The Straits Times says

A pricing model for downtown flats

There has always been an element of luck involved in getting one's dream HDB flat - for example, in beating others waiting for a new apartment in a mature housing estate and in getting a queue number via ballot to pick a choice unit in a block. Fortune also plays a part in riding the property market cycle in order to buy low and sell high consistently. So, one might not begrudge those who happen to make a capital gain from subsidised public housing, especially when there's a prospect the market could favour others too in the same way. Indeed, appreciation over time of the biggest asset most people own is the basic assumption that is often made when they contemplate financial contingencies and retirement.

However, an outsized short-term gain rankles, all the more when it's available to only a few. This response was all too evident when owners of HDB flats at the Pinnacle@Duxton in Cantonment Road made huge profits - up to nearly $500,000 - when they sold their assets after the five-year minimum occupation period. If they qualified, they could have got back in the queue to buy another subsidised flat from the HDB. The public policy question that arises is whether state funds ought to be used to offer a potential windfall to a small category of buyers when there is a big gap between the subsidised price and the market value of a flat in a particular location - typically public housing in prime areas.

Location being a timeless factor affecting property values, it is necessary to review the existing HDB practice when planning for more downtown flats, like those to be built in the Greater Southern Waterfront. This is prized real estate - blue and green assets near the city, offering the possibility of a new reservoir and a 30km trail stretching from Gardens by the Bay to Labrador Park. The area cannot possibly exclude public housing, given the overarching need to promote social integration and social mobility. Treating it as a gold mine for a lucky few would perpetuate what National Development Minister Lawrence Wong called the "lottery effect". Clearly, a more equitable model is required by adjusting the usual parameters - a resale levy, minimum occupation period and lease duration - or devising something different.

Some industry players have suggested raising the launch price to limit the capital gains of buyers cashing out as soon as the rules permit. That would make public housing less affordable - an undesirable feature of the Design, Build and Sell Scheme, which was suspended in 2011 after a public outcry over high prices. The social mix that is desired in all areas would be crimped if only the better-off can afford to get a limited supply of HDB flats in prime districts like the Greater Southern Waterfront. Ultimately, luck might have to be a determiner, but it should be allowed to smile upon a broad base of home hunters.

A version of this article appeared in the print edition of The Straits Times on October 20, 2016, with the headline 'A pricing model for downtown flats'. Print Edition | Subscribe