Thursday, March 24, 2011

Housing Board does have buffer stock of flats

MS JESSICA Cheam (''Ghost towns' vs fewer homes'; Monday) suggested that the Housing Board could consider permanently maintaining a 10 per cent to 20 per cent buffer of new flats each year. This is indeed being done, as the Minister for National Development had explained in Parliament in response to Madam Cynthia Phua's suggestion.

There is a buffer of flats over and above the build-to-order (BTO) supply, accumulated each year through unsold BTO flats and balance Selective En Bloc Redevelopment Scheme replacement flats. With this buffer, HDB offered about 10 per cent to 20 per cent extra new flats in 2009 and last year, as Ms Cheam suggested.

The tightness in the market over the past year is, therefore, not simply due to the lack of a buffer stock. The surge in housing demand was more than the buffer stock, due to the strong economic recovery, accompanied by low interest rates and bullish market sentiments.

It is inappropriate to compare HDB flats to staple food such as rice. First, a flat purchase is also an investment. Home buyers can advance or defer their purchases, depending on the economic outlook and market sentiments. Second, first-time home buyers are generally able to meet their housing needs under the BTO system, within a reasonable waiting period.

We disagree that oversupply is simply a 'hyper-local problem that affects only certain new towns'. Depressed flat prices due to oversupply will affect all home owners. Those in mortgage arrears may be in debt even after selling their flats.

The interests of flat owners are no less important than those of flat buyers. The holding cost of excess supply of new flats is ultimately borne by taxpayers. A depressed property market has significant ramifications for our economy and society.

HDB will continue to seek the 'sweet spot' in housing supply to meet volatile demand. This will involve trade-offs - balancing the interests of flat buyers and flat owners as well as between more housing subsidies and cost to taxpayers.

At the same time, HDB will increase the supply of new flats if demand remains strong. With a planned supply of 22,000 BTO flats this year, supplemented with flats under the Design, Build and Sell Scheme and executive condominiums, Singaporeans will have ample affordable housing options.

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