Hri Kumar: HDB's Priority Should be Promoting Home Ownership

HDB – Enabling Home Ownership

Speech Delivered by PAP MP Kri Kumar on March 10:

HDB’s priority should be to promote and enable home ownership.  This is especially so for first-time home owners.   

But that principle has been somewhat diluted by the pre-occupation with asset enhancement.  In the past, prices have increased substantially and rental returns for HDB flats have been among the highest in the market.  That has affected behavior, and many have treated their HDB flats as an asset to invest in or speculate on or, sell to pay off debts.       

The rising prices has led to the enduring narrative that flats have become unaffordable, and that young couples will be expected spend a good part of their working lives paying for their homes.   This has caused anxiety and unhappiness among young couples and their parents.  Steps have been taken to reduce prices – including increasing subsidies.   But the anxiety remains.   

I submit that it has become necessary for the HDB to make bolder moves to reinforce the principle of home ownership and affordability.   I have several proposals for the Minister’s consideration. 

First, peg the price of new flats to a multiple of the annual median incomes for first timers.  During Budget 2013, the Minister set a target for prices to be around 4 times the annual median income¹ .  While we have come closer to meeting this, we are still some way off.  As of last year, three-room flats cost 4.57 years of salary, while four and five-room flats cost 5.26 times and 5.36 times respectively².   If the ideal is 4 times annual incomes, then why not make that peg now?   The prices of new flats are currently not that far off the peg to result in a market shock.   More importantly, it establishes a steady state and gives assurance that prices will only move with incomes and no one should be priced out.      

Second, I renew the call I have made since 2010 to lift or remove the income ceiling³.  The income ceiling is too blunt a tool.  It does not take into consideration the circumstances faced by each family, such as the number of dependents.   Some may not want to take on large mortgages, and cheaper homes would enable them to employ their capital to start a business or pursue other interests.