A 111-square-metre public housing flat sold for a record S$1.73 million (US$1.28 million) in Singapore this week has reignited debate about home affordability in the city state, with analysts warning that efforts to cool down the public housing market may take much longer.
Political observers told This Week in Asia even if such eye-watering transactions for public housing were rare, they could fuel perceptions of government-built homes being unaffordable, a view that may resonate with some voters.
On Monday, local media reported that the 45th-floor Margaret Drive unit broke the record for the most expensive Housing and Development Board (HDB) resale flat in Singapore.
About four-fifths of the resident population in Singapore live in public housing.
The S$1.73 million flat had 96 years left on its lease as its owner did not have to wait the typical five-year period before selling the flat since it was a Selective En bloc Redevelopment Scheme replacement flat. This means the homeowners could sell their unit seven years from the date of the flat’s selection or five years from the date of key collection – whichever is earlier.
The transaction price surpassed that of a five-room unit at City Vue @ Henderson, which sold for S$1.59 million last month.
Resale prices of public housing flats have been on the rise. Data from HDB on July 1 showed that prices of flats climbed 2.1 per cent in the second quarter of 2024, up from the 1.8 per cent growth in the previous quarter. It was the 17th consecutive quarter where prices increased, dating back to the second quarter of 2020.
To deal with rising prices, the government has been ramping up supply of new flats and introduced measures to curb the outsize profits from public housing. This includes the prime location public housing model which involves a clawback of subsidies used to buy flats in central locations when the owner sells the unit and a longer minimum occupation period of 10 years for flats in these prime locations.
Property analysts noted that the S$1.73 million flat was an outlier in that design-wise, even the private housing condominiums in the city fringe vicinity could not offer such a height of over 40 storeys.
Chief researcher and strategist at OrangeTee Christine Sun noted that according to HDB data, the unit was more than double the median price of other five-room resale flats on the market. The median price of five-room resale flats in the second quarter of this year was about S$685,000, and for five-room flats in mature estates it was about S$793,000.
Chief data officer for property portal 99.co Luqman Hakim said: “The price tag is comparable to something that you can get for a private property but if you factor in the amenities … the age of the flat, and its size, this is definitely much cheaper than a similar private property.”
He noted that cooling measures work to slow down the rise of property prices, not to prevent the rise completely, and the measures have achieved this goal. He cited HDB resale prices slowing to 5.8 per cent growth in 2023 compared to 9.4 per cent in 2022 and 13.3 per cent in 2021.
“[The government has to] keep a fine balance between stagnating the property industry and killing off businesses such as mortgage lenders and property agencies, and keep housing affordable for the masses,” said Luqman.
Nicholas Mak, chief research officer of property portal Mogul.sg, said the transaction showed a loophole in the resale market since the rules were different for such replacement flats.
He pointed out that City Vue also comprised replacement flats and were able to sell before reaching the typical five-year minimum occupancy period. Mak is of the view that all flats should have a standard five-year waiting period from the key collection date.
“In the end, these people who are allocated these popular flats are making supernormal profits. It’s a lottery effect,” said Mak, who added that the government should further relook restrictions on such public housing flats, including by imposing a tax on supernormal capital gains.
Regardless of how rare such price tags are for public housing flats and whether cooling measures work, political observers caution that there is a perception among some Singaporeans that public housing has become unaffordable, which could influence vote patterns in Singapore’s next general election. The election must be held by November 2025.
Sociologist Tan Ern Ser from National University of Singapore noted that public housing affordability came across as part of a bucket of symptoms of higher prices and “bread-and-butter issues remain important practically in all elections”.
Law professor and political observer Eugene Tan said the record-breaking flat did not pose a political problem in itself for the government but added to the perception that “Singapore has entered an inexorable path of being an expensive society such that even public goods have become costly”.
The experts also point out that the S$1.73 million flat raises the conundrum plaguing policymakers in Singapore – are HDB flats meant to be public goods or appreciating assets?
“While these two purposes need not be mutually exclusive, they appear to be increasingly at odds in the minds of Singaporeans,” said SMU’s Tan.
Emeritus Professor at National University of Singapore Chua Beng Huat said: “It is clear that when public housing became a commodity rather than a welfare good, since the mid-1970s, it was only a matter of time that the government would lose control of resale prices to the market.
“All measures taken to soften the market are remedial rather than corrective.”
NUS’s Tan said: “We can’t turn back to using a social housing model, and if we did we would likely face a different set of issues. It’s a Catch-22 for the government, and will always be.”
