Speech by 2M Indranee Rajah, Second Minister for National Development and Finance at PropNex Annual Convention 2023

Mar 16, 2023

1. Good morning. I’m glad to be able to join you at your Annual Convention today.

Rapid pace of change

2. Half a year ago, I was here. I shared how Singapore has come a long way since our independence and how we  have emerged stronger as we weathered the storms together, through hard work, resilience and strong partnership with each other. At that time, if you remember, we were concluding our Long-Term Plan Review – planning ahead for the next 50 years and monitoring property market trends.

3. Since then, six months on, the accessibility and affordability of public housing became a hot topic of debate. We had a full debate on it last month and Parliament affirmed the importance of keeping public housing affordable and accessible, while protecting the interests of current and future generations and endorsed the Government’s commitment to both goals.

4. For those who missed the debate let me recap a few salient points. The first question is this, how did housing become such a hot topic?

5. There are several reasons:

    a. The major reason was the pandemic.

    b. As property agents you will recall that for the past 10 years before the pandemic, the housing market was fairly stable. We grew HDB flat supply in step with demand, and we opened up access to better meet housing aspirations of singles.

    c. HDB resale prices were also fairly stable, and actually, even somewhat soft, with HDB Resale Price Index (or RPI) experiencing almost six consecutive years of decline from 2013 to 2019, falling by around 12%.

    d. But our public housing building programme was severely interrupted during COVID-19. You will remember - construction works halted for a few months. This was exacerbated by worker shortage and disruption of supply of construction materials when works resumed.

    e. When people saw that the supply of BTO flats was disrupted and project completions delayed, some then decided they needed to get a resale flats instead, and this lead to an increase in demand for resale flats. The problem was compounded by private property owners who sold their private properties and bought HDB flats. Others then got worried and decided to join the BTO queue even earlier because they were worried they might not be able to get a flat. So the demand for BTO flats also went up, causing further anxiety.

    f. At the same time, there has been a marked shift in social norms, with young Singaporeans want to move out to live on their own, earlier. Before, we were happy to stay at home with our parents until we get married. And if you don’t get married, you continue to stay with your parents, that’s not so much the case now as I think all of you know. This trend may have been accentuated by the pandemic, as many people worked from home, and wanted more space of their own.

6. Since then, HDB has been working hard to catch up with the building schedule. You may recall the newspaper report a few weeks ago saying that the delayed projects are now down to 40% from 90%, and that is a marked improvement. We have been launching new projects including the mega launch of nearly 10,000 flats in November last year.

7. We are making progress and are starting to see early signs that the market may be stabilising. In the most recent February 2023 BTO sales launch, HDB had the lowest number of flat applications, particularly those from first-timer applicants, since the onset of the pandemic in February 2020.

8. These numbers are encouraging, but we must press on.

9. In the face of rising costs and changing social norms, how do we keep BTO prices stable and flats in non-mature estates accessible, especially for first-timers?

Keeping BTO flats affordable and accessible

10. We do so by setting BTO prices based on affordability outcomes rather than just pass on rising costs to buyers. So this is a very important thing and if you could help explain this to your clients, because we don’t do it like private property developers, where all the cost is just passed on to the buyer. For the government, it is different because this is public housing. So how do we do it?

    a. We first establish the market value of the new flats based on the recent transacted prices of comparable resale flats nearby. Then, we look at the household incomes and apply a substantial market discount so that the BTO launch prices are affordable to flat buyers across different income levels. So we price to affordability.

    b. In NMEs, BTO flats are typically priced at around a Mortgage Servicing Ratio (MSR) of 25% or less, meaning to say that buyers only need use a quarter or less of their household income to pay for the mortgage instalments. With CPF, this often results in little to no cash outlay.

11. In addition to pricing new flats below market value, we also provide generous grants to make the flat more affordable to flat buyers across different income levels. So that is how we keep the pricing of BTO flats affordable. Eligible first-timers can enjoy the Enhanced CPF Housing Grant (EHG) of up to $80,000, with more in grants provided to those with lower incomes.

12. We have been doing as much as we can, building aggressively and on a very large scale to ramp up flat supply. It is not easy. A great deal of forward planning and preparation work is required before we can launch a site.

    a. Unlike the past when Singapore still largely undeveloped, today we only have limited greenfield sites left. This means that increasingly we have to build on other plots of land, or  brownfield sites. This in turn may require relocation of existing uses which adds to time and cost.

    b. Time is also required for land preparation to ensure that supporting infrastructure like roads and sewers are ready, we conduct extensive soil investigations and soil remediation works where necessary.

    c. For greenfield sites, we will also have to perform Environment Impact Assessments and conduct engagements with relevant stakeholders to protect our valuable flora and fauna. Everybody loves green, but with limited space, sometimes we have to choose between the green and between what we build. And here, we try to make sure that we get that balance right by doing the environmental impact assessment.

    d. But all these have an impact on the timeline.

13. Nevertheless, we are working towards launching more flats, with shorter waiting times of three years.

    a. By 2025, we plan to return to pre-COVID levels and launch around 2,000 to 3,000 of such flats per year.

    b. We will also recalibrate our building programme, to increase the proportion of Shorter Waiting Time (SWT) flats in our overall flat supply.

14. Across the public market and private sector, we are expecting close to 100,000 home completions between 2023 and 2025, with almost 40%, or 40,000 home completions, this year alone. This will be the highest number of home completions in the last 5 years, including the pre-COVID years of 2018 and 2019.

    a. This increased rate of completions should help to alleviate some of the pressures in the rental market. Households who have been waiting for their keys will leave the rental market for their new homes, and there will also be some additional rental supply from the newly completed homes.

    b. Looking forward, we have significantly increased the supply of BTO flats. As I’ve said before, we will launch up to 100,000 new flats in total from 2021 to 2025. We launched more than 23,000 flats last year and will launch around the same number this year. By 2025, HDB will be overseeing more than 150 concurrent BTO projects island-wide. 

15. At the 2023 Budget Speech and MND’s COS debate, we announced a series of moves to further prioritise first-timer families with children and young married couples below the age of 40, who are embarking on their homeownership journey. With this, First-Timer Parents and Married Couples should be able to select a flat within fewer attempts, especially if they apply for a 4-room or smaller BTO flat in the non-mature estates. 

16. Yet, the impact of our efforts and many initiatives cannot be fully effective if flat applicants who are invited to select a flat don’t do so.

    a. Today, about 40% of applicants who are invited to select a flat do not do so, with the result that genuine flat applicants who might have otherwise selected those flats were deprived of a chance to do so.

    b. We have therefore also announced that we will tighten the rules for non-selection, so that the BTO flats can go to those who are really need them, as quickly as possible.

Enhancing housing affordability in the resale market

17. We also assist first-timers who choose to buy resale flats, maybe to live near their parents or start raising families sooner.

    a. These families can benefit from the increased CPF Housing Grant and receive a maximum of $190,000 to offset the price of their resale flat purchase. 

18. Some have raised concerns that this grant increase will cause prices to rise even further in a buoyant resale environment.

    a. There is always this risk, and we took it into account. At the end of the day, it was a considered decision to give targeted support to eligible first-timers, a very specific group who make up about one-third of all resale flat buyers in the past two years.

    b. In this economic climate, buyers are also increasingly price conscious, so sellers who raise their asking prices will risk of pricing themselves out of the market. The CPF Housing Grant also cannot be used to cover cash over valuation, so buyers may not want to buy a flat that exceeds its valuation.

    c. Therefore, professionals and trusted advisors, your clients will look to you for advice on accurate information and balanced advice on what is in their best interests. We hope you will help your clients make prudent decisions in their flat purchases to choose homes that suit their needs and long-term interests. Do also encourage your sellers to be realistic in their asking prices.

Diminishing Leases versus Asset Enhancement

19. Last month, we also debated extensively in Parliament on how HDB flats hold their values well. Owning a HDB flat that can last us for life is important for retirement security. Understandably, there may be some anxiety over what happens to the flat we own at the end of its lease.

    a. Today, our policies allow HDB flat owners to realise the value of their flats and monetise them by selling, if they choose to do so. However this is would not be possible with weak or falling resale prices. Having a strong resale market is therefore not a bad thing so long as it does not overheat.

    b. Those who do not sell their flats have the assurance of a home that belongs to them and in which they can stay in their old age. At the same time our policies are also flexible in providing monetisation options, such as through renting out of rooms or the Lease Buyback Scheme, which can supplement living expenses while allowing flat owners to age-in-place.

    c. This is why, notwithstanding that HDB flat value must eventually go to zero at the end of its 99 year term, before that point is reached, that same flat can be a good store of value over the owner’s lifetime, and possibly more – such that even the children may benefit depending on the circumstances. Those who are concerned about whether their children can get flats can be assured that their children can get Government support to buy their own HDB flats, meaning the children’s own HDB flats and likewise benefit from having a tangible stake that also appreciates in value.

20. Beyond just good policies, we do our best to create favourable economic conditions in Singapore. A strong economy powered by growth would allow the value of flats to continue rising for a considerable time before it reaches its natural end. There is a trajectory or curve and we hope that you will help your clients to understand this trajectory and advise them on the best options for them according to their needs and their objectives.

Greater industry ownership in transformation

21. Real estate professionals like yourselves play an important role in helping fellow Singaporeans, understand the broader trends that affect the property market, and to make sound decisions.

22. I am very heartened that property agencies such as PropNex have been working closely with CEA, investing resources to educate consumers on scams, property trends and tips through seminars, videos, reports and social media.

    a. We appreciate the well-designed infographics on housing measures announced at Budget 2023, and your sharing of key initiatives such as the Forward Singapore exercise on public housing.

    b. We also thank PropNex for working closely with CEA in putting out anti-property scam messages to alert consumers and educating them on how to spot and avoid the scams.

23. To continue to fulfil these responsibilities, it is important for the industry to continue to transform to serve your clients better.

    a. Property agents should keep up with changes to integrate technology into business processes.

        i. I am glad that the large property agencies, including PropNex, are committed to achieve the Real Estate Industry Transformation Map (RE ITM) targets of 100% digital signing of property transaction related documents, and 100% of property agents to be trained in at least one digital marketing tool or skill by 2025.  Among the five largest property agencies, over 75% of the processes are digitalised, and more than 65% of the agents digitally trained.

         ii. Initiatives on digitalisation will not only allow us to deliver better and faster services to consumers, but also be a step forward towards transforming Singapore into a Green Nation. I thank PropNex for committing to the Green Nation Pledge, and hope that more property agencies can join the bandwagon by going paperless by adopting e-submission and e-signing, and issuing digital name cards to your agents. Just now, Ismail talked about planting trees. That is a very important step. It is a nature-based solution, and it is part of our One Million Trees movement. As you may know, NParks hopes to plant one million trees by 2030, so in addition to what you mentioned, every time a child is born, you can plant a tree to mark the birth of your child. You can plant this as a company, you can plant with your clients, just go to the NParks website and have a look and sign up for tree planting.

24. On a personal level, just like other professionals, real estate agents should keep upskilling and upgrading to keep abreast of the changes in order to provide, good, sound and value-added advice your clients.

    a. To support you on that, CEA has been working with PropNex and other key industry stakeholders through Project ADEPT (Advancing and Enhancing Professionalism and Training) to review ways to enhance the Continuing Professional Development (CPD) ecosystem to strengthen competencies of our agents so that they can deliver better property transaction experiences.

    b. The findings from this study will be published in the coming weeks. Please do take some time to read the workgroup’s report and share your feedback with us.

25. We will continue to partner and support the industry to take greater ownership and am confident that together, we will achieve our RE ITM 2025 goal of a successfully transformed real estate agency industry that is client-centric, professional, productive and resilient.

26. Thank you and congratulations to our award winners in advance.