order HDB flats primarily caused by the bottleneck from COVID-19 resulted in the high demand for rental. With hybrid work arrangements in place, the return of foreign employment presents has also pushed up rents.
The increase in rental is also pressured by the increase in bank interest rates. Landlords are forced to increase rental rates to service their mortgages.
The rise in HDB BTO prices is due to inflation and rising development costs, which include construction and land costs.
Why we cannot disregard land costs
While this proposal may seem attractive, it will do more harm than good for all Singaporeans.
For a country with few natural resources, the 700km2 of land that we have is very precious. State land is considered part of Singapore’s reserves and ignoring the value of the land when computing the cost of our public housing means we are writing off generations of investment into our economy, society and environment.
Investments from tax-payer money are put into building infrastructures that make our country attractive for foreign investments such as building roads, MRT lines, sewers, water pipelines, power supply, optic fibre and recreational parts.
Furthermore, Singapore has a vibrant economy, functioning ‘tripartism’, and harmonious society with many talents and these attributes make Singapore one of the most liveable cities in Asia, hence, increasing the value of our land.
Mr Cheng Hsing Yao, a nominated MP said, “If we do not factor the value of land into the cost of public housing, we are creating an open loop for land value to be given away for free. Some part of the society will enjoy a significant windfall from the free land, while another part of the society will be paying for the windfall,” in Parliament on 6 February.
Why HDB BTO prices differ based on location
HDB BTO would naturally be more desirable in mature estates because of its surrounding amenities and established infrastructure.
Some may argue that the pricing of HDB flats should be kept low as public housing is a necessity, serving the public’s need for shelter. And pricing between mature and non-mature estates should not differ too much.
Mr Cheng shared that artificially suppressing prices through some form of price controls, additional subsidies or grants to buyers will distort the real prices. And this would result in mature estates being severely oversubscribed, resulting in a disproportionate gain to those who win the ballot.
Because public housing serves low-income earners, middle-income earners and a good proportion of affluent Singaporeans, people living in HDB flats cannot be seen as a homogenous group. Rather, HDB has many schemes and grants in place to help low-income earners.
Mr Cheng added, “The call to either bring down the prices of mature estates or provide more grants to make them more accessible ultimately leads to the same things; more subsidies in the form of taxpayer’s money or tapping into the reserve.”
With 80% of HDB flat owners servicing their mortgages entirely from their CPF, with zero cash payments, it is without question that HDB flats are affordable.
Is there a need for more handouts? Asking for more subsidies or grants means wage-earners have to shoulder higher taxes and eating into our reserves could jeopardize the future of our generations to come. Is this a price we are willing to pay?