The Singapore Democratic Party (SDP) - an opposition party in Singapore - has comes up with a new policy to address Singapore's housing affordability issue. In their whitepaper “Housing A Nation: Holistic Policies For Affordable Homes”, the SDP put forth a new category of housing in the public housing market: Non-open Market (NOM) Flats. These flats will exist alongside HDB flats, but the purpose of the former is to provide a more affordable housing option for Singaporeans who are not looking to reap capital gains from their homes. Below is the pricing scheme for NOM.
Under this scheme, the lower selling price is make possible because land cost is excluded. However, the restrictions for NOM flats include
- Flats can only be re-sold to HDB, after a Minimum Occupancy Period (MOP) of 5 years, “at the current price of an equivalent new NOM flat (less grants) minus the value of the consumed lease.” Thus no capital gains can be made.
- Only Singapore citizens are eligible to purchase these flats.
- Owners of flats are not allowed to own private property or HDB flats.
- Renting of flats is prohibited, except under extenuating circumstances.
According to SDP, NMO flats fulfill the function of housing as a social good. The rationale for having such flats being that it frees up financial resources. SDP argues that due to Singapore's high housing prices, households have a huge mortgage liability. For example, with a monthly median household income of S$5,600, taking a 30-year loan for a five-room unit at an average price of S$380,000 will require installment payments of 25 percent of their income.
However, for a NMO flat, a household can expect to settle its housing loan in 9 to 15 years' time, using at most 20 percent of its income. This will allow households to utilise the savings for other purposes. The SDP believes that these savings will be channelled to other activities that can stimulate the economy. Singaporeans, in the process, will enjoy a higher living standard as they will not be burdened by huge mortgages.
In addition, under this scheme, current owners of HDB flats that have been bought directly from HDB will be given the option to convert their houses into NMO ones, within a year after NMO flats are launched. Owners will get to continue living in their houses while being refunded an amount based on a formula.
But, as with any other policy, flaws exist. A key shortcoming, pointed out by experts, is its socially divisive effect, as it creates a group (NMO flat owners) who cannot make capital gains from their properties versus a group who can. For a more detailed read of the comments by 4 experts, please go to Singapolitics.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
References
1. Singapore Democratic Party, “Housing A Nation: Holistic Policies For Affordable Homes”, Web <http://yoursdp.ucoz.org/_ld/0/7_Housing_a_Natio.pdf>
2. Singapore Democratic Party, “SDP Proposes Non-open Market Flats in Housing Policy”, 4 November 2012, Web
<http://yoursdp.org/news/sdp_proposes_non_open_market_flats_in_housing_policy/2012-11-04-5430>
3. Wong Tessa, “SDP's Non-Open Market flats: Experts Give Their Take”, The Straits Times: Singapolitics 6 November 2012, Web
<http://www.singapolitics.sg/news/sdps-non-open-market-flats-experts-give-their-take>
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