Lowering BTO prices and ignoring land costs will end up hurting Singaporeans: Sim Ann

SINGAPORE – Drastically lowering prices of Build-to-Order (BTO) flats, to the extent of disregarding land costs, would only end up hurting all Singaporeans instead of helping them, said Senior Minister of State for National Development Sim Ann.

As state land forms part of the nation's reserves, not paying back the fair market value of the land would, in effect, run down the value of the reserves, "to the detriment of current and future generations", said Ms Sim in a Facebook post on Sunday (Dec 11) evening.

She was responding to Progress Singapore Party Non-Constituency MP Leong Mun Wai, who questioned in a Facebook post on Thursday if government subsidies are generous enough relative to land costs and sufficient to make Housing Board flats affordable.

Mr Leong said land costs should not be included when pricing HDB flats, as the Government had acquired land from the Pioneer Generation for a "relatively modest sum". Pricing should instead account for only construction costs and price differences between locations, he added.

His post came a day after HDB revealed the breakdown of development costs, which include land costs and construction costs.

Ms Sim said the Government cannot disregard land costs if it accepts that land values vary across locations, noting that Mr Leong had conceded in his post that BTO pricing should account for location differences.

"So I conclude that what Mr Leong is really asking for is the Government to price BTO flats much lower, whatever the justifications may be," she said. "It is of course always possible to price BTO flats lower."

In fact, the Government has been increasing subsidies and grants where necessary to keep prices of BTO flats affordable and stable, despite HDB resale prices climbing 28 per cent from 2019 to 2022, said Ms Sim.

"Mr Leong alleges that the Government has become less generous with housing subsidies, but the market knows this is not so," she added.

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Ms Sim said any further increase in housing subsidies must be weighed carefully against other urgent spending priorities, as it would mean reducing spending on education, healthcare and security.

Taxes may have to be raised to pay for the higher housing subsidies, she added.

Mr Leong's response would be that the Government can charge HDB less for the land, she said.

"By this, he means that we should draw more from our reserves, though he has avoided saying this explicitly."

Ms Sim said BTO flat prices have been kept affordable for Singaporeans, going by objective measures. The majority of flat buyers use about four to five years of their total household income to pay for their BTO flats, compared with the eight to 20 times in other global cities.

As such, many BTO flat buyers service their mortgages entirely via their Central Provident Fund contributions with little to no cash outlay, while using less than 25 per cent of their monthly income to pay for their housing loans.

She added that the Government is sympathetic to the needs and concerns of Singaporeans, especially those starting families, and will continue improving its policies to "smoothen the home ownership journey".

This article was first published in The Straits Times. Permission required for reproduction.