Mr Pritam Singh (Aljunied): The headlines last month rang loud and clear. By the end of 2025, Housing and Development Board (HDB) resale prices are set to rise for a record 23-quarters. That will see close to six consecutive years of resale prices going up and further up. HDB resale prices jumped 12.7% in 2021, 10.4% in 2022, 4.9% in 2023 and 9.7% in 2024. The projected increase for 2025 means that resale HDB prices would have risen since early 2020 by a cumulative 58%.
In April last year, the Minister for National Development said that the Government expected the property market to continue stabilising. He noted that resale HDB prices had risen less in 2023 at 4.9%, compared to 10.4% and 12.7% in the previous two years. At that time, which was a mere 11-odd months ago, the Minister attributed the slower price rise, which I should point out is still a significant price rise, to HDB having caught up on construction delays and a ramping up of Build-To-Order (BTO) flat launches.
Based on what the Minister said, a reasonable expectation would be for price rises to have slowed down further in 2024. But then, the news in January this year was that in 2024, HDB resale prices climbed the steep 9.7%. This was despite cooling measures being introduced in August last year, such as lowering the loan to valuation limit for HDB housing loans from 80% to 75%.
On another front, 2024 was an unusual year for Government Land Sales (GLS) sites for non-HDB use. Last year, the Government rejected three tenders for three private residential sites because it deemed the sold bids for them to be too low. Partly because of this, land betterment rates for non-landed residential use sites dropped by an average of 5.4% for the half-year from September 2024 to February 2025.
The Chief Valuer (CV) reviews the Land Betterment Charge (LBC) rates twice a year in March and September, and the rates can be a barometer of the Government’s assessment of land values in recent land sales. The CV’s work on land not sold for HDB purposes is highly granular. There are individualised LBC rates that reflect market sentiment for each of the 118 geographical areas in Singapore. For example, in March 2024, LBC rates were cut 19.2% for non-landed residential use in Tanglin, but increased 14% in the West Coast and Clementi areas. These numbers mirrored the differing market sentiment between suburban and non-suburban sites over the period from September 2023 to March 2024.
In contrast, the public knows far less about how land is priced for HDB BTO flats. What we do know is that land price for BTO flats takes reference from resale HDB prices. With a 58% increase in resale flat prices from 2020 to 2024, there is inevitably a serious concern about whether land for HDB BTO flats is priced sustainably, or if ever-growing subsidies are going to be needed in future to make HDB flats affordable.
It has been stated that the HDB pays fair market value, which is determined by the CV and that the land for public housing is lower compared to private housing in the same area. However, there is no information available to the public about land prices for HDB flats, similar to the chart like the 118 Zone LBC chart, which suggests how the CV adjusts the fair market value of HDB BTO flats in response to rising HDB resale prices. There is a public demand to better understand and unpack the fair market value determined by the CV for land reserved for HDB.
Sir, what is stopping the Government from lifting the veil on this aspect of the CV’s work? With well over 80% of all land in Singapore belonging to the state, there is a deep interest in determining the sustainability and affordability of land prices for BTO flats for current and future generations of Singaporeans. Can the Minister tell us how the CV discounts the land sold to HDB beyond the general explanation of market principles? How is this discount derived and what is its basis?
Would the Government release zone-specific data on land values for land reserved for BTO flats over time? In connection with this, how does the Government assure the public and this House that it is not raiding the reserves when it prices land for BTO flats, when the only explanation the public relies on is its reference to the unknown fair market value for HDB land? Could the Minister please address this too?
Ms Indranee Rajah: I will now turn to the Leader of the Opposition Pritam Singh’s cut. Mr Singh wanted to know why there is no information available to the public about land prices for HDB flats, similar to the 118-zone Land Betterment Charge (LBC) Table of Rates, and how the Chief Valuer (CV) assesses the value of land purchased by HDB to build flats.
Mr Chairman, there are two parts to his cut: first, the comparison to the LBC Table of Rates; and second, how the CV assesses the value of the land. I will deal with each in turn.
First, the comparison to the LBC Table of Rates (LBC TOR) is misconceived. The general principle is that rates or valuations are made known to parties who would have to pay the fee or price.
The LBC is a tax payable on the enhancement in land value arising from modifications landowners make to their land. Any landowner can make this request to modify their land, such as to intensify the use of the land, and this is subject to approval by the Urban Redevelopment Authority or Singapore Land Authority. Following this approval, they would have to pay the LBC.
There are several hundred LBC transactions in any given year. For ease of tax administration, we have a Table of Rates (TOR) instead of valuing each transaction individually. This TOR is made public so that the parties who need to make payment know how much they have to pay.
However, the CV could also do a site-specific, or what we call a spot, valuation of the land value enhancement for each case. This happens if the landowner opts for it for precision or if the LBC TOR is not applicable, such as when the current or proposed new use do not fall within a comparable use group within the LBC TOR.
For this spot valuation, the CV would use established valuation methodologies consistent with how she values any state land for sale. In this instance, the spot valuation outcome is made known to the requesting party as the potential paying party but not to the general public at large.
The valuations for state land purchased by HDB are all spot valuations because there is only one buyer – the HDB. The valuation outcome is made known to HDB as the paying party. It is not necessary to put out a public table of rates like the LBC TOR as there are no other buyers for these sites.
In all three instances, whether it is the LBC TOR, the spot valuations for landowners or HDB, the CV uses established valuation methodologies.
Let me now deal with the second part on the valuation of land sold to the HDB.
Mr Singh asked how the CV discounts the land sold to the HDB. Again, this question is misconceived. There is no discount. HDB pays fair market value for state land. The fair market value is determined by the CV using established valuation principles. This approach would be no different from that of other professional valuers.
The normal approach is to reference comparable transactions. Private housing transactions would not be a suitable reference as public housing has restrictions, such as more stringent eligibility criteria. Hence, for public housing land, the methodology takes into consideration relevant resale flat transactions and site-specific attributes.
So, for the reasons I have just explained, the fair market value of land sold for public housing will typically be lower than the fair market value of the same land if it were to be sold to a private developer for private housing.
This is not a discount. It is the fair market value of land intended for the purposes of public housing. One must not confuse the two concepts.
Sir, our approach of paying fair market value for land, including land sold to the HDB, helps maintain our reserves for the benefit of all Singaporeans. By putting the fair market value of land into the reserves, we preserve the value of our reserves.
The financial proceeds of the sale are invested to grow them for the benefit of Singaporeans. Fifty percent of the investment returns on our reserves supplement the annual Budget through the NIRC.
This careful approach of managing our reserves strikes a balance between the needs of current and future generations of Singaporeans.
Mr Singh also made a reference to BTO flats. He said, “What we do know is that the land price for BTO flats take reference from resale HDB prices. With the increase in resale flat prices for 2024, there is inevitably a serious concern about whether land for HDB BTO flats is priced sustainably or if growing subsidies are going to be needed in the future.”
So, that is the question of the price of the BTO unit, not the price of the land that HDB purchased. That is a separate concept. We have actually answered this many times before, but let me just do a very quick summary.
The issue of land costs should not be conflated with BTO affordability. The land cost is the amount paid by HDB for the land. That is different from the flat price, which is what the BTO flat buyer pays HDB for the unit.
BTO flat pricing is based on affordability, not cost. And we have explained this many times before. HDB first establishes the market value of the flats by considering the prevailing market conditions, the prices of comparable resale flats nearby and the individual attributes of the flats. It then applies a subsidy to ensure that BTO flats are affordable for Singaporeans across different income levels. On top of this, HDB provides housing grants to support eligible first-time buyers, with lower-income buyers receiving more support of up to $120,000.
The pricing of BTO flats is therefore not based on the land cost of the flats. We do not pass land cost through to the BTO buyer.
Our approach has paid off. We have one of the highest home ownership rates in the world, with 90% of households owning their own homes. Our BTO system plays an integral part in keeping public housing affordable for Singaporeans. By pricing BTO flats based on affordability, more than eight in 10 first-timer families who collected keys for their BTO flat last year had a mortgage servicing ratio of 25% or lower. This means they were able to service their monthly mortgage repayments with their monthly CPF contributions, with little to no cash outlay.
This has remained stable in the past few years.
We have also taken steps to ensure that BTO flats remain affordable and accessible to Singaporeans. HDB will provide additional subsidies to those buying Plus and Prime flats on top of the significant market discounts that already apply to all BTO flats. And to ensure fairness, we impose tighter restrictions and a subsidy recovery rate commensurate with the extent of additional subsidies.
Over the past five years, we have ramped up our BTO supply significantly to meet Singaporeans’ demand for housing. HDB is on track to exceed its commitment to launch 100,000 new flats from 2021 to 2025.
Mr Chairman, these figures speak for themselves. Our approach ensures that BTO flats remain affordable and accessible to Singaporeans. We will continue to keep it that way.
The Chairman: Are there any clarifications? Yes, Mr Pritam Singh.
Mr Pritam Singh: Thank you, Chair. My question is directed to Minister Indranee vis-a-vis my cut. If I heard the Minister correctly, the Minister said, land for HDB developments is typically priced lower than that for private housing. Can I confirm how is the differential then determined by the CV between private housing and land for HDB?
Ms Indranee Rajah: Mr Chairman, I think what I said was that the fair market value for land intended for public housing is typically lower than the fair market value of land for private housing, because by its nature, public housing has restrictions. So, I think, what Mr Singh is asking is “what is the methodology or the workings of the CV?”
I am not privy to the workings of the CV. What I can say is the principles that she applies, which is the principles that I had elucidated earlier. I mean, it is just like when you have an MRT track. If you ask the engineer to design the rail track or you ask an architect to build something, you do not go and ask them for all of their internal drawings and so on. You look at the final outcome.
The CV is a professional. The CV applies valuation principles. Valuation, as everybody knows, is part science, part art. You need some experience, you need to make relevant adjustments. And this is the same whether it is the CV or whether it is valuers in the private sector. So, in short, what I have explained is the principles that she would apply and from site to site, it may differ, depending on locational attributes and particular characteristics of the site.
Ministry of Finance
28 February 2025
https://sprs.parl.gov.sg/search/#/sprs3topic?reportid=budget-2577
Office of the Leader of the Opposition 