HDB's Reply

New flats priced to be affordable for first-time buyers
Date: 24 Dec 2022

We thank Mr Desmond Teo Mingjie for his feedback (Stop thinking of HDB flats as nest eggs for retirement, Dec 15 ).

We agree with him that Build-To-Order (BTO) flat prices should be pegged to average household incomes to keep them affordable. In fact, this is how BTO flats are priced today.

HDB adopts an affordability-based pricing approach. While we consider the recent transactions of comparable resale flats in the vicinity, we also apply a significant subsidy to ensure that BTO selling prices remain affordable for first-time homebuyers across different income levels.

When resale prices go up, we increase our market subsidies in tandem to keep BTO prices stable and affordable. With these subsidies, most first-time BTO flat buyers use about 25 per cent or less of their monthly income to service their mortgage payments. This means that they can service their HDB loans fully using their Central Provident Fund contributions, with little or no cash outlay.

Mr Teo considers a three-room BTO flat that costs $350,000 an affordable housing option for a young couple. He will be pleased to know that the average price of a three-room flat in a non-mature estate is actually much lower, at $235,000, in the recent November 2022 sales launch.

In fact, the average price of a four-room BTO flat in a non-mature estate was $341,000 in 2019 and $342,000 in 2022. Prices have remained relatively stable despite the rising resale prices because of the substantial subsidies provided.

Mr Teo’s suggestion for HDB to buy all flats back was among the suggestions raised at the recent Forward Singapore engagement sessions.

However, during these sessions, most also agreed that it would be challenging for HDB to set resale prices that are acceptable to all. If HDB were to purchase the flats below market value, this would affect sellers hoping for some price appreciation to upgrade to a bigger flat as their family grows.

Conversely, some felt it would be unfair for HDB to purchase the flats at market value as the Government would, in effect, have provided these sellers with a risk-free asset. Others have also pointed out the challenges in allocating resale flats, whether through a ballot or queue system, and how this could restrict the options and autonomy currently available to resale buyers.

These views are among the many that HDB will consider carefully as we continually review our policies to ensure public housing remains affordable and accessible.

Ignatius Lourdesamy
Director (Marketing and Development)
Housing and Development Board

Letter to The Straits Times

Stop thinking of HDB flats as retirement nest eggs
Date: 15 Dec 2022

From: Desmond Teo Mingjie

Recently, there has been a lot of discussion on the affordability of Housing Board flats. To me, it is not just about the price of the HDB flat, it is more about matching the life cycle needs of the average Singaporean.

Consider a dream scenario. Two fresh graduates from local universities get married at the age of 25. They apply for a Build-To-Order (BTO) flat and go for the more affordable option, a three-room flat which would cost about $350,000.

This couple will be 30 by the time the flat is completed. By the time they finish serving the minimum occupation period, they may have a child, maybe even two, and need more space. Since they are unlikely to be successful in balloting for a larger flat their second time around, they have to look to the resale market, where prices are even higher. They will have to stretch their salaries to get a bigger flat, which would have an impact on retirement planning.

The current public housing system does not provide enough affordable and accessible opportunities for families to grow.

We need to stop thinking of HDB flats as nest eggs for retirement. They must fulfil the purpose of affordable housing first.

The Government should not have to consider market rates when it prices BTO flats. It could, for example, consider pegging BTO flat prices to average household income. This way, flat prices would rise when household incomes go up, instead of being driven by market forces.

For that to be feasible, all flat transactions should have to be with HDB, whether as buyer or seller.