It is 'insignificant' to publish a cost breakdown of new HDB flats: Indranee

Nov 08, 2022

THE government does not price new Housing and Development Board (HDB) flats to recover the cost of land and construction, but providing a breakdown of their total development cost will not be "helpful or meaningful," said Second Minister for Finance and National Development Indranee Rajah in response to a parliamentary question on Monday (Nov 7).

Pritam Singh, leader of the Workers' Party and Leader of the Opposition, had asked if the HDB would provide such a breakdown for new apartments, as well as the value of subsidies applied to the assessed market price of these units.

This was in response to a correction instruction given under the Protection from Online Falsehoods and Manipulation Act last month involving former GIC head economist Yeoh Lam Keong's social media postings about the HDB's deficit and Singapore's previous reserves.

The Ministry of National Development (MND) said in a statement at the time that the posts falsely conveyed that HDB will not incur a loss of approximately S$270 million from the build-to-order (BTO) project Central Weave @ AMK, and that the government is free to sell state land at nominal or much lower cost than its fair market value.

On Monday, Indranee did not react directly to Singh's question on the data, but she did say that HDB does not profit from the sale of new apartments, which are priced "far below market value using generous subsidies to ensure they are affordable to all Singaporeans."

She went on to say that, according to HDB's most recent annual report, which was released on October 31, the total revenue collected from flat sales is less than the cost of HDB's building programme and the amount of housing assistance distributed each year.

"As a result," she explained, "HDB incurs a net deficit in the creation and selling of new units." HDB had a net deficit of S$4.4 billion in fiscal years 2021 and 2022, a record high and nearly double that of the previous fiscal year. The loss resulting from its home ownership scheme alone was S$3.9 billion.

When Singh questioned Indranee for a breakdown of HDB's development costs, she stated that affordability is what buyers are looking for, and BTOs are sold below market value. A breakdown of costs for all new units "is not meaningful," she says, because prices vary by locality.

Singh later inquired as to why the HDB does not publish the house price to income ratio - a measure of affordability - for BTO apartments in mature estates. Previously, the HDB stated that the current house price to income ratio for new flats in non-mature estates is fewer than five times. Indranee asked Singh to submit a second query on the subject.

Indranee had previously stated in response to a separate query from Progress Singapore Party Non-Constituency MP Leong Mun Wai that "the government does not profit from the sale of state land transformed into public housing." Rather, HDB buys the land from the government at "fair market value" to avoid depleting Singapore's past reserves, she explained.

According to her, all state land is part of Singapore's reserves, and when sold, the physical asset is turned into a financial asset for additional government investment. When the lease expires, the land reverts to the government, with the previous financial proceeds used to "make up for the state's loss of use of the land for 99 years, not for the state handing up the land forever."

According to an MND spokeswoman, the degree of BTO subsidies varies throughout launches according to flat supply and market conditions.

"Our overarching goal is to ensure that, despite their many characteristics, flats are broadly affordable," they continued.

According to MND, for flat buyers collecting keys to new flats in the first half of 2022, 90% of those in non-mature estates and more than 80% of those in mature estates had a mortgage servicing percentage of 25% or below for their HDB loans.