How HDB flats are priced affordably

Source : Straits Times - 16 Jul 2008

I REFER to the letter from Mr See Leong Kit, ‘Market-based pricing has cost buyers dearly’ (July 7).

HDB adopts a market-based pricing approach so as to reflect the true subsidy that buyers enjoy. Under this approach, HDB determines the market value of the flat, based on its location, finish and other attributes. Then, it sells the flat at a discount to the market value. HDB buyers understand this, and appreciate that new HDB flats are priced lower than resale flats. Similarly, when they want to sell their flat in the open market, they do so at the prevailing market value, not at their cost of purchase of the flat.

We also wish to highlight that this approach has enabled HDB to continue to price its flats affordably despite the current sharp escalation in construction costs. Currently, a new four-room flat can cost close to $300,000 to develop, taking into account land, building and other costs. This is significantly higher than the subsidised price of a four-room flat in Punggol/Sengkang sold by HDB at about $200,000 to $260,000.

Through the market-subsidy approach to pricing, HDB has been able to keep its flats affordable for Singaporeans. On average, first-time flat buyers need to pay only about 20 per cent of their monthly household income to service their housing loan. This is well within the 25 to 30 per cent that is commonly cited internationally as the benchmark for affordable housing. Lower-income households can enjoy additional help in the form of the Additional CPF Housing Grant.

Mr See commented that young couples have to wait as long as six years for new flats. This is incorrect. New Build-To-Order flats take about three years to complete from time of registration. Those with urgent housing needs can consider the resale market where there is a wide range of resale flats to match the preference and budget of buyers. Eligible first-time buyers can also enjoy a CPF Housing Grant of $30,000/$40,000.

Kee Lay Cheng (Ms)
Deputy Director (Marketing & Projects)
for Director (Estate Administration & Property)
Housing & Development Board