July 13, 2024

Housing Finance Development

It's Your Housing Finance Development

Pritam, Indranee spar over development costs of HDB flats, details of subsidies to buyers

SINGAPORE – Leader of the Opposition Pritam Singh and Second Minister for Finance and National Development Indranee Rajah on Monday sparred over the development costs of new Housing Board flats and details of subsidies provided to buyers, with the minister saying it was not meaningful to provide such information as affordability is what matters to Singaporeans.

The Workers’ Party chief referenced a recent correction direction issued under the fake news law over HDB’s deficits and Singapore’s past reserves, and asked for a breakdown of the total development costs of all new HDB flats and the dollar value of the subsidies applied to the assessed market price of these new flats.

In response, Ms Indranee told Parliament that development cost is made up of land cost and construction cost. The effective selling price of a flat is derived after subsidies and grants are applied to its market value, she added.

“What we sell to Singaporeans, less the total development cost, will give you, in virtually all cases, a net loss, because we are subsidising, we are selling below market value,” she said.

Providing a breakdown of the total development cost of all new Build-To-Order (BTO) flats henceforth is “not helpful or meaningful” for buyers, she added.

“Should we give the total development cost? We don’t think anything would be achieved by doing so. The reason is this – what is the real important thing to Singaporeans? The real important thing is, are you able to afford a flat?” said Ms Indranee, who is also Minister in the Prime Minister’s Office. 

“Every Singaporean who buys a BTO knows that actually the price that they are paying is less than what you would have to pay if you were paying at pure market price. That’s why BTOs are so popular,” she added, noting that different locations have different pricing and subsidies applied to them.

“It’s not meaningful (to give the breakdown) because you will just compare this one with another. Prices in one area may not be the same as the other,” said Ms Indranee.

Replying, Mr Singh (Aljunied GRC) raised the prime location public housing (PLH) model as one reason why a detailed publication of HDB’s subsidies is warranted.

Since November 2021, HDB has launched six PLH projects with a subsidy clawback for all set at 6 per cent. This means, owners of these flats will pay 6 per cent of the resale price or valuation, whichever is higher, to HDB when they resell their home on the open market for the first time.

Second, the amount of subsidies used for home ownership purposes can be scrutinised and tracked if the dollar value of the subsidy is published, he added, especially since BTO prices have been delinked from the HDB resale market since 2011.

Mr Singh said the median price of a four-room and larger resale flat has increased 26 per cent 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… would appear to be the main way through which BTO prices can be kept affordable,” he added. “What is preventing HDB from publishing the dollar value of HDB subsidies for new BTO flats?”