SINGAPORE - Flat buyers will not be better off with the Progress Singapore Party’s (PSP) proposed housing scheme, which calls for land cost to be excluded from the price of Housing Board flats, said Senior Minister of State for National Development Sim Ann.

In his speech in Parliament on Monday, Non-Constituency MP (NCMP) Leong Mun Wai had suggested that Build-To-Order (BTO) flats be priced at construction cost, plus a notional location premium. Flat buyers would pay the land cost, with accrued interest, only when they sell their flats in the resale market.

Responding on Tuesday, Ms Sim noted that while buyers may be attracted by the low entry price, they will face a very high clawback – consisting of the land cost – if they wish to sell.

As the clawback is on a cost-based model, it is possible that prospective sellers of these flats will have to pay a much higher price to the Government when everything is added up, she said.

If they are unable to muster the financial resources to sell, it might be challenging for them to upgrade or move somewhere else, she noted.

She added that if the PSP scheme sees a lot of demand, that could make it harder for first-timers to get a flat and worsen current concerns that some have about accessibility.

Ms Sim also contended that Mr Leong’s proposal does not solve the challenges posed by BTO flats in mature estates, which cannot be priced the same as flats in less desirable locations.

“Although some prospective buyers find them pricey, there are still many buyers within the eligible income range who are able and willing to pay the posted price – as can be seen by the high application rates,” she said.

“The issue is how to price mature estate BTOs so that they do not become out of reach for most buyers, and also not in a way that induces its own demand.”

Turning to Mr Leong’s other proposal to keep a large stock of rental flats in prime locations near the Central Business District, Ms Sim said the Government has good reasons for keeping subsidised rental housing very targeted for families who cannot afford to own a home.

Young people should not be encouraged to keep renting, she said.

“Paid rent, even if subsidised, is a consumption expense that could have gone towards financing a home purchase,” said Ms Sim.

“Compared to subsidising rental as a lifestyle, subsidising home ownership brings more benefits, especially if it is for the majority of Singaporeans for whom home ownership is attainable... we are doing our utmost to ensure BTO flats continue to be accessible and affordable to younger buyers.”

Mr Leong and PSP NCMP Hazel Poa had also flagged the issue of lease decay, which they said threatens the value of HDB flats as the leases get shorter. Ms Poa had voiced her concern that flat buyers who used most of their Central Provident Fund (CPF) monies to buy their flats would be left with little retirement funds as the value of their flats drops to zero. 

Disagreeing, Ms Sim said helping Singaporeans achieve home ownership and retirement adequacy are both important goals for the Government.

“Owning an HDB flat that can last us for life is, in itself, important for retirement security. Why? Because the retiree would be assured of a home without having to rent accommodation,” she said, noting that the flat could potentially be monetised through rental or the Lease Buyback Scheme.

She added that the Government does not allow all CPF monies to be used to purchase a home – funds in the CPF Special Account are safeguarded for one’s retirement.

About eight in 10 active CPF members turning 55 in 2027 are expected to be able to set aside at least the basic retirement sum in their Retirement Account, without having to right-size or monetise their flat, said Ms Sim.