Progress Singapore Party (PSP) Leong Mun Wai and Hazel Poa on Monday (Feb 6) called for a housing policy “reset” starting with two recommendations:
1 – The Affordable Homes Scheme (AHS)
PSP proposed to defer land costs when buying an HDB flat until after the minimum occupation period, when they would be paid only if the flat is sold. This means that flat buyers who buy flats solely for owner-occupation will not have to pay land cost, which will greatly lower the cost of housing for such buyers.
2 – The Millennial Apartments Scheme (AHS)
PSP proposed that the government would keep a stock of quality flats for young Singaporeans to rent at affordable rates for two to five years. The main supply would come from prime locations near the central business district and would provide young Singaporeans with more options for affordable housing.
Leong Mun Wai previously wanted to remove land costs but backtracked with new proposal
In December last year, Leong said HDB flat prices should account only for construction costs and price differences between locations.
“Land costs should be taken out of the picture, because much of the land used for building HDB flats was surrendered by the Pioneer Generation to the Government for a relatively modest sum under the Land Acquisition Act between the 1970s and the 1980s,” he wrote.
Leong’s new proposal, however, suggests to defer land costs instead of removing it entirely, through AHS.
Leong implies that Singaporeans are “condemned” to living in HDBs
In response to a netizen’s comment about how the AHS may ‘crash’ the resale market, Leong responded that resale prices will hold due to shrinking supply. Surprisingly, he also implied that Singaporeans are condemned to living in HDBs if they can’t afford private housing.
This drew the ire of another PAP MP Carrie Tan who responded in parliament that 80% of Singaporeans are living in HDB flats, and that Leong should avoid such description.
She added: “Does he (Leong) means that he is looking down on Singaporeans living in HDB?”
Why PSP’s proposal is problematic
PSP’s Affordable Housing Scheme allows a prospective buyer to pay for the costs of the HDB unit less the land costs which makes up half the price.
A flat in Tengah costs $350,000 but without land cost, it will be reduced to $140,000. This is assuming that the construction costs (of which is included in the flat price) remains constant. With changing geopolitical climate, construction costs isn’t predictable and can fluctuate wildly.
The buyer will only pay for land costs when he wants to upgrade or downgrade. This is where the problem lies.
Assuming the buyer buys the Tengah flat at $140,000, he would have to fork out the land cost of $210,000 should he wish to upgrade/downgrade.
Compared to HDB’s existing scheme, HDB provides for the buyer to gradually pay off the full cost of the unit (including land cost) and when the time comes for the buyer to sell his property, he is not slapped with a hefty bill.
No sane buyer would buy a second hand property worth half a million dollars when they can buy a first hand apartment for cheap
PSP’s AHS assumes that Singaporeans are not going to move out of their first home. The proposal also assumes that there will be prospective buyers in the resale market even with AHS.
To put it in perspective, why should a buyer pay $350,000 for a secondhand apartment when he could get it for less than half the price? With this thinking, demand in the resale market would drop and inevitably crash.
Affordable housing or a rental scheme?
On PSP’s proposal to offer rental housing for young Singaporeans, PAP MP Vikram Nair said that HDB should continue to prioritise building flats for those who need BTO flats first, given the limited supply of flats.
If the demand for BTO flats has adequately abated, the Government can consider providing rental homes, although rental housing should be prioritised for families in financial difficulty, he added.
Assuming that Singaporeans do not move out of their first flat in the AHS, they are practically living freehold. Afterall, land cost is not paid thus there is no lease.
To put it simply, PSP’s proposal is a big rental scheme.
At the crux of what PSP’s Leong and Hazel are proposing, Singapore will eventually become a nation of renters, similar to Hong Kong.
And if no one is paying for the land – assuming that a majority do not move out of their first home, Singapore’s reserves will take a hit.
How then would future generations fare?
PSP’s claims it is proposing concrete solutions to the housing problems.
But the concrete seems to be spalling.
