HDB Does Not Price Flats to Recover Land and Building Costs
HDB, like any developer, incurs land and construction costs when it develops HDB flats.
HDB’s total development cost, which includes construction and land costs, and the CPF housing grants disbursed to eligible home buyers, cannot be fully covered by the sale prices of its flats. This is why HDB incurs a significant deficit every year for its Home Ownership Programme. The annual deficits, funded by Government grants, are reflected in HDB's audited financial statements, which are published annually.
However, HDB does not price flats to recover costs.
In pricing new flats, the key consideration is to ensure affordability for flat buyers, especially for first-timers. HDB would first establish the market value of the flat by considering the prices of comparable resale flats nearby, as well as the individual attributes of the flat (such as its location, floor area, storey height, orientation and accessibility to facilities, key transport nodes and amenities), and the prevailing market conditions. A significant subsidy is then applied to this assessed market value, so that new flats are priced below market.
A: BTO flats are priced to reflect individual attributes and are based on comparable resale flats in the vicinity. It is not accurate to compare BTO flat prices to average resale prices for the entire town, as the resale flats are scattered across the town with some located near the town centre and/or other facilities while the others further away.
Take Woodlands as an example. Champions Bliss, which was launched in August 2020, is located near the newly-opened Woodlands South MRT Station, and comprises mostly 4-room flats.
Over the past 5 years prior to August 2020, while median resale prices of 4-room flats in the entire Woodlands Town dropped slightly in line with the overall resale price trends then, comparable resale flats in the vicinity of Woodlands South MRT Station have seen an increase of 5-10% due to improved transport connectivity. This also explains the higher sales prices at Champion Bliss compared to past BTO projects in Woodlands.
The Government is committed to helping Singaporeans own their first home. On top of pricing new flats at a significant discount to market, HDB introduced and enhanced various housing grants over the years to ensure that flats remain affordable and accessible to Singaporeans. The Enhanced CPF Housing Grant (EHG) was introduced in September 2019 to provide Singaporeas with more affordable housing options. With the EHG, eligible first-timer families buying new flats can now enjoy up to $80,000 in housing grants regardless of their choice of flat type or location.
The EHG amount is calibrated according to the household income to provide more help to lower-income families.
How has the Enhanced CPF Housing Grant (EHG) helped first-time flat buyers?
Take John and Cheryl, a first-timer couple with a monthly household income of $4,800. They are looking to buy a 4-room BTO flat in Tampines, a mature estate.
Couples buying BTO flats could enjoy the following housing grants, if eligible:
As John and Cheryl’s household income is $4,800 a month, they would have qualified for the AHG. However, as they intend to buy a flat in Tampines, which is a mature estate, they would not have qualified for the SHG.
This means the couple would have qualified for $5,000 in housing grants.
Couples buying BTO flats can enjoy the EHG, if eligible:
As John and Cheryl’s household income is $4,800 a month, they can qualify for the EHG of $45,000. They now enjoy an additional $40,000 in housing grants.
These housing subsidies help to keep flats affordable for first-timers. Over the past five years, the House Price to Income (HPI) ratio has remained stable at below 5 for the average first-timer family buying a 4-room flat in the non-mature estates. In addition, the Mortgage Servicing Ratio (MSR) – or the proportion of monthly income used to service a housing loan – for these families has remained below 25%. This is below the international affordability benchmarks of 30-35%. At the current MSR levels, the vast majority of first-timer families can service their monthly mortgage instalments using their CPF, with little or no cash outlay.