Explainer | Will Singapore’s housing tweaks help families get their first homes more quickly?
- Amid ballooning prices, rents and mortgages, the affordability of public flats – home to over 80 per cent of the population – is under the spotlight
- Construction delays over Covid bottlenecks have extended the median wait time for new flats to 4.3 years, further delaying young couples’ plans
Pandemic-induced delays
It is a decades-long norm for young couples in Singapore to apply for a public housing flat before they are even engaged – at times within a year of courtship. The reason for this is the waiting time for a new “Built-To-Order” (BTO) flat.
The current median waiting time for some 94 housing projects being constructed is 4.3 years. The delay in part is due to supply chain issues and labour shortages linked to the pandemic. There is also a problem of oversubscription, leading to applicants feeling dejected by multiple failed applications.
These issues have prompted some couples to consider alternatives, such as renting while they wait for their flat to be ready or opting to buy a resale flat on the open market. Not everyone can afford these options. The upfront cash required for a BTO flat, for those eligible for various subsidies, is far lower than what is required for a market-value resale flat.
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Renting has also become an expensive option, with prices soaring in tandem with the net surge in global talent to Singapore.
Ethan Wong, a 26-year-old public relations specialist, said he and his partner had four unsuccessful BTO applications in the last year.
“Housing comes with the marriage question. I think you’d hardly find anyone in Singapore who’d want to get married first before settling the finances and house,” he said, adding that discussions about their matrimonial home began early in the relationship.
Wong likened the BTO balloting system to a “lottery” and with renting a flat in the meantime “out of the question”, Wong and his partner have pushed back plans for a marriage and children, which they had planned to have before turning 30.
“Let’s say I were to get a BTO flat, the worst-case scenario is that it takes six years with the delays and issues on top of renovations and furnishing it, then I am only likely able to move in at 32 or 33, which is [nowadays] the norm apparently,” he said.
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How is the government responding?
The government has announced it will increase housing grants for resale flats and give an additional ballot entry for some first-time homebuyers.
In this year’s budget speech, Wong said housing grants for young couples will be raised by S$10,000 (US$7,500) for eligible families looking to purchase resale flats with five rooms or more, and by S$30,000 for resale flats with four rooms or less.
Although first-time applicants are a priority group in HDB’s supply of BTO flats, Wong noted the category covered a wide range of buyers and that more support for specific groups was needed.
Analysts lauded the move, saying it would help those who need urgent housing, like families with children and young married couples.
“The increased ballot chances may see more eligible buyers applying for BTO flats. It can also help lower to middle-income earners own a home faster, especially if they are cash-strapped and cannot afford a resale flat,” said Christine Sun, senior vice-president of research and analytics at property agency OrangeTee & Tie.
A three-bedroom BTO flat in Yishun, which was launched in May last year, was estimated to be priced from S$328,000, while a resale flat in the same area and size ranged from S$368,000 to S$920,000, according to personal finance website MoneySmart.
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Sun said increased subsidies for resale flats may divert some demand to the resale market and push more eligible homebuyers to buy at popular locations, such as mature estates, which have better amenities.
This comes after National Development Minister Desmond Lee said the ministry would increase the number of concurrent BTO projects to about 150 by 2025. He was responding to opposition MPs’ criticism that the government had underestimated demand for flats.
In an effort to ease the anxieties of homebuyers, the city state is also seeking to launch BTO flats with shorter waiting time of less than three years from 2024. Some 8,000 of such flats will be completed over the next two years.
The authorities have also introduced a 15-month “wait-out period” that private homeowners must serve before they are allowed to buy a resale flat, which is aimed at moderating the demand in the HDB resale market.
Other property cooling measures include tightening maximum loan quantum limits – with the loan-to-value limit for HDB loans lowered from 85 per cent to 80 per cent.
What are some alternative policy options raised?
There have been calls for the government to take more drastic action.
The country’s small political opposition has suggested proposals such as building BTO flats ahead of demand and excluding the cost of land from the selling price.
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The ruling People’s Action Party has thus far rebuffed these ideas. Excluding land costs – or pricing at its historical value – was akin to “raiding” the country’s reserves for short-term gain, officials have said.
On the proposal to build more BTO flats ahead of demand, Lee said that while there had been a long wait in the 1990s when the country was in the midst of a property boom, there was subsequently an overhang of 31,000 unsold flats when the Asian Financial Crisis hit in 1997.
That led to depression of prices, and a higher occurrence of negative equity, the minister said.
