Budget 2023: Ensuring A Sustainable Housing Market With The Affordable Homes Scheme

Mr Chairman,

The PSP has recommended the Affordable Homes Scheme (AHS) and the Millennial Apartments Scheme to deliver affordable and accessible public housing to Singaporeans of current and future generations.

I am sure Singaporeans will be excited to be able to buy a new flat in Tengah at $140,000 under the AHS and live in it for their entire lives without having to pay land cost, instead of paying $350,000 under the current BTO scheme. 

The lower housing costs under AHS will allow Singaporeans to afford housing without depleting their CPF savings. They can look forward to a comfortable retirement, and no longer need to worry about the ups and downs of the resale market, the lease decay and the ever-changing policies of the Government.

The Government must admit that the current housing system has reached its limits. The Minister has argued that the main problem is temporary short supply, but the biggest problem we face is actually ever-increasing BTO prices. BTO prices will hit $1 million soon, what will be the BTO price in 20 years’ time? Future generations will have to constantly worry about BTO prices.

On the other hand, the AHS will ensure that every Singaporean of each generation will be able to afford an HDB flat because he pays only the construction cost and not the land cost.  The land cost is waived because public housing is considered a public good. This is the most equitable way of distributing the benefits of our land to Singaporeans.

The AHS also continue to offer Singaporeans the choice of making a profit from his flat by selling in the resale market.  However, to be fair to other Singaporeans, he will need to repay the deferred land cost with accrued interest to the Government upon the sale of his flat.

Therefore, whether a Singaporean buys a 4-room BTO flat in Tengah for $350,000 or the same flat for $140,000 under AHS, he will need to sell it at about $700,000 in order to make a profit after 25 years. For the BTO flat, it is for recouping the loan servicing cost, and for the AHS flat, it is for paying the deferred land cost.

The deferred land cost feature prevents the AHS owner from profiteering from selling his flat.  This also prevents the AHS owners from affecting the resale market. 

Overwhelmed by the value proposition of the AHS, the Government has tried to frighten Singaporeans into thinking that the PSP is going to cause a crash in resale flat prices with our policy proposals, but this is just a red herring.

In the short term, it is the policy intent of AHS to cause a slight adjustment in the current surging resale market so as to enable keen buyers to get their flats at a more reasonable price. That will be healthy after recent market exuberance.

However, the resale price will recover in the long-term because fewer AHS owners are likely to sell as they can live in the flat throughout their life without paying for the land cost. 

Furthermore, there will also be support for the resale market from the backlog of first-timer demand. In addition, buyers who are ineligible for new flats, buyers who want to live in a specific location because they want to live near their parents, Permanent Residents and upgraders form a large pool of demand that will underpin the resale market, which is still much cheaper than the private property market.

The AHS will not require excessive fiscal resources to implement. Most of the land cost forgone at the beginning is recoverable from the deferred land cost later.  Effectively, we will only defer our reserve accumulation.

Singaporeans may ask that all these are too good to be true and where’s the caveat?  There is actually no caveat, and all these are possible because the Government has acquired the land from the 1970s to the 1980s at zero or nominal costs.

We only need our rich Ah Kong to agree to do more for Singaporeans.

Singaporeans deserve better.

For Country For People. 

Thank you.

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