COS 2022: Improving Current BTO Model

MP Louis Chua

Mr Chua Kheng Wee Louis: Chairman, long waiting times for BTO flats has been a persistent concern among Singaporeans with current average waiting times of around four to five years and in some cases, six to seven years where projects have been delayed by COVID-19. Such long waiting times are not just an inconvenience but seriously affect Singaporeans’ life plans such as causing young couples to delay starting a family.

The BTO demand and supply situation is made even more challenging by rising demands for BTO flats. As Minister recognised in January this year, a strong demand for flats has been driven by factors including rising marriage and family formation rate, smaller household sizes and higher income ceiling, allowing more households to qualify.

In view of these realities, it is an apt time for the Government to review and improve its approach towards the supply of HDB flats in order to keep waiting times in check.

We recognise that large housing development projects simply take at least three to four years to complete. Therefore, in order to achieve shorter average waiting times of say, two to three years, Singaporeans must be allowed to apply for new flats at a point in time much closer to project completion and delivery.

This basic idea is not new and indeed, MND confirmed that where possible, HDB has, since 2011, already been commencing some BTO projects ahead of demand or actual bookings. In 2017, the Government specifically introduced a plan to offer BTO flats with shorter waiting periods of two to three years, such as approximately 3,000 flats launched in 2018 with waiting time of 2.5 years. More recently, HDB also announced BTO flats with waiting times of two to three years such as at Tenggah and Yishun. 

Unfortunately, despite these apparent relaxations of the BTO system, average BTO wait times are still stubbornly long, suggesting that the HDB’s efforts, though welcome, do not go far enough.

A potential approach would be to expand on HDB’s existing initiatives and create two distinct application tracks for BTO flats: first, the current system with a four- to five-year wait; and second, some kind of BTO express lane for projects already one to two years into construction, resulting in a much shorter waiting time of two to three years.

In order to maintain parity between the two tracks and to mitigate against the risk of vacant flats, the express lane option should perhaps offer applicants less specificity in their preferences. For example, an applicant may only specify a unit type in the ranking of different floors of the zones.

For this to work, there may need to be a larger percentage of HDB stock being contracted every year ahead of demand. For instance, there could be a certain baseline of HDB supply, say 15% to 30% of the annual new stock, that is continually constructed every year regardless of prevailing BTO demand.

To be clear, this is not a proposal to revert to the pre-BTO era with the registration for flats system. We saw an oversupply of flats in the wake of the Asian Financial Crisis. However, the proposal does involve an acceptance of some risk of excess supply if there were to be a severe demand shock.

That being said, I strongly believe that such a risk is low and in any event, worth taking given the stubborn problem of long BTO wait times plaguing us today. It is worth pointing out that since 2010, BTO flats have consistently been multiple times oversubscribed, with only one exercise where the ratios specific to that of 2-room Flexi Flats was close to one time.

8 March 2022
Ministry of National Development

https://sprs.parl.gov.sg/search/sprs3topic?reportid=budget-1881

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