SINGAPORE - Singaporeans who live in the same flat their entire lives should be exempted from paying for land cost to keep homes affordable, Non-Constituency MP Leong Mun Wai has suggested.
The scheme proposed by the Progress Singapore Party (PSP) is designed to set a “user price” which is equal to the construction cost plus a notional location premium, he said.
Home owners would have to pay for land cost with accrued interest only when they sell their flats in the resale market, Mr Leong said in Parliament on Monday, when he spoke to move his motion for a review of the housing policies.
He also called on the Government to keep a large stock of quality rental flats, the majority of which should be in prime locations near the Central Business District. This is to provide young Singaporeans with affordable leases of two to five years.
Mr Leong and fellow PSP NCMP Hazel Poa had filed a motion on Jan 20 asking Parliament to call upon the Government to review its housing policies in order to deliver affordable and accessible Housing Board flats, strengthen the owner-occupation intent of public housing, protect retirement adequacy and keep public housing inclusive for Singaporeans of all generations.
Explaining how the concept of homes minus land cost would work, Mr Leong said that at the point of purchase, the “land cost” for the flat would be made known and recorded with HDB.
“If the Singaporean sells his flat in the resale market after the minimum occupation period, he will have to pay this land cost with accrued interest based on historical mortgage rates to the Past Reserves before pocketing the net profit; hence, he ends up paying the full price of the flat,” he added.
He gave an example of how a Singaporean buyer would need to pay only $140,000 for a Tengah Build-To-Order (BTO) flat priced at $350,000 at the time of purchase, under PSP’s proposed scheme.
Since land cost must be paid at the point of resale, the value of existing flats would be preserved, as the scheme would put new flats on a par with the other flats sold earlier with land cost.
The proposed scheme would not have any major impact on the nation’s fiscal position and reserve accumulation, as the Government would still be able to recover substantial land costs when HDB flats are resold.
Mr Leong noted that since 1990, the HDB resale price index has increased seven times, while the median monthly household income has increased only four times. BTO flat prices have also been rising. With the heavy burden of home ownership, young couples will have less incentive to have children due to financial challenges, he added.
Ms Poa noted the long waiting time for BTO flats, and urged the Government to ramp up its supply of flats in the immediate term. She questioned the big discrepancy between the 100,000 units which the Government is prepared to launch from 2021 to 2025, which works out to an average of 20,000 units a year, and the average of 39,500 flats built each year from 1981 to 1985.
She added that HDB flat buyers use 64 per cent to 100 per cent of their Central Provident Fund (CPF) Ordinary Account contributions to pay for their HDB flats, leaving them with less for retirement.
There is also the lease decay issue, which threatens the value of HDB flats as their leases get shorter, said Ms Poa.
She said: “The worry is that flat buyers who used most of their CPF funds to buy the flat will be left with little retirement funds as the value of their flats goes to zero. Under this proposal, with the land cost deferred, the amount of CPF withdrawn to pay for the flat will be much lower, leaving Singaporeans with more funds in their CPF. This will make the lease decay less of a problem.”
Mr Leong said: “Our public housing has become a national malaise which robs young Singaporeans of the financial security they need to be enterprising risk-takers and build Singapore into a competitive information economy, and the old Singaporeans of their well-deserved retirement.”