Forum: HDB reform proposals will further separate resale and BTO markets

Resale flats currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years.
Resale flats currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years. PHOTO: ST FILE

I thank Associate Professor Walter Theseira and Mr Nicholas Mak for their comments on some of our HDB reform proposals (HDB lease top-up proposal has drawbacks: Observers, Dec 17).

Mr Mak argued that our proposed lease extension in Future of Singapore, presented by Mr Ku Swee Yong, Mr Tay Kheng Soon and me, would face popular outcry if it were ever stopped after introduction. But isn't this true of all good and necessary public social policies? Imagine the outcry if Singapore stopped selling subsidised flats or closed polyclinics. Is this a good argument for not introducing them?

He also argued that the provision of more cheap rental flats might prevent people from working harder. The relevant empirical research shows that lowering the cost of living for the poor to affordable levels has negligible effect on their incentive to work.

Following this argument, we should also not lower the prices of Build-To-Order (BTO) flats with grants or subsidise healthcare, or education either, as it might make citizens lazy.

Prof Theseira also commented that resale flat prices could in the end come down to construction costs if BTO flats were to be sold at construction costs.

However, our proposals are also to raise the minimum occupancy period (MOP) to 15 years. This would insulate the resale market from the cheaper BTO flats by extending the MOP well beyond the normal property cycle.

Resale flat values would also likely be boosted as they would now become a residential leasehold asset with an affordable means of leasehold extension.

Resale flats also possess a premium over BTO flats because buyers can choose their location as well as enjoy immediate purchase and sale.

Resale flats also currently already enjoy up to a $160,000 grant discount from listed prices and have an MOP of only five years. If Prof Theseira's arguments were correct, resale prices should already be in the process of being pulled down to this significantly subsidised BTO price.

Yet this is clearly not the case, as the BTO market is effectively still segmented from the resale market. This separation between HDB resale and BTO markets will be even more pronounced with our proposals.

Yeoh Lam Keong

A version of this article appeared in the print edition of The Straits Times on December 23, 2019, with the headline 'HDB reform proposals will further separate resale and BTO markets'. Subscribe