• How BTO Flats are Priced

    HDB prices new flats to keep public housing affordable, to help Singaporeans own their homes. Unlike private developers, HDB prices new flats with affordability in mind and does not apply a profit margin on costs. To determine housing affordability, we look at the buyers’ household incomes and the selling prices of the flats on offer.

    How BTO Flats are Priced

    First, HDB establishes the market value of the flat by looking at the prices of comparable resale flats nearby, individual flat attributes and prevailing market conditions.

    Some factors that impact the prices of a new flat include:

    Project location

    Projects with locational advantages will have higher prices:

    • Proximity to city or town centre
    • Accessibility to key transport nodes
    • Accessibility to key amenities, such as supermarkets, food centres or malls

    Flat attributes

    Flats with more attractive attributes will cost more:

    • Larger flat sizes
    • Higher storey heights
    • More ideal orientation with desirable views
    Prevailing market conditions Prices of BTO flats across different time periods will differ as we also consider the prevailing market conditions at the time of sale.

    Next, a significant subsidy is then applied to this assessed market value. The difference in prices between the comparable resale flats and subsidised flats broadly reflects the market subsidies provided for the new flats, after accounting for differences in attributes and tenure.

    Using resident household incomes and Mortgage Servicing Ratio to determine affordability

    To determine affordability, HDB looks at the resident household incomes, and compares them with the range of flat types and selling prices on offer at every Build-to-Order (BTO) launch, using benchmarks such as the Mortgage Servicing Ratio (MSR).

    MSR refers to the percentage of monthly household income used to service housing mortgage. Our affordability benchmarks consider a range of different household incomes, both above and below the median household income level, to ensure a wide range of BTO flats for first-time homebuyers with different housing needs and budgets.

    To better support households, we also provide eligible first-timers with housing grants of up to $80,000, which are tiered by household incomes, when they purchase a BTO flat. This ensures that those who are most in need receive greater support to own an HDB flat.

    In 1H2022, 90% of flat buyers who collected keys to their new flats in non-mature estates and more than 80% of flat buyers who collected keys to their new flats in mature estates used 25% or less of their monthly income to service their HDB loan instalment payments (i.e. had an MSR of 25% or lower). In short, these flat buyers can service their HDB loans using their monthly CPF contributions, with little or no cash outlay. This is lower than the international affordability benchmark of 30%–35%.

    Q: Does HDB price flats to recover land and construction costs?

    No. HDB’s affordability-based flat pricing approach is totally separate and independent from the BTO projects' development costs. This is fundamentally different from private developers’ cost-based pricing approach for private residential developments, which takes into account provision for a profit margin.

    By increasing the subsidy applied in a rising property market, HDB has kept BTO flat prices relatively stable. This was the case even in the past two years. While construction costs have increased by almost 30% since 2019, these costs have been largely absorbed by HDB.

    This is why HDB incurs a significant deficit every year for its Home Ownership Programme.