Mr Chua Kheng Wee Louis asked the Minister for National Development in each year over the last five years, what is the average discount applied to the market value of comparable resale HDB flats in pricing new HDB BTO flats in (i) mature estates and (ii) non-mature estates, with the respective breakdown in flat types.
Mr Desmond Lee: In pricing new Build-To-Order (BTO) flats, HDB’s overriding aim is to ensure public housing is affordable to help a broad segment of Singaporeans own their own homes. This is different from private residential development where new flats are priced above development cost to achieve a certain profit margin. This flat pricing process is separate and independent from the determination of the development cost of HDB projects. Overall, the money that HDB collects from selling new flats cannot cover the total development cost incurred for these flats and HDB has been running a deficit every year for its homeownership programme since its formation.
Affordability is a function of household income and flat selling price. At the current income ceiling of $14,000, about eight in 10 Singaporeans may buy a BTO flat and HDB aims to provide affordable flats for a range of household incomes, as measured by the Mortgage Servicing ratio (MSR). BTO flats have been priced at a level where on average, first-time homebuyers generally require little or no cash outlay when servicing their mortgage payments, as it can be fully covered using their CPF contributions.
HDB first establishes the market value of the new flats by considering the prices of comparable resale flats nearby, as well as the individual attributes of the flats and prevailing market conditions. A significant subsidy is then applied to the assessed market values of the new flats to ensure affordability for flat buyers. A wide range of flat sizes and locations of new BTO flats are offered at every BTO sales launch. The market values of these flats are not the same and the flats should not be uniformly-priced. As the locations and attributes of BTO projects and the resale market conditions at each BTO launch, are different, the extent of the discounts will thus vary across different BTO projects, launches and years. This is the case because HDB’s overriding objective is to ensure that BTO flats remain affordable and help protect homebuyers from price fluctuations under different market conditions.
In addition, eligible first-timer flat buyers can enjoy the Enhanced CPF Housing Grant (EHG) of up to $80,000. The EHG is means-tested and calibrated progressively by household income, providing more support to lower- and middle-income families buying their first home. It is not tied to flat type or BTO project and it is given on top of the generous market discount applied to the flat.
In sum, market subsidies vary across projects and launches because of the wide range of HDB flats on offer at every BTO sales exercise. They also vary with the prevailing resale market conditions and depend on the homebuyers’ household incomes after factoring in the EHG.
For each BTO project launched, HDB provides recent transacted prices of comparable resale flats alongside the BTO flat prices. It is clear to every BTO flat applicant that there is a significant difference between HDB BTO flat prices and comparable resale flat prices. The difference in these price ranges also explains why BTO flats are highly popular and usually over-subscribed.
HDB also provides relevant price-related information for different family archetypes as well as worked illustrations of how homebuyers with different household incomes can afford the different flat types in the BTO launch materials. We also compute their corresponding MSRs to show the affordability of these new BTO flats. In fact, HDB has been providing these comparative information and affordability illustrations since December 2008. The information is made available is to guide homebuyers in their flat purchase decisions and help them choose an HDB flat that best meets their budgets and needs.
Ministry of National Development
29 November 2022