In a Facebook post, Leong Mun Wai concedes that BTOs are indeed subsidised. He also agrees that the pricing of BTOs should take into account locational factors.
He wants prices to be lowered further, and to achieve this, he wants land costs to be disregarded.
However, one cannot factor in locational factors while ignoring land costs.
It is why some land is considered prime land.
Minister of State (MOS) Sim Ann noted in a Facebook response that hundreds of thousands of homeowners who bought their flats from the Housing and Development Board (HDB) had sold them for higher prices in the resale market. They know the subsidies are generous.
Yet, Leong’s ‘zero land costs’ suggestion has delighted many people. They don’t realise that such a suggestion will have grave implications for all homeowners if it is adopted. It will leave many homeowners bleeding.
All HDB homeowners will see a depreciation in their assets.
Hundreds of thousands of homeowners still servicing their HDB home loans will suddenly find themselves in hardship. In all likelihood, they will need to make a lump sum payment to refinance their loans, as their BTOs will now be considered overpriced.
Banks do not provide loans for overpriced properties. They want to avoid being stuck with overpriced properties if the owners go bankrupt.
Should homeowners wish to sell the flats quickly because they can’t afford to pay the bank to refinance their mortgages, they will have to sell at a loss. Either way, they will be deeply hurt financially.
The land is a scarce and finite asset. A quarter of it only existed after land reclamation.
The whole of the Marine Parade is built on reclaimed land.
So are parts of Bedok, Clement, and Pasir Ris, just to name a few.
Land sale proceeds fund the cost of reclaiming land.
Leong took care not to mention in his Facebook post that the land is part of our previous reserves.
To use land without putting back its fair market value amounts to a draw on past reserves.
This is against the Constitution because you need the president’s permission to use money from the past.
Furthermore, using land without recouping its fair market value reduces the size of our past reserves, harming current and future Singaporeans.
In general, Singaporeans still find the new BTOs affordable.
The concern over affordability is usually focused on BTOS in sought-after locations. MOS Sim Ann pointed out that HDB already priced these flats at a very generous discount to the open market in order to keep them affordable.
BTO prices have been kept stable and affordable. For example, the average price of a 4-room BTO was $341,000 in 2019 and $348,000 in 2022.
This is in spite of the resale index rising by as much as 28% over the same period.
Leong claimed that the government has become less generous in giving subsidies, but this is clearly not the case, Ms Sim said.
There is always a trade-off in every action.
“Increasing housing subsidies further must be weighed carefully against other urgent spending priorities. It would mean reducing spending on many other important things we need as a country, like education, healthcare and security. We may well also have to raise taxes to pay for the higher housing subsidies,” Ms Sim wrote.