Cutting land prices for HDB flats risks destabilising entire property market: Lawrence Wong

Feb 24, 2023

THE government cannot simply sell state land at a lower cost to bring down the price of Housing and Development Board (HDB) flats, said Finance Minister Lawrence Wong, in response to Members of Parliament (MPs) who raised concerns and proposed solutions related to public housing prices.

Not only could this destabilise the market, it does not address the underlying cause, he said in his Budget debate round-up speech on Friday (Feb 24). Current high prices are not due to land costs, but Covid-era supply issues.

From 2013 to 2019, HDB resale prices actually fell for six consecutive years. “No one seemed to be unduly concerned about the prices of new flats (then),” said Wong. “On the contrary, there was a great anxiety that there would be a huge overhang of flats, and we would end up with a price meltdown.”

This changed when the pandemic delayed Singapore’s Build-To-Order (BTO) programme, thus disrupting supply and causing longer waiting times. “People felt anxious and more started applying for BTO flats earlier; others decided to get a resale flat instead.”

More funding would be required to make new flats cheaper, but the Workers’ Party (WP) does not want to discuss increasing subsidies and taxpayers’ burdens, said Wong. Instead, the WP has proposed selling state land to HDB at a lower cost, which they probably think is “a more expedient and seemingly painless option” to lower prices.

“But we must remember that public housing land is sold directly to HDB at a fair market value,” he noted. “These valuations are based on objective facts. They are not an arbitrary opinion.”

Public housing land itself is not sold through an open tender because HDB is the only developer, but flats are sold in the open market, he said. “There is a well-established open market value for the flats, and therefore working backwards, one can calculate the value of the land used to build HDB flats.”

“The bottom line is, you cannot just change the way land is priced to bring down the selling price of flats,” he said. “If you were to try to artificially ‘reset’ the housing market in this manner, you will risk destabilising the entire property market.”

Instead, what needs to be done is to tackle the root cause of the high prices, by ramping up BTO supply and catching up with the delays that arose in the pandemic, he explained.

As it will take time for supply to go up, the government has addressed demand in the meantime. Budget 2023 introduced greater BTO priority for first-timer families with children and couples aged 40 and below.

The CPF Housing Grant for resale flats has also been increased, to help eligible first-timer families and singles with more urgent needs. Wong noted MPs’ concerns that this may cause resale sellers to demand higher prices, and added: “There will always be a risk like this when we increase the grants.”

But that is why, before deciding on this move, the government considered earlier property cooling measures and HDB’s progress in ramping up BTO supply. The grant’s impact is also limited, he pointed out, adding that only about a third of resale buyers receive it: “This is a targeted support measure, rather than a broad-based move.”

https://www.businesstimes.com.sg/sin...-lawrence-wong