Lim Hng Kiang
Singapore
“The company has made commitments to recycle the ash, and as for renewable energy, the gasification project is not an energy project, it is not a generation company (genco). It is to produce hydrogen and carbon monoxide or, essentially, carbon. Because as feedstock to the petrochemical sector, you need more C and more H2.”
“The Government will continue to recover the IIA awarded if the company fails any conditions or breaches the legislative amendments. I would like to highlight that there are no errant cases in the last five years for IIA and the current amendments are, therefore, not reactionary in nature, but are being made for legislative clarity.”
“In addition, the IIA scheme will be extended till 31 December 2022. Clauses 10 to 13 give legislative effect to this change. The remaining legislative changes arising from our periodic review of the income tax system are either administrative or technical in nature.”
“Data on household and individual savings rates by income groups are not available. However, data on the aggregate level of household financial assets can be obtained from the Household Sector balance sheet compiled by the Department of Statistics.”
“The aggregate level of financial assets owned by Singapore’s household sector6 in each of the past five years is provided in Table 1 below. Data on the amount of financial assets owned by households and individuals in the different income percentiles is not available.”
“The Second Review of the Comprehensive Economic Cooperation Agreement (Second CECA Review) is ongoing. The review is taking some time as both countries have our respective interests to work through, such as in the area of labour mobility. Our agencies regularly engage Indian counterparts to work through issues collaboratively.”
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“I am sorry I give Mr Chiam more credit than it is due. Apparently, the years of exchange with Mr Teh and Mr S. Dhanabalan have made no imprint at all. All these numbers are in the HDB's accounts and they are all added up for you. We do not have to give you all the individual accounts for you to aggregate. These are all in the accounts audited by the Auditor-General and published in the HDB's Annual Report. It shows the development cost. It shows the selling prices and it shows the development loss or gain for the whole year as well as per unit. So all these numbers have been published since 1985. Mr Chiam is back to his old hobbyhorse about land prices. As Mr S. Dhanabalan explained to him way back in 1988, since 1988 HDB has been buying land from the Government at a price set by the Chief Valuer and sold by the Land Office. That price is determined by the Chief Valuer. That price is a fraction of the private market land price. It is not meaningful to talk about land prices based on old acquisition cost. I have raised this example many times. I will raise it again. If you price a unit based on historical cost, it makes nonsense of the pricing. For example, we are building flats in Gillman Camp. This is an old armed forces land. Therefore, the price is free of charge. We are going to reclaim land in Punggol. It is going to cost us a lot of money. So the price would be very high. If we go by his accounting, we will price the central area at Gillman flats much cheaper than Punggol flats. Why? Because the land historically is priced at zero cost to the Government and therefore we should sell them at a much lower price than Punggol flats. If that is how Mr Chiam will run the government, then I think he better gets his arithmetics and economics right.”
“But if you want that number, just take the two figures in the Annual Report and divide it. Mr Chiam See Tong: I do not think this is economics 101. It is a question of subsidy of HDB flats which is a big issue and in fact very complicated. First of all, the land cost. The Government acquires land compulsorily, not at market price but at a price fixed by the Government. In the early days, it was 1976 price, then 1985 price. Now we have got the January 1991 price. All these prices are lower than the market value. So the Government has already made money on the land for a start. It spends money on clearance cost. Then it tenders out for development of HDB flats. Of course, the Government has to take away some land for roads and other power plants. But taking all that into account, I believe the Government prices the land for sale of each unit at market value and not the acquired value. So the Government has already made money on the land. As regards the contracts, I wish the accounts of HDB could give the detailed contract prices of each development. We have got structural and piling cost. We have got finance cost and electricity, sewerage cost. I wish they could give all these in detail. We can add them all up and see how much the Government has spent and the number of units. Then we would know the true value of the flat. We will take the selling price and I will tell you that there is no subsidy. The Government makes on the sale of HDB flats.”
“I am telling you the concept of market subsidy is what the commodity will be priced in the market and what you are paying for it. Singaporeans are not that stupid. Singaporeans will gain no pleasure at all if HDB, instead of making a development loss of $280 million, makes a development loss of $2,800 million because of inefficiency. Singaporeans are not interested in what HDB makes or loses. When they buy a flat, they are interested in the value of the flat in the market and what they are paying for it. And that is the market subsidy. And as I have explained, the market subsidy for a Sengkang flat is $103,000. That is why we have more than 40,000 applicants in the queue. For development contracts in Sengkang, in some contracts, we made a development gain, in some contracts, we made a development loss. In a design-and-build contract, we price them higher because they cost more and there are extra design features. There is a bigger development gain. Overall, for 1997, HDB made a total development loss of $280 million. And as I have said, the Government's intention is to subsidise the smaller flats and the less popular estates more. As for the development cost per unit, maybe I need another tutorial on arithmetic 101. HDB publishes in its annual accounts the development cost of the flats it sells. It also publishes the number of units it sells. If you take the two, you get the development cost per unit. That is not a very meaningful figure because the development cost per unit, if you get an average figure like that, it averages the development cost of a 4-room flat to an Executive flat from mature estates to new town. So I do not see the gain in HDB publishing the development cost per unit.”
“It looks like I need another session of economics 101. The concept of market subsidy ---”
“So this is one of the extensions of the programme to allow low income families to buy flats even during this economic downturn. Let me now turn to the IUP programme. Several Members have raised this issue about lift upgrading. Let me just say that even within the budget of $6,000 per unit, some town councils were able to implement lift upgrading. Nevertheless, last year, we increased the budget to $7,000 so as to facilitate lift upgrading during the MUP. In response to the appeals made by Members in this House, the Government will now raise the budget for IUP to $8,000 per unit for the next batch of IUP, provided you undertake lift upgrading. If you do not undertake lift upgrading, then the budget is cut back to $5,000. Then Members will be able to implement what they have been saying all along. Dr Teo asked about lifts in private housing estates. Under the Land Titles (Strata) Act, the management corporation is allowed to collect service and conservancy charges and set aside a portion of these charges as sinking fund for the upgrading of lifts. If the sinking fund is not sufficient, the management corporation can pass a resolution at the general meeting to levy the cost of lift replacement from the owners of the private housing estate. Therefore, we encourage the owners and the management corporations to plan in advance for such cyclical upgrading works. I believe I have answered most of the queries raised. I would be prepared to respond if I have left out anything.”
“Upon completion of the MUP, some of the 2-room flats will be sold to the sitting tenants at a discount. In addition to this, HDB has a programme to upgrade 1-room flats, to improve the living conditions of the elderly living in these 1-room flats. I have explained this several times. Since 1993, we have upgraded 1-room rental blocks and, together with the VWOs, we will then provide services to the elderly. This programme has been very successful. The project is now being implemented for 25 1-room rental blocks, comprising 7,800 units. So the elderly living in these units will benefit. Let me also take this opportunity to announce that HDB will undertake an Ad Hoc Upgrading Programme for 2-room rental blocks. As I have said earlier, when the 2-room rental blocks are upgraded under the MUP, we will sell them to the sitting tenants at a discount, after the upgrading is completed. HDB has identified 54 blocks of rental flats that are suitable for sale to sitting tenants. So far, 18 of these 54 blocks have been included for upgrading under the MUP. Another 22 blocks are within the MUP age band and will be grouped with the neighbouring blocks for MUP upgrading over the next few years. We therefore have the remaining 14 blocks which fall outside the MUP age band. Under normal circumstances, it will be several years before we can upgrade these units and sell them to sitting tenants. So we are taking this opportunity to undertake an Ad Hoc Programme to upgrade these 14 blocks in four batches, starting from the third quarter this year and the whole programme should be finished by the year 2002. When we have upgraded the units, we will then sell them to the sitting tenants.”
“When the economy recovers, we will then bring the programme back to its original scale. Similarly, the IUP programme will be scaled down to between 16 and 20 precincts this year. I thank Mr Ong Kian Min for his support of this slowdown, but not the reasons for his support. Mr Ong supported the slowdown because he said that the cost-sharing is a burden to the HDB lessees who participate in this programme. I can assure Members that this is not so. First of all, lessees who participate in the MUP programme do not have to pay their portion of the cost-sharing in a one-off payment. They can take a loan. If they cannot afford the loan, we can keep in view the loan until they sell the flat. So it is not true that participating in the MUP is a financial burden. Mr Lew Syn Pau asked whether we could reschedule or reorganise the MUP programme so that it would not take so long. HDB has worked out this arrangement in the best way of saving cost and a smooth flow of work. But I leave it to individual MPs and their architects and consultants. If they want to call a tender with a different way of organising their MUP programme, they are free to do so. The only requirement is - do not bust the budget. Dr Teo Ho Pin asked for upgrading of 1-room and 2-room flats. He gave the impression that the MUP programme is targeted at 3-room flats and above and that the 1- and 2-room flats have been left out of the programme. That is not so. Under the MUP and the IUP programmes, the 1- and 2-room flats which form part of the precinct will similarly be upgraded. And if they are rental flats, the HDB pays for all the costs. So far, 10,000 of such 1- and 2-room flats have been selected for the MUP. Another 3,800 have been selected for the IUP.”
“In fact, the grant should be less than half, and therefore we have pegged it at $15,000. Let me also say that with effect from 1st June 1998, singles can only purchase HDB flats from the resale market, either under the Singles Scheme or the Joint Singles Scheme. They can no longer purchase a flat directly from HDB. So those who are on the queue now, under the Joint Singles Scheme, to purchase flats directly from HDB, we will keep that queue. But from today, HDB will not take anymore applications under the Joint Singles Scheme for direct HDB flats. Why is that so? Because with this grant, we would like singles to now purchase flats from the resale market and not add to HDB queue. In addition, we have been noticing a trend of singles incorporating single elderly in the Joint Singles application. We think this is an abuse of the system because a single would bring in another elderly single, a grandaunt or a relative, but there is no intention at all that the two would stay together. They would get a new flat and the single would then stay in that flat on her own. So we are stopping the Scheme as of today. Let me now turn to upgrading. The Main Upgrading Programme was introduced in 1990. Since then, we have announced 12 batches, comprising 73,000 flats. The IUP now involves more than 100,000 flats. In other words, almost one in every three HDB flats has undergone or is undergoing some form of upgrading, either under the MUP or IUP. This is a very massive programme. It is a key programme to share the wealth with Singaporeans. With this current economic slowdown, there is a need to review the MUP and IUP schedules. As we have announced, the MUP schedule will be slowed down from 15 precincts last year to 10 precincts this year.”
“You only pay a levy if you re-enter for a second flat. We also allow you to sell after five years, not after 10 years. And when we talk about market subsidy in Singapore, we are comparing the price of HDB flats to the resale HDB price, not to the private property as in Hong Kong. So what does this all add up to? In the latest HDB's audited accounts for FY96, the deficit for sale of flats amounted to $1 billion. This comprises the development losses that HDB incurred from the sale of new HDB flats as well as the market discount for the sale of 3-room flats to low-income families. For FY97, the accounts are not audited yet, but HDB expects to incur a deficit of about $600 million for its sale of flats activity. As I said earlier, HDB incurred a development loss of about $280 million in 1997. HDB incurred $100 million in the buy-back of 3-room flats, and there is another $200 million of subsidies in CPF grants. All these numbers have been published in HDB's accounts since 1985. There is no great revelation in what Mr Low said yesterday. In fact, as I have offered, we will be happy if he publicises these figures and encourages the people to withdraw from the Sengkang queue. Let me now turn to CPF grant for the singles. This is an appeal made several times by MPs in this House. I am happy to announce that, with effect from 1st June 1998, the Government will extend the CPF Housing Grant Scheme to single citizens to help them purchase HDB resale flats. Single citizens who purchase a resale flat under this scheme will get a grant of $15,000. Joint singles who purchase a resale flat under the Joint Singles Scheme will get a grant of $30,000. Why $15,000? We feel that the singles should not have the same amount of grant as the first-timer couple.”
“Dinner! Would Mr J. B. Jeyaretnam object to him having dinner with a PAP member? If Mr Low wants to publicise these numbers further, I can help him even further. There are 1,400 constituents in Hougang Constituency who are on the North-east queue. HDB can provide a direct mailing list to these 1,400 applicants, tell them that Mr Low says that Sengkang flats are not subsidised, that the Government made a development profit and, therefore, they should withdraw from the queue. Singaporeans are not stupid! They know whether there is a subsidy in HDB flats or not. Mr S. Dhanabalan took some pains to explain the concept of market subsidy to Mr Chiam. I hope Mr Chiam now understands the meaning of a market subsidy. The concept of market subsidy is nothing new. It is practised in Hong Kong. It is a very complicated system in Hong Kong. Let me just explain the gist of it. In Hong Kong, the Hong Kong Housing Authority sells a flat to the Hong Kong resident at a price. When they sell the flat, they estimate what is the market price of the flat that they are selling and, therefore, what is the price that they are selling, the discount of the flat that they are selling, compared to the market price. So if they sell a flat at, say, 35% discount of the market price - the market price is compared to the private property in Hong Kong - that 35% discount is levied when the Hong Kong residents sell their flats 10 years later. So when the Hong Kong Housing Authority sells you a flat, they tell you that this price is at 35% discount of the market price. You are not allowed to sell your flat until 10 years later. When you sell your flat 10 years later, they levy 35% on the market price. In Singapore, we do not do such a thing. We allow you to sell your first flat and you do not pay a levy.”
“I assume the Workers' Party can command 10-20% of support from Singaporeans. So I shall look forward to perhaps 4,000 to 8,000 of Workers' Party supporters listening to Mr Low Thia Khiang, knowing that the Government made a profit and, therefore, withdraw from the North-east queue. If that happens, I will buy Mr Low a very good lunch. An hon. Member: Dinner.”
“Since the scheme started in 1994, HDB has bought more than 7,500 3-room flats. The subsidy involved in this scheme amounts to about $375 million over the three years. Let me now turn to new HDB flats. There are 128,000 applicants on the queue. Why is that so? Because the subsidy is greater for those waiting for new flats than the $40,000 or $50,000 CPF grant. If the subsidy is less, then why wait so long in the queue? The Government's approach to pricing of HDB flats and housing subsidy is very clear. I have explained this many times. Let me reiterate the principles. 1.00 pm First, we will subsidise the smaller flats more than the bigger flats. Second, we will subsidise the less popular areas more than the popular areas. Mr Low Thia Khiang said that HDB made a development profit in the Sengkang contracts. This is no great revelation. I supplied those figures last month. For the bigger flats, especially the design-and-build flats in Sengkang, HDB made a development profit. In the Woodlands and Jurong West contracts, however, HDB made a development loss. Overall, HDB made a development loss of $280 million in 1997. If there is no subsidy, then why do we still have 40,000 applicants in the North-east queue waiting for flats in Sengkang Town? The reason is very simple. Because the average market subsidy of a new flat in Sengkang Town in 1997 was $103,000. Mr Low Thia Khiang gave these numbers, which were supplied in February. I hope he would take these numbers and publicise them in The Hammer. Publicise these numbers widely, tell all the Workers' Party supporters that the Government made a development profit in Sengkang and that therefore they should withdraw from the North-east queue. We have 40,000 applicants in the North-east queue.”
“The amount of loan HDB grants also depends on their age and household income and is capped such that the monthly instalments do not exceed 40% of the buyer's gross monthly income. With these conditions in place, there is therefore no need to impose further criteria for applicants of 5-room flats. We hope, and we encourage, all Singaporeans to buy within their means. Let me now turn to the issue of housing subsidies. The reason why HDB flats are affordable is because they are heavily subsidized. This question of public housing subsidy is a long-standing debate. It started in 1984 between Mr Chiam and the late Mr Teh Cheang Wan and continued in 1988-1989 between Mr Chiam and Mr S Dhanabalan. I assume Mr Chiam now understands housing policies and therefore we do not hear very much about this from him. But now we get a new "Chiam". Mr Low Thia Khiang wants to raise this debate. The most direct and the clearest manifestation of housing subsidy is the CPF housing grant of $40,000 for first-timer couples to buy a resale flat. This is the most direct subsidy. Furthermore, if the first-timer couple buys a resale flat within 2 km from their parent's flat they enjoy a higher grant of $50,000. In FY96, 4,692 first-timer families made use of this grant. A total of $203 million was disbursed. In FY97, based on current projection, the disbursement of CPF housing grant is estimated to go up to $223 million. This is the most direct form of housing subsidy. The extension of this CPF grant concept is the 3-room buy-back scheme. Here, HDB buys 3-room flats from the open market, pays the going market price and then sells the flats to applicants on the 3-room flat waiting list at a discount of up to $50,000. That is again a very direct form of housing subsidy.”
“Thirdly, we also allow those in hardship to defer payments of the loan instalments for an initial period of six months, and with a further extension of six months if their temporary difficulties continue. Fourthly, we can also convert their loan scheme to an easy repayment scheme. Under this scheme, the monthly instalment for the first five years is at 75% of the normal instalment amount. It is then recomputed from the 6th year onwards to the end of the repayment period, based on the outstanding loan on the 6th year. Finally, we also encourage the inclusion of a working family member as a joint owner so that the CPF monies of the new lessee can be used to pay for the arrears. Sir, I want to assure Mr Ong Kian Min that HDB would resort to recovering the flat due to loan default only as a last resort. Mr Ong also asked about applicants who may want to change to a smaller flat because of their difficulties. If applicants are unable to afford the flats they have booked because of financial difficulties, they can apply to HDB to cancel their applications or change their applications to smaller flats. On a case-by-case basis, depending on their circumstances, HDB will consider waiving the penalty fees for the cancellation and also the 3-month setback for the change of flat type. Mr Kenneth Chen has asked whether more first-timers are now applying for 5-room flats rather than smaller units and whether we should have some criteria to make sure they can afford to do so. As you all know, HDB has already implemented policies such as credit assessment to ensure that applicants buy flats within their affordability.”
“This proportion is very high considering that some purchasers are self-employed with no CPF contributions. A further proof that HDB flats are affordable is evident in the very low loan default rate. Last year, HDB recovered only 5 flats out of 430,000 flat owners with outstanding mortgage loans, arising from the purchasers' inability to service their monthly loan payments. To make sure that HDB flats remain affordable to Singaporeans even in the current economic conditions, we will monitor the affordability indicators very closely. Mr Zainul Abidin has raised concern about Government helping low income families own their flats. I can assure Members that MND would keep its eye on the ball and make sure that low income families continue to be able to afford HDB flats. In 1994, we announced four policies to allow them to do so: (i) the sale of rental flats to sitting tenants at a discount; (ii) sale of 3-room flats purchased by HDB from the open market and then sold to applicants, also at a discount; (iii) sale of smaller 4-room HDB flats; and (iv) priority allocation of 3- and 4-room flats to HDB rental flat tenants. These policies have been very successful and later on I will announce an extension of this programme. Mr Ong Kian Min asked about applicants or buyers who may have lost their jobs in the current economic turmoil and how HDB can help them service their loans. HDB has several measures to allow home buyers to reschedule their mortgage loans. First of all, we allow them to pay the mortgage loan arrears by instalments within a reasonable period. Secondly, we allow them to reschedule their loans up to the maximum repayment period that they are eligible for.”
“This correction in the HDB resale prices is not unwelcomed, considering the huge increase in prices from 1993 to 1996. The correction has made resale flats more affordable. Upgraders who need extra living space or who want a flat fast can now consider buying flats from the resale market. For first-timers, they are assisted by a $40,000 CPF housing grant or $50,000 grant if they live near their parents. More and more first-timers are taking up the CPF housing grant to buy a resale flat. Let me now turn to pricing and affordability. Several Members have expressed concern that in the current economic downturn some HDB flat owners may not be able to afford HDB flats or they may face difficulties paying for the mortgage loans. I would like to reaffirm the Government's commitment to provide affordable public housing to Singapore citizens, especially first-timers and families in the lower income groups. As I have said several times, the Government's commitment is to price new HDB flats such that 90% of Singaporean households will be able to afford at least a 3-room flat and 70% at least a 4-room flat. This policy has not changed. In general, HDB flats are priced such that purchasers are able to pay their monthly loan instalments within the 30% limit of their monthly CPF contributions which can be used to pay for their housing. The cash outlay that flat applicants have to take out from their disposable income is minimal. HDB records show that in 1997 the average monthly loan instalment constituted around 25% to 30% of the gross household income of the purchasers. Also, 80% of purchasers were able to service their monthly household loans entirely from their CPF contributions.”
“Applicants are allowed to transfer their applications to another flat type or zone and their applications will be set back by three months on the queue. The revised resale levy imposed in 1997 has also discouraged frivolous demand from upgraders whose existing flats are already able to meet their existing needs. Prior to May 1997, there were about 300 new applications received per month from upgraders who were already existing lessees or ex-lessees of 5-room flats or bigger. This number has now dropped to an average of 22 per month. The vast majority of upgrader applications now are applicants from 4-room or smaller flats. These applicants are our target group for upgrading to a second flat. So the measures have achieved what we set out to do. HDB is building 35,000 flats in 1998, 27,000 for first-timers and 8,000 for upgraders. The waiting time for first-timers has shortened. We have weeded out the more frivolous demand. I would therefore say the overall impact of the 1997 revision in the policies has been positive. Let me now turn to the resale market for HDB flats as a backdrop to our subsequent discussion. Resale prices of HDB flats showed huge increases from 1993 to 1996. In May 1996, the Government introduced measures to curb speculation in the private residential property market. With the correction in prices for the private residential properties it is inevitable that HDB resale prices will also follow suit, especially for the top-end of the HDB resale market. A correction of prices at the top-end of the market will subsequently filter down to the smaller HDB flats. The 1997 HDB policy changes also curbed the speculative demand for HDB flats brought about by easy credit policy for HDB mortgage loans.”
“Sir, first let me thank Members for raising several issues on public housing policies. Let me take first Mr Zainul Abidin's request for a report of the effectiveness of last year's policy review. The public housing situation is now stabilized. As at end February 1998, there were 128,800 applicants on the waiting list. Of these, 60,800 are first-timers and 68,000 are upgraders. Compared to February last year, we had 141,000 applicants. So the situation today is better than last year. The new applications received by HDB are now more sustainable. HDB now receives about 1,000 to 1,500 applications per month. This trend, if sustained, will bring the annual demand for new HDB flats to a more realistic level of about 20,000 per year compared with the 67,000 that we received in 1996. The number of applications under the fiance-fiancee scheme has also dropped to a more realistic figure of 500 a month, about half the monthly figures that we received in 1996. There were also more first time applicants than upgraders recently. This should be the case as first-timer applicants should be and are given higher priority in owning their first flats. The revised policies have led to an overall reduction in the waiting time for new HDB flats. First-timer applicants for 4-room and 5-room flats in the north and west zones will now be able to book a flat in approximately 2 years, those in the north-east zone within 3 years, and those in the Punggol 21 queue slightly over 3 years. Upgrader applicants in all zones will have to wait longer for their flats, about 3 1/2 years for the north and west zones, about 4 years for the north-east zone, and more than 5 years for the Punggol 21 estate.”
“Mr Deputy Speaker, Sir, I beg to report that the Committee of Supply has made further progress on the Main and Development Estimates for FY 1998/1999, and ask leave to sit again tomorrow.”
“The bottomline is: do you implement an upgrading programme when it is not cost effective, when the alternative of using bottled gas is so much more cost effective? Do you need to re-lay pipes for town gas when each household could just make use of bottled gas? So it is not just a question of upgrading but also the economic usefulness of expending that sum of money. On the establishment of RAs, I think we are supportive but not at the price of having to build a clubhouse for every one of them. I believe I have answered most of the questions. Please point out any other issues which I have not covered.”
“What the price would be will have to be determined by the market and the developers who are building these properties. Let me now turn to upgrading of private housing estates. I take all the comments of various Members. Let me just explain. First, the Government has the intention to upgrade private housing estates. We have said this before and we are still committed to upgrading private housing estates. Second, what is the scope of this upgrading? I am a little taken aback by all these suggestions about clubhouses. I think we want to make it quite clear that upgrading of private housing estates, as we see it today, will only take place in the public areas. It will take the scope something like the Interim Upgrading Programme of the HDB for the public areas. We are not likely to enter into the common property of the condominiums, neither are we likely to enter into the compound of the landed property. So I think the scope is limited to the public areas. The budget will be more or less like the IUP budget. The next question will be when do we implement the project. We have hoped to implement it this year. But because of the economic downturn, we have to postpone it. It will be very difficult for me to explain how we can cut back on MUP and IUP on one hand and start off another programme on the private housing estates on the other. So I think it will be more prudent for us to launch this project when the economy recovers. At that point, we can reinstate the MUP and IUP programmes and at the same time launch the programme for the private housing estates. As to Mr Lew Syn Pau's specific examples of laying of gas pipes, I think we are familiar with that issue.”
“Let me reiterate the objective of the Executive Condominiums. As many Members have highlighted, it is to satisfy those who want to buy something more than a HDB flat but yet cannot afford the private property. We can either call it a "sandwich housing", we can call it a hybrid between HDB and private housing. The intention is that since HDB now builds and sells 5-room and 4-room flats, we think that there is a group of Singaporeans who aspire to own more than HDB flats but cannot quite cross into private housing. That is why we introduced the Executive Condominiums. We think this concept remains valid in good times or bad, but we have to be realistic. If private property prices increase, then less people will be able to afford private property and the demand for Executive Condominiums will go up. Similarly or conversely, if private property prices decrease, then more people would be able to afford private property and therefore the demand for ECs will drop. So it is not possible for us to set a fixed supply of ECs and not adjust according to the market conditions. 6.15 pm Based on our estimates of what this group of people would be, we think that out of 25,000 new households per year, between 5% and 10% would be the target group to own Executive Condominiums. And therefore between 1,500 and 2,500 units every year will be the right number to sell. We started off in 1996 with 2,000 units because of the sharp prices. We increased the number to 4,000 in 1997. We have therefore decided to cut back in 1998 to 1,500 units. As you can see, if you average this out, this is more or less the number that we expect to be able to buy Executive Condominiums. The price of the Executive Condominiums has to settle between the HDB prices and the private property prices.”
“If young Singaporeans cannot afford the 20% cash outlay, then they should start off with the HDB flat and upgrade to private property when they can better afford it. Alternatively, they can apply for the Executive Condominiums where they will be given a $40,000 CPF housing grant if they are first-time purchasers. Mr Chng Hee Kok asked whether the Government will set reserve prices for land tenders. I have discussed this with the Ministry of Finance and the Ministry of Law, and they are not in favour of stipulating reserve prices for the following reasons: There is a fairly long time lag between the launch of a sale and the closing of the tender. For example, for the site that Mr Chng mentioned, the Marina South site, there is a five-month time lag. So if the Chief Valuer were to announce a reserve price in November last year and we close in May this year, I think his reserve price will be very much out of sync with the market. Similarly, it is not the market practice for private land owners to disclose their reserve prices. So I do not see why the Government should have a practice different from the private sector. As to Mr Chng's comments about the results of the Marina South tender, I would not want to pre-judge the results. I agree with him that there is a certain upfront cost in preparing for the tender. I will get URA to examine how to minimise this cost, because it is a large site and we need not tie up a large deposit unnecessarily. In any case, it is not that the developers are tying up $100 million. This takes the form of a banker's guarantee and so it is not tying up capital unnecessarily. We will examine it. For large sites, perhaps we need not have such a big amount as a deposit. Let me now turn to Executive Condominiums.”
“Another 8,600-over units started construction, not yet launched for sale, also unsold. So you have more than 17,000 units in the market unsold, ready for takers. The Government will continue to monitor the economic and property situation carefully, and will sell more units when the market recovers Mr Inderjit Singh asked the Government not to lift the May 1996 anti-speculation measures. I agree with him. These measures will serve us well, both in the upturn as well as in the downturn. The Government, therefore, has no plans to lift them. Mr Inderjit Singh was also concerned that the tax exemption for land under development and not for vacant land will accelerate the development and thus add to the housing supply. I do not think developers would start development and add to the oversupply situation simply because the property tax allows them to do so. Developers will add to the supply only if they think there is a demand and that they can sell the units for a profit. Therefore, property tax exemption for land under development will not exacerbate the land supply. Mr Sinnakaruppan asked whether Government should lower the upfront cash payment for housing purchase from 20% to 10%, to help young first-timers to own private property. I must reiterate what Dr Richard Hu said, ie, that "Singaporeans should only purchase private property only if they can afford it. It is not advisable for banks to lend or for buyers to borrow beyond what is financially prudent for them, especially at this time of economic uncertainty." The 80% financial limit on mortgage loans in Singapore is still higher compared to 70% in Hong Kong.”
“Again, if the Government did not intervene in May 1996, the property market would also have risen much higher and a subsequent correction more painful. So, when the markets do go up, people get caught up in it, and think that prices would not fall. We can call it exuberance or we can call it euphoria. Similarly, when markets do come down, there is gloom and doom. People stay away. The market declines further and it becomes a self-fulfilling prophecy. It is not possible to prevent such cycles. The Government can only take limited action to moderate the excesses of such cycles. Since the middle of last year, the economic landscape has changed substantially. There is now an excess supply of properties and a contraction of demand due to uncertainties arising from the regional economic turmoil. Under the present circumstances, it will not be prudent for the Government to continue with the land sales at the same level as previous years. This is because releasing more land than the market can absorb will exacerbate the downward swing of the property market. The Government has thus decided to suspend the sales of sites for 2,500 residential units to the second half of 1998. However, let me assure the House that the Government remains committed to releasing sufficient land over the medium term to meet Singaporeans' aspirations to own private residential properties. Prof. Low Seow Chay asked whether we have enough units in the medium term. As Members have noticed, in the fourth quarter 1997 land supply data, we have more than 40,000 units under construction, of which more than half are still not sold. 8,000 units, started construction, have all the building plan approvals, launched for sale and not sold.”
“So in 1990, we announced a systematic Government land sales programme to inject more private housing units into the market. We started off with 1,500 units in 1990, rising gradually to 3,000 units in 1993. When prices started to rise sharply in 1993, the Government stepped up its annual land sales from 3,000 units in 1993 to 4,000 units in 1994, and then to 6,000 units in 1995, to meet the increased demand for private housing. So it is not possible for the Government to set a fixed land sales and expect to operate as an auto pilot. I know Prof. Low Seow Chay himself argued for more land sales when the property prices were going up. Many MPs did so in 1993 and 1994. So it is not possible when prices are coming down to say that Government stay clear and do nothing at all. Similarly, the Government introduced Executive Condominiums in 1995 to make private housing more affordable to a certain group of people. When the private property market stabilised for the first nine months in 1995, we thought we had solved the problem. However, the property market started to overheat again at the end of 1995 and in early 1996. The Government then had to introduce the anti-speculation measures in May 1996. This was necessary to curb market excesses and prevent the property bubble from further ballooning, as this would have made the subsequent market correction even more drastic. The reason why I explained the history is to show that the Government anticipated the strong demand for private housing, as early as 1989. If the Government did not inject more private housing into the market through the Government land sales programme, prices would have gone up much higher in the early 1990s.”
“Another reason why the Government cannot take a completely hands-off approach is because the Government itself is involved in land sales. At the end of the day, the Government must decide how much land to sell, and that will affect the supply side of the equation. What is the Government's role in the property market? First, the Government will monitor the property market and dampen excessive volatility that can undermine the overall financial and economic stability of the country. Second, the Government will always ensure that property loans for development and for mortgages are within prudent limits. Third, the Government will release sufficient land to meet the medium term demand. Finally, the Government encourages market transparency by making clear Government's land sale programme ahead of time and providing timely and comprehensive information on property stocks, occupancy and potential supply. At the end of the day, market forces will settle the price levels, not the Government. The second issue which was raised by the MPs is that the Government appeared to be passive when the property market was rising a few years ago, and now seem to be actively intervening when the market is declining. Let me set the record straight. When the market went up sharply in 1993 and 1994, it reflected the very strong double digit economic growth then. Furthermore, the region was booming. Foreign funds flowed into the region and into Singapore. As we all know, the region is now suffering from the excesses of that period. Before 1987, the Government planned on the basis that public housing will constitute 90% of homes in Singapore. We realise that this did not reflect the rising incomes and rising expectations of Singaporeans.”
“Sir, this is supposed to be an austerity year. I am surprised to hear such a long wish list from Members. Let me first address the key issue raised by several Members, ie, what is Government's role in the private property market. Mr Lew Syn Pau stressed that the Government should strive for stability in the property market. Mr Inderjit Singh asked that the Government not intervene in the market and let the free market settle the private property prices. Earlier on, during the debate on the Budget, several Members such as Mr Inderjit Singh, Mr Simon Tay and Mr Chuang felt that there had been too much Government intervention and support given to the property sector and property developers. I would like to take this opportunity to reiterate what the Government's role in the private property market is. First, can the Government adopt a completely hands-off approach and let the free market reign in the private property market? The answer is no. The property market is closely linked to the overall economy and the stability of the financial system. More than 90% of Singaporeans own their homes. No government can, therefore, take a completely hands-off approach to the private property market. We all know that the private property market will go through the business cycles. Prices will go up and prices will come down. The Government has no intention of fixing property price levels, nor can it do so. The Government does not have a target price level to reach. However, the Government will intervene in the property market when it is necessary to prevent excessive swings in the market. This is because a severe overheating of the property market or a crash will have serious ramifications on the real economy.”
“This loss will be funded by the Government through the annual grant given to HDB. The MP has also asked about the pricing of HDB flats. In the last Parliament sitting, I have explained that the selling prices are determined by the location, floor area, design features, and finishes as well as other attributes of the flats. Other factors like good view, proximity to MRT/LRT stations, the demand for flats in the different towns are also taken into account in the selling prices of the flats. The selling prices of flats offered for booking are therefore derived from a combination of factors depending on their individual attributes and are not directly comparable from one building contract to another. To ensure affordability of HDB flats to the lower income families, the Government is committed to pricing the HDB flats such that 90% of the first timer households can afford at least a 3-room flat and 70% of the first timer households can afford at least a 4-room flat. FAMILY POLICY RESEARCH UNIT 11. Mdm Claire Chiang See Ngoh asked the Minister for Community Development whether his Ministry will consider setting up a Family Policy Research Unit to conduct and co-ordinate policy-oriented research, particularly between inter-ministerial agencies, on issues related to family and work, given the increasing pressures and prevalence of dual-career families.”
“Sengkang is also the first town to be built with the LRT incorporated in the town planning and the LRT built before the town is fully developed. The average market subsidy of a Sengkang flat is $103,300. The Government's policy is to subsidise the smaller flats more heavily than the bigger flats. To encourage applicants to choose the less popular towns in Jurong West and Woodlands, the flats in these estates are priced lower than in Sengkang and hence the development loss is greater (see Table 1). TABLE 1 Town Bkg Contracts Units Average Cost Sale Devt Loss Equivalent Subsidy Qtr Price /(Gain) Market Price Constrn Land Total ($) ($) ($) ($) ($) ($) ($) Sengkang 4Q97 N2C27 795 104,395 130,473 239,268 278,489 (39,221) 349,037 70,548 N3C1 442 100,436 122,758 227,595 256,698 (29,104) 331,694 74,996 1Q98 N2C28 444 104,918 121,931 231,249 232,265 (1,016) 310,644 78,380 Woodlands 4Q97 N5C12 447 100,478 124,893 229,771 171,453 58,318 268,159 96,706 Jurong West 4Q97 N6C15 497 95,626 106,458 206,484 160,510 45,974 250,045 89,536 The overall development costs, selling prices and development loss of all HDB flats offered for 1997 are shown in Table 2 below: Table 2: Development Costs And Sales Prices Of New HDB Flats in FY 1997 Flats Estimated Costs of Sales Price Estimated Offered Development Development For Loss Booking In 1997 Total Ave Unit Total Ave Unit Total Ave Loss Costs Cost Revenue Cost Price Loss Per Unit 27,938 $6.43 b $230,000 $6.14b $219,800 $280 m* $10,200 * Excludes subsidy incurred for the purchase of 3-room resale flats at market prices for sale at subsidised prices to the lower income families. The above table shows that for new HDB flats offered for booking in 1997, HDB is expected to suffer a development loss of $280 million.”
“House-cleaning and home-meal catering are provided by private operators and the costs of such services are determined by market forces. If there is enough demand by HDB households for such services, private operators will set them up accordingly. HDB will leave it to the private sector to carry out such services. HOUSING AND DEVELOPMENT BOARD FLATS IN SENGKANG 10. Mr Low Thia Khiang asked the Minister for National Development (a) if he will provide the detailed costs of development of Housing and Development Board flats under (i) Sengkang Neighbourhood 3 Contract 1 (ii) Sengkang Neighbourhood 2 Contract 27 (iii) Sengkang Neighbourhood 2 Contract 28 (iv) Jurong West Neighbourhood 6 Contract 26, and the selling prices of individual units built under these contracts; and (b) how are the individual units constructed under these contracts priced and what are the details of these pricing factors. Mr Lim Hng Kiang: The MP for Hougang has requested for the development costs and selling prices of four building contracts at Sengkang N 2 C27, N3 C1 and N2 C28 and Jurong West N6 C26. The flats in the first two building contracts in Sengkang were offered for booking in 4th Quarter 1997, whereas the third building contract is scheduled for booking in 1st Quarter 1998. The new flats in Jurong West N6 C26 have not been offered for booking and their development costs and selling prices have yet to be finalised. The development costs and selling prices of the three building contracts in Sengkang as requested by the MP are in Table 1 below. The prices of flats in the Sengkang contracts are generally higher than those of other towns. This is mainly due to factors such as better building designs, higher demand and good location near the MRT station and Town Centre.”
“The Pang Sua Pond is also known as Bukit Panjang Stormwater Pond. It is located 1.2 km west of the proposed Zhenghua Park. It is feasible for a park connector to be built along Bukit Panjang Road from the pond to the park. However, NParks has many park connectors to be built and has to prioritise the development based on the expected usage of the different park connectors and the provision of park facilities nearby. STATUS OF CABLE TV 40. Dr Tan Boon Wan asked the Minister for Information and the Arts what is the status of the project to cable up the country and when the project will reach the private residences in Nee Soon South. BG George Yong-Boon Yeo: As at the end of last month, the Singapore Cable Vision (SCV) has cabled up 80% of HDB flats or 580,000 units and 40% of private high-rise apartments or 35,000 units. SCV has also started to cable up landed households. Altogether, 70% of all households in Singapore have been cabled. SCV is required by its licence to cable up the whole island by 1st January 2000. It would be able to cable up all high-rise apartments in Singapore - HDB and private - by the end of this year. For landed estates, SCV would cable up first those which have a high proportion of households wanting cable TV. SCV will get in touch with the private estate associations in Nee Soon South and other constituencies to discuss their interest in cable TV. WRITTEN ANSWERS TO QUESTIONS MINISTERS IN MULTI-NATIONAL COMPANIES 1. Mr J B Jeyaretnam asked the Prime Minister whether any Ministers sit on the Boards or Councils, international or regional, of multi-national companies and, if so, if he will give the names of the Ministers, the companies and the remuneration received by the Minister or Ministers.”
“HDB has been looking into the request by taxi hirers residing in the central area, who do not own their vehicles, to purchase season parking tickets at concessionary or resident's rate. Amendments to clause 4 of the Parking Places (Housing & Development Board) Order need the approval of the Minister for Communications. HDB will support this request and take this up with LTA and Ministry of Communications. PARK CONNECTOR BETWEEN ZHENGHUA PARK AND PANG SUA POND 39. Dr Teo Ho Pin asked the Minister for National Development whether his Ministry will consider developing a park connector between Zhenghua Park and Pang Sua Pond.”
“Then file a Question and we will give you the numbers. ASEAN REGIONAL HAZE ACTION PLAN (Fulfilment of obligations) 5. Mr Simon S C Tay asked the Minister for the Environment (a) what means the Singapore Government will have of ensuring that all countries involved in the ASEAN Regional Haze Action Plan fulfill their obligations under the Plan in due time so as to avoid a recurrence of the haze pollution and (b) how much Singapore will spend in its follow-up to the Regional Haze Action Plan, both for its own activities as well as in support of joint activities or activities carried out by its ASEAN neighbours.”
“HDB's accounts are published every year. And from there, he will know what are the selling prices.”
“It is not so. I think the whole objective of the 1985 exercise was to give HDB management and Government a better evaluation of what goes into the construction and the development of HDB flats. As you know, we had a big debate between Mr Chiam See Tong and the late Mr Teh Cheang Wan in the early days on how much HDB flats were subsidised. And there was no way you could explain to Mr Chiam unless the accounts were presented every year in a generally accepted practice of accrual accounting. Today, whether you like it or not, the cost that goes into each HDB flat is clearly reflected, clearly explained and totally accountable for. Therefore, what it costs, what we sell the flats for, and how much subsidy per unit are reflected in HDB accounts every year. Mr Low Thia Khiang rose ---”
“Before 1985, on a cash accounting basis, whatever HDB spent in its development was expensed off in that year. And the pricing of HDB flats was based on how much subsidy you want to give out. So there was no clear attribution of how much each HDB unit would cost. Because like all cash accounting, whatever you spend that year, in 1979, you would expense it.”
“As you know, before 1985, HDB operated more like a Government department by using cash accounting. In 1985, we decided that the HDB should present its accounts on an accrual basis, like most statutory boards. And on that basis, we moved from cash accounting to accrual accounting, and we built up the cost structure of HDB and how to determine the total development of each HDB flat on that basis with the help of outside consultants.”
“The costing of HDB flats and the way the HDB accounts are built up have been in place since 1985. As you will remember, we had consultants like Price Waterhouse, etc, to come in and build up the HDB accounts. There has not been a change since that basic structure was built up in 1985.”
“The approximate contribution of the land cost that I quoted just now, 50%-60%, is on a per square foot built-up area basis. The HDB operates as an agent of Government and the infrastructure cost is part of the work to develop a town. As you know, most HDB towns are green field sites. Some are even sea that we have to reclaim and put in all the infrastructure. And from there, a town is built up. All these constitute the total development cost of HDB flats.”
“What the Member is quoting probably constitutes the building contracts that we gazette or publicize upon receipt of the tenders. There are several components that go into the pricing of HDB flats. First, the land cost which today constitutes about 50%-60% of the total cost of HDB flats. Secondly, infrastructure to build up the town. Before we go for building contract tender, HDB acts as an agent for Government, putting in the major roads, major sewerage pipes, major water pipes, etc. The Government gives a grant to HDB. So HDB acts like the PWD for the Government, building the roads and all the facilities. Once the land is prepared, then HDB will tender the land. And what the Member is quoting now is the building contract prices. Beyond that, of course, will be the administration cost. HDB also employs architects, project managers, etc. and that would add another 5%-7% of building supervision and administration costs. So that will constitute the total development cost of the HDB flats.”
“In which case, HDB flats built on Gillman Camp will cost only $100,000 per unit whereas HDB flats built in Jurong West or Punggol which are on reclaimed land and at a very high cost would cost $300,000 or $400,000. How do you then allocate flats in Gillman which would only cost $100,000? The Workers' Party can do that.”
“The Government has a land bank built up of land from different sources. Let me take an example. Recently, Gillman Camp has been reverted to the Government. Gillman Camp was an old army camp and it is on crown land, so it was given to the Government at $1. Does that mean that we will price the land at $1?”
“If an area is more desirable, this should be reflected in the higher land prices. HDB pays for the land price and this would then be reflected in the pricing of the HDB flats and therefore reflect the higher prices.”
“Mr Speaker, Sir, the prices of new HDB flats vary according to the location, floor area, design features and finishes. In addition, factors like good view, proximity to MRT/LRT stations and commercial centres, etc, are also considered in the pricing of the flats. Let me first explain the price differences for the 4-room and 5-room flats in the 1st quarter 1998 compared to the 4th quarter 1997. In the 4th Quarter 1997, only flats from Sengkang were available for booking whereas in the 1st Quarter of 1998, flats from both Sengkang and Hougang Towns are being offered for booking. As Hougang is a more developed town with more established amenities than Sengkang, the selling prices of the new flats in Hougang are higher than those in Sengkang. This accounts for the slightly higher average selling prices of the new 4-room and 5-room flats in this zone in the 1st Quarter 1998 offer. As for the Executive flats, those in Sengkang that were offered for booking in the 4th Quarter 1997 are located closer to the proposed Sengkang MRT station and Town Centre. They were therefore more attractive and command higher prices compared to those offered for the 1st Quarter 1998. For the second part of the question, flats in the North-East Zone enjoy greater popularity than flats in the North and West Zones. This is reflected in the higher resale prices of the flats as well as the demand for these flats. In the queue for the new HDB flats, 57% of the applications are for flats in the North-East Zone. In view of this, flats in the North-East Zone are priced relatively higher compared to similar units in the other zones.”
“The cost for the extra room or Space-Adding Item (SAI) does not vary very much with the different flat types. However, from project to project, the cost varies with the number of storeys in the block, the design features, soil and site conditions and other construction constraints. The tender prices for each project depends on the prevailing market conditions. The SAI cost ranges from $15,600 to $31,150. The average unit cost for the SAI based on recent tender prices is about $21,000, with the average cost breakdown as follows: a. Piling $ 2,930 b. Building works $ 11,780 c. Reinstatement works $ 390 d Services Diversion and other Incidental Costs (e.g. Title survey fee) $ 2,220 e. Construction Contingencies $ 870 f. Manpower Cost $ 2,230 Total Cost $ 20,420 Annex (Cols. 125 - 132) AG's elaboration (Cols. 133 - 136)”
“When the North-East MRT line was announced, some private properties near the proposed stations were acquired to facilitate comprehensive redevelopment. This is to enable these lands to be developed to higher intensity so that more people can benefit from living or working near the stations. It will also ensure that the North-East MRT line would become more economically viable. The revisions to the land use plans for these lands will be made known to the public when the studies are completed. CONSTRUCTION COST OF EXTRA ROOM IN HDB APARTMENT 11. Mr J B Jeyaretnam asked the Minister for National Development what is the breakdown cost (showing all components) per unit to the Housing and Development Board for the construction of the extra room in 3-room, 4-room and 5-room apartments in the upgrading programme for HDB apartments.”
“PLOT RATIO OF PROPERTIES NEAR MRT STATIONS 10. Mr Shriniwas Rai asked the Minister for National Development if he will review the plot ratio of properties near proposed MRT stations so as to maximise the land usage.”
“The ex-gratia payment for HDB shop tenants affected by relocation/redevelopment is $48,000. In the case of market produce and cooked food stall tenants, the ex-gratia payments are $15,000 and $19,000 respectively. HDB will not increase the ex-gratia payments for tenants of Lakeview Shopping Centre as the levels of ex-gratia payments were recently revised in June 1996. The revised ex-gratia payments were made retroactive for shop and stall tenants affected by the Government relocation and redevelopment programmes on or after 1st March 1996. The ex-gratia payment is a goodwill gesture. For shop tenants, the ex-gratia payment is granted on a per tenancy basis. Hence, it does not depend on the trade, size of the premises or the equivalent number of unit space occupied. In the case of stalls, the current practice is to grant ex-gratia payment to first generation stallholders on a per stall basis. First generation stallholders are those who were resited from the streets or were given the stalls under the hardship scheme years ago. A stallholder with two stalls will be given ex-gratia payment for both the stalls provided he is eligible for ex-gratia payment for both stalls. For affected hawkers, stallholders and shopkeepers who have been served clearance notice and have accepted the offer of the ex-gratia payment while they were alive, but passed away before the payment is made, his estate/dependants will receive the ex-gratia payment. The 10% preferential margin is granted for a period of one year from the date of relocation notice. Since the tenants in Lakeview Shopping Centre are required to vacate the shops by 31st December 1999, HDB will grant an extension of the validity period for the 10% preferential margin in the second year on a case by case basis.”
“I mentioned this in my speech. Many of these enforcement powers have to be increased for us to act expeditiously on complaints. A typical example will be illegal use of residence for workers' quarters or the illegal use of residence for place of worship. Under the present Act, the URA officers find it very difficult to take enforcement action. People congregate in a house to be used as a temple over the weekend, at night or for certain religious ceremonies. It creates a big nuisance. Under the present Act, we do not have the powers to enter. We have to collect a lot of evidence before we can take action. And when we do take action, invariably there will be a long series of appeals to Members of Parliament, Ministers, etc. Meanwhile, the people who live around the residence will have to put up with it being used as an illegal workers' quarters or illegal temple for a long time. So I think we want to strike a balance in which we can take more effective action against such illegal uses. As for the enhancement of fines, again, as I have explained, it is the relativity between the fines and the economic value of continuing with the illegal use. That relativity has to be struck again. Otherwise, they just continue with the illegal use and pay the $50 fine per day. I hope I have clarified many of the very important points raised by Members and I would like to thank them again for supporting the Bill. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang]. Bill considered in Committee. [Mr Speaker in the Chair]”