Singaporeans who live in the same flat their whole lives should not have to pay land cost
Singaporeans who stay in the same flat their entire lives should be exempted from paying 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.
Homeowners 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 HDB 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, he said that at the point of purchase, the ‘land cost’ for the flat will be made known and recorded with the 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.”
Mr Leong gave an example of how a Singaporean buyer only needs to pay $140,000 for a Tengah BTO (Built-to-order) 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 will be preserved as the scheme will put new flats on par with the other flats sold earlier with land cost.
The proposed scheme will not have any major impact on the nation’s fiscal position and reserve accumulation, as the government will still be able to recover a 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 only increased four times. BTO flat prices have also been rising.
With the heavy burden of homeownership, 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 average of 20,000 units built per year from 2021 to 2025, over the average 39,500 flats built each year from 1981 to 1985.
She added that HDB flat buyers use 64 to 100 per cent of their 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 go 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.”
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