I refer to the Singapore Democratic Party’s (SDP) launch of their paper “Housing A Nation: Holistic Policies For Affordable Homes”, on 4 November.

Non Open-Market HDB flats

The proposed “Non Open-Market” (NOM) category of HDB flats for Singaporeans only, is a novel one, and a significant departure from our current public housing policy.

Briefly, NOM flats are priced at construction and administrative costs plus without land costs, and cannot be sold in the open resale market, but only back to the HDB at cost less depreciation.

NOM implications, outcomes?

Whilst no one can say for sure what the impact, implications and outcomes may be, if the SDP Housing Plan is adopted, in part or in totality., a great deal may depend on the speed and graduality of implementation.

Notwithstanding the above, I think the NOM may be a welcome relief for the following groups of Singaporeans:-

… those who cannot afford a new BTO (Build-to-order) flat

… those who cannot afford a resale flat

… those who cannot pay their existing HDB mortgage and want to downgrade, but are currently unable to do so in the resale market due to financial constraints like outstanding loan balance, high resale prices, Cash-over-valuation (COV), loan availability , etc

… those who want to downgrade to retire or monetise their existing flat

… those who are homeless, but have sufficent CPF and/or cash-flow to afford the much lower priced NOM flats

… those in the Interim Housing Scheme or renting in the open market, as the SDP plan does away with the 30-month waiting period before anyone who has sold a HDB flat can apply for a BTO flat or HDB rental flat

Conversion to NOM

With regard to the option for any open market (OM) flat to be converted to a NOM flat to receive the pricing differential back in CPF/cash, I think it may also be a welcome relief to the following:-

… those who cannot pay their existing HDB mortgage and want to continue staying in their existing flat

… those who want to to retire or monetise their existing flat, and still continue to stay in the same flat

… those who have not passed their 5-year Minimum Occupation Period (MOP), and need to get funds (CPF/cash) out of their current HDB flat

… divorcees (Note: I believe under the SDP plan, divorcees will not be penalised in regard to MOP or the need under the current policy to re-arrange a new housing loan)

Impact on Resale market prices?

If the NOM is implemented gradually, such as the initial about 10 per cent of BTO flats suggested by the SDP Housing Panel, I believe the impact on the HDB resale market may not be substantial, and perhaps gradually cool current escalating prices and COV.

Of course, it may also be more prudent to implement the plan in stages, such as the NOM first, whilst holding back the Conversion to NOM to gather feedback and reaction of the market.

I think those who can afford may still prefer OM flats due to the possibility of capital appreciation in the future.

Conversion to NOM vs HDB Lease Buy-back?

As to the NOM conversion in retirement scheme, which allows those who retire to covert to NOM in order to get the price differential to obtain a life annuity, it may be more suitable for retirees than the current HDB Lease Buy-back scheme because

… the sum available from the NOM conversion may be higher

… the monthly life annuity increases in the future with an adjustment for inflation

… there may be more certainty as the flat owners can stay for as long as they live, instead of for 30 years

A much needed truly National Conversation?

In summary, my opinion is that generally, the SDP Housing Plan may help to reduce much of the financial stress that so many Singaporeans are faced with today. I therefore suggest that the Government, stakeholders and Singaporeans, engage with more ideas, feedback and suggestions, to explore the possibility of refining and using some if not all of the features in the SDP Housing Plan.

Leong Sze Hian