Published: 00:54, June 20, 2023 | Updated: 10:05, June 20, 2023
Understanding the different roles of private and public housing
By Ho Lok-sang

Policymakers need to understand the different roles of private and public housing when they design housing policy. When President Xi Jinping said that housing is for accommodation and not for speculation, his focus was on meeting the needs of the masses. Interestingly, it is also with the needs of the masses for accommodation in mind that the Housing and Development Board (HDB) in Singapore was set up. To this day, HDB housing continues to serve the city-state well. However, perhaps surprisingly, the share of the resident population living in HDB housing has been decreasing steadily since 1998.

The official website of the HDB says: With more than 1 million flats spread across 24 towns and 3 estates, the Singapore brand of public housing is uniquely different. The flats spell home for over 80% of Singapores resident population, of which, about 90% own their home.

The HDB says it provides a uniquely different kind of public housing. Many people in Hong Kong envy its remarkable results but are unaware of the reasons why it is so successful.

The key to HDBs success is it is designed to provide public housing exclusively for accommodation, not for speculative gain. Since the HDB housing program is open for purchase to all Singapore citizens or permanent residents with at least three years residency without any income or asset limits, there is little reason for Singaporean households to buy in the resale market if the asking price commands a significant price premium over the price of new HDB flats.

Singapore has a lot more residential land than Hong Kong. Because Singapore has aggressively increased its land supply through reclamation, it is able to offer citizens roomy HDB flats ranging all the way from one- and two-room flats to five-room and executive flats. Given that Hong Kong has a much smaller supply of residential land and a much bigger population, and that 36 to 37 percent of Hong Kong households already own homes in the private sector, if there is anything we can learn from HDB housing, it is from its eligibility criteria and pricing. But we should only aim at supplying starter-home flats.

The share of Singaporean households living in HDB flats in 1998 stood at 88.1 percent. In 2022, the share dropped to 77.9 percent. In 1998, the percentage of Singaporean households living in condominiums and other apartments stood at 5.4 percent. In 2022 Singaporean households living in private flats rose to 17 percent. This shows that quite a number of Singaporean families have chosen to opt out of HDB housing and upgraded to better homes in the private sector. More interestingly, there is a housing category called Other Types of Dwelling (OTD). Other means other than HDB, condominiums and other apartments, and landed properties. This is generally very low-quality housing. In 1980 this stood at 19.8 percent. In 2022 this had fallen to 0.28 percent. At that time, the HDB share was only 67.8 percent. As HDB housing expanded, the OTD share fell dramatically.

Because HDB housing does not offer too much prospect for capital gains, and because condominiums and other apartments may offer superior locations and facilities, many well-off families would move to these private flats if they could afford it. When they do so, their flats become available to other Singaporean families. Thus, HDB flats are recycled to alleviate the burden on the government. While the HDB housing price index was up by 7.7 percent over the years from May 2022, HDB flats still cost much less than S$1 million ($747,000). Compared to the non-landed housing price index, which includes private flats as well (at 242.9 in April 2023), the HDB housing price index stood at 179.4. HDB flats can only be resold to Singaporeans (citizens or permanent residents). 

In Singapore, ownership of any real estate, whether in Singapore or overseas, disqualifies one from buying an HDB flat. Moreover, owners who occupy the unit must dispose of their HDB flat within six months of buying a private property. While buyers of HDB housing are not allowed to own any private property, owners after the minimum occupation period can rent them out for income, but only to Singapore citizens or permanent residents, or foreigners working in Singapore.

We can see that in Singapore, HDB housing is strictly for the accommodation of Singaporeans or foreign workers living in Singapore. There is limited prospect for profiting from HDB ownership. 

Back to Hong Kong: We know that in Hong Kong, 36 to 37 percent of all households are private-homeowners. These owner-occupiers are typically middle-class people who buy their homes not only for accommodation but also as a store of value and for long-term investment. This role is actually legitimate and increasingly important given the aging of the population. In particular, under reverse mortgages, the value of the home provides much income security and guarantee for a comfortable post-retirement life. Some are business owners who often use their homes as collateral to get loans for running their businesses. Homeowners are also typically taxpayers. Since Hong Kong has a rather narrow tax base, homeowners play an important role in Hong Kongs fiscal health. For all these reasons, it is important to ensure that Hong Kongs housing market is stable.

The author is director of Pan Sutong Shanghai-Hong Kong Economic Policy Research Institute, Lingnan University. 

The views do not necessarily reflect those of China Daily.