SINGAPORE — The Housing Development Board (HDB) has released a statement with a breakdown of the total development costs of its Build-to-Order (BTO) flats for the past three years since FY 2019, stating that their price remains affordable for buyers.
In its statement on Wednesday (7 Dec), HDB said that BTO flats are highly subsidised, and their selling prices cannot fully cover development costs, which include construction and land costs.
It noted that its pricing approach is “fundamentally different” from private developers who price their residential units for profit.
According to HDB, the total development costs for 13,506 new flats in FY2021/22 came up to S$5.346 billion.
HDB said the bulk of the development cost, S$3.167 billion went to land costs, while S$2.077 billion went into building costs. The remaining S$102 million is the costs incurred when HDB acquired flats from ex-owners.
|S/N||Breakdown of cost of sales for sales completed||FY2019/20 ($ million)||FY2020/21 ($ million)||FY2021/22 ($ million)|
|(i)||Land development costs**||2349||1816||3167|
|(ii)||Building development costs**||1598||1161||2077|
|(iii)||Other costs (largely from cost of flats acquired from ex-flat owners)||142||88||102|
|(B)||Cost of sales of completed flats (i)+(ii)+(iii) [Number of flats where keys have been issued to buyers]||4089 [11,609 units]||3,065 [8,124 units]||5,346 [13,506 units]|
HDB said it has increased subsidies to keep flat prices relatively stable, amid rising property prices and construction costs increasing by nearly 30 per cent due to Covid-19-related factors.
It noted that its flat pricing approach is totally separate and independent of the BTO projects’ development costs. It instead prices the flats’ market value by considering the prices of comparable HDB resale flats nearby as well as the unit’s individual attributes.
HDB further notes that all subsidies are factored into flat prices when they are launched as BTO flats and that the increase in BTO flat prices over the last decade has kept within the growth in household incomes.
It claims its pricing approach and costs are also available to the public, such as publishing the construction costs of every BTO project and prices of awarded contracts on the HDB InfoWeb and government procurement portal GeBiz. And also publishes the cost of building flats and the revenue from the sale of flats in its annual report.
HDB also said it incurred a record S$4.367 billion deficit in its latest financial year, of which S$3.85 billion was due to the homeownership programme.
The issue of HDB making a profit or a loss through the sale of HDB flats has been the subject of POFMA correction directions.
Not helpful or meaningful to provide breakdown of development cost
The latest statement by HDB, which appears to be a rehash of what it has been saying all these while, is a follow-up from the Parliamentary Questions filed by Members of Parliament last month.
During the exchange of questions and answers, Mr Pritam Singh, Workers’ Party Secretary-General, asked if HDB would provide a clear breakdown of the total development cost of all new flats and the value of the “generous subsidies” applied to the assessed market price of these new flats, in light of the POFMA Correction Directions issued on 14 October 2022 to an individual for his Facebook posts dated 4 October 2022.
In response, Ms Indranee Rajah, Minister in the Prime Minister’s Office and Second Minister for Finance, said on 7 November that “it won’t be helpful or meaningful to” provide the breakdown of the development cost for flats built by HDB.
“It’s not meaningful because you will be just comparing this one with this one. And, you know, prices in one area may not be the same as the other. So that is the answer. My straightforward answer is it won’t be helpful or meaningful to do so.” said Ms Indranee.
Explaining to Ms Indranee why it would be meaningful to do so, Mr Singh said:
“So since the introduction of the prime location housing (PLH) of bleached flats last year, it suggests to me at least or provides an example why a detailed publication of HDB subsidies actually warranted. A HDB PLH flat buyer upon selling his PLH flat after ten-year MOP (Minimum Occupancy Period), will have to return the quantum of additional subsidies provided as a percentage of the original assessed market value of the flat and the subsidy recovery will apply to the resale price.”
He added, “That is a reflection of the prevailing market value regardless if the flat is sold at a gain or loss. Another reason I would suggest to the Minister to publish the dollar value of the subsidy is to scrutinise and track the amount of subsidies being diverted for homeownership purposes.”
“This is particularly in view of the Ministry of National Development’s 2011 decision to delink BTO prices from the rising resale market than the median price of a 4 room and larger HDB resale flats has increased 26% between 2017 and 2022, with resale prices reaching record highs today and therefore pushing up the market price of land. Increasing the size of the subsidies under the current HDB policy would appear to be the main way through which BTO prices will be kept affordable.”
In view of these new reasons, Mr Singh asked what is preventing HDB from publishing the dollar value of HDB subsidies for new BTO flats.
Ms Indranee retorted saying, “With respect to prime location housing. It actually doesn’t really change my answer because at the end of the day, the question is what is affordable to the person who’s buying? And in that, we have made no secret of the fact that for prime location housing, you will have to have a greater subsidy.”
“So that’s the key thing. So it comes back to the same question, why would you have to disclose or put out the development costs of every single project? It’s just not meaningful.”
“The key thing is to the buyer, is this affordable? And that’s what HDB does.”
HDB’s “breakdown” is less detailed than what was released in 1988
While it seems that HDB has provided a breakdown of its development cost for its BTO flats, but as it said, these are figures that are already provided in its annual reports, deprived of the actual breakdown of figures which include subsidies for each BTO project.
The figures provided by HDB are a consolidation of all the BTO projects without the subsidies attached to them and not what Mr Singh had specifically asked for.
The last time that HDB revealed its construction costs for its flats — including the subsidies provided to flat buyers, appears to be in 1988 when former MP for Potong Pasir SMC, Chiam See Tong asked the then-Minister for National Development, S. Dhanabalan if he will give the breakdown cost of unit flat including land cost incurred by the Housing and Development Board of flats constructed at six constituencies.
At this point, the late Mr Lee Kuan Yew was the then-Prime Minister of Singapore.
In response, Mr S. Dhanabalan provided exact details of the breakdown in a written reply and said that the cost incurred by HDB in building its flats can be broken down into construction cost and land cost.
“Construction cost relates to the cost of the building itself, the cost of piling, the installation of electrical supply, sanitation, lifts, water supply, etc, as well as the cost of earthworks, ancillary roads, sewers and drains. Construction cost is determined by the prices of contracts tendered out by HDB.”
“Land cost is determined by the Chief Valuer based on the market values of comparable land. Land cost attributed to the flats does not include the land for commercial premises, town gardens and other non-residential uses in the HDB estate.”
The former minister noted that cost data in detail is only available since the HDB introduced the new accounting system in 1985.
However, there has been no more detailed breakdown from the Singapore Government ever since.
Perhaps it is indeed as what Ms Indranee said; it is not helpful or meaningful for HDB to provide such breakdowns.