Correlation between Income of Singaporeans and Cost of HDB BTO and Resale Flats
Ministry of National DevelopmentSpeakers
Summary
This question concerns whether Singaporean incomes have kept pace with Build-to-Order (BTO) and resale flat prices and the long-term loan repayment capabilities of current owners. Minister for National Development Desmond Lee stated that HDB provides substantial subsidies and grants of up to $160,000 for resale and $80,000 for BTO buyers. He noted that incomes have generally kept pace with prices, with the average mortgage servicing ratio remaining at or below 23% over the last three years. This allows most buyers to service their loans via CPF contributions with little to no cash outlay. Despite a slight rise in loan arrears to 6% during 2021, the Government continues to offer financial assistance and monitor market conditions.
Transcript
37 Mr Yip Hon Weng asked the Minister for National Development (a) whether the income of Singaporeans has been keeping up with the costs of BTO and HDB resale flats; and (b) in spite of over-subscription of BTO launches, whether the Ministry has done any studies on the long-term financial plans and abilities of the current generation of flat owners to pay off the loans.
Mr Desmond Lee: When pricing new flats, HDB applies a significant subsidy to the assessed market value of the flat so that new flats are priced below market, to ensure new flats are affordable. In addition, eligible first-timer flat buyers can also enjoy the Enhanced CPF Housing Grant (EHG) of up to $80,000, which provides further support to lower- and middle-income families buying their first home. For resale flats, the Government provides housing grants of up to $160,000 to ensure resale flats remain affordable for eligible first-timer families.
HDB new and resale flats continue to remain affordable, as incomes have, generally, kept pace with new and resale flat prices over the past few years. On average, the mortgage servicing ratio (MSR), which is the proportion of monthly income used to service mortgage instalment payments, has remained at about 23% or below for new and resale flat buyers taking an HDB housing loan over the past three years. This means that buyers, generally, require little or no cash outlay in servicing the payments for their flats as their mortgage loans can be paid using their CPF contributions.
As the servicing of mortgage loans is a long-term commitment, we will continue to monitor the long-term ability of the current generation of flat owners to pay off their loans. The proportion of existing flat owners that faced difficulties repaying their loan has remained fairly stable – prior to COVID-19, the proportion of households on loans issued by HDB that were in arrears of three months or more remained below 5% from 2015 to 2019. This figure was slightly higher at 6% from January to September 2021, as some flat owners are still recovering from financial difficulties due to COVID-19 and HDB has reached out to them to offer assistance.
The Government will continue to monitor the housing market conditions closely and ensure that Singaporeans have access to affordable public housing.