The Singapore Parliament will be sitting next Monday (7 Nov) at 12 pm and Members of Parliament have filed their parliamentary questions for the various ministries to answer.
One of these questions comes from Mr Pritam Singh, Member of Parliament for Aljunied GRC and the Leader of Opposition, who is asking Mr Desmond Lee, Minister of National Development if the Housing Development Board (HDB) will provide a clear breakdown of the total development cost of all new flats and the value of the “generous subsidies” applied to the assessed market price of these new flats, in light of the POFMA Correction Directions issued on 14 October 2022 to an individual for his Facebook posts dated 4 October 2022.
Last Breakdown Of HDB Cost In 1988
The last time that HDB revealed its construction costs — including the subsidies provided to flat buyers, appears to be in 1988 when former MP for Potong Pasir SMC, Chiam See Tong asked the then-Minister for National Development, S. Dhanabalan if he will give the breakdown cost of unit flat including land cost incurred by the Housing and Development Board of flats constructed at six constituencies.
In response, Mr S. Dhanabalan provided details of the breakdown and said that the cost incurred by HDB in building its flats can be broken down into construction cost and land cost.
“Construction cost relates to the cost of the building itself, the cost of piling, the installation of electrical supply, sanitation, lifts, water supply, etc, as well as the cost of earthworks, ancillary roads, sewers and drains. Construction cost is determined by the prices of contracts tendered out by HDB.”
“Land cost is determined by the Chief Valuer based on the market values of comparable land. Land cost attributed to the flats does not include the land for commercial premises, town gardens and other non-residential uses in the HDB estate.”
The former minister also noted that cost data in detail is only available since the HDB introduced the new accounting system in 1985.
21 years later, Mr Chiam asked again for the cost, this time addressed to then-Minister for National Development, Mah Bow Tan.
In his parliamentary question in 2009, Mr Chiam asked how much it costs the Government to build a 3-room, 4-room and 5-room HDB flat; what is the profit margin which HDB adds to the cost for each of these categories of flats when it sells them to the public; and whether HDB bases the selling price of flats on the prevailing market price of these flats.
However, Mr Chiam did not get a detailed breakdown from Mr Mah as he did from Mr S. Dhanabalan.
Without providing any breakdown of the cost components, Mr Mah said, “The total cost varies depending on when we build, where we build and what we build. It includes the cost of land as well as the cost of construction of the flats and ancillary services.”
“It varies from $230,000 for a 3-room flat in Punggol today, to $530,000 for a 5-room flat in Tiong Bahru. He also asked the profit margin HDB adds on. Let me explain that HDB does not price its flats based on cost plus profit, but on market price less a generous discount. Together with the additional Housing Grant, which various from $5,000 to $40,000, depending on household income, on average, the subsidies amount to about 20% of the market price for a 4-room flat. It will be even more for smaller flats.”
“Sometimes, HDB’s selling price is more than the total development cost to build the flats. Other times, it is less than the cost, especially when construction costs are high, as in the last few years. Overall, HDB incurs a large deficit in building and selling flats every year, and this is reflected in its audited annual accounts.” added Mr Mah.
A quick search online suggests no other instance of HDB providing the breakdown of costs and subsidies for its flats apart from the response in 1988.
Furthermore, what the Workers’ Party MP is probably asking for, is a standard procedure for HDB to release data about its cost rather than having to ask again and again in Parliament for the breakdown of cost — which the ministers these days might answer with a question instead of providing actual figures.
POFMA Correction Directions On Facebook Posts
Without a doubt, the individual whom Mr Singh is referring to in his question is Mr Yeoh Lam Keong, former Chief Economist of GIC.
Mr Yeoh had earlier published two Facebook posts on 4 October, which commented on a reply made by Minister Lee to Constituency Member of Parliament, Mr Leong Mun Wai’s Parliamentary Question.
Mr Leong had asked for the HDB’s net loss for the Central Weave BTO project at Ang Mo Kio; the cost of land paid by HDB to the Singapore Land Authority (SLA) for this project; and the net profit and loss position for the Singapore Government, including HDB and SLA, for this project.
In response, Mr Lee said that the estimated development loss of about S$250 million for the project would increase to about S$270 million after considering the Central Provident Fund (CPF) housing grants given to eligible buyers.
Mr Lee’s reported reply to Mr Leong spurred Mr Yeoh to write on his 4 Oct Facebook post, “A rather disingenuous and misleading analysis of the supposed $270mn loss made by HDB and by inference the government in developing BTO flats in AMK imho.”
The post was then reported by TOC on the same day.
Subsequently, on 14 October, Mr Lee directed the POFMA Office to issue Correction Directions to Yeoh Lam Keong and The Online Citizen Asia (TOC) over alleged false and misleading statements regarding Housing Development Board (HDB)’s deficits and Singapore’s Past Reserves.
The Minister claims that Mr Yeoh’s Facebook posts had falsely conveyed the message of HDB not incurring a loss of about $270 million from the Central Weave @ AMK Build-To-Order (BTO) Project and that the Government is free to sell State land at nominal or much lower cost than its fair market value.
In regards to the HDB’s loss, the Minister in his correction directions states that the losses incurred by HDB are accurate and real.
He states that for the Central Weave @ AMK project, HDB will incur an estimated development loss of about $250 million, or about $270 million after taking into account housing grants.
It is also stated that HDB’s deficits are covered using funding from the annual Budget, which is raised from taxes and other revenue streams.
As for the sale of State land, Mr Lee wrote that the State land is part of Singapore’s Past Reserves.
The Government cannot sell State land at nominal or much lower cost than its fair market value without the President’s approval, as doing so would constitute a draw on Past Reserves, claims the Minister.
“Past Reserves are protected by the Constitution for the benefit of future generations and use during crisis. The President’s concurrence is needed before the Government can draw on Past Reserves.”
As stated by Mr Mah in 2009, HDB has consistently insisted that it does not price its flats to recover costs and claims that its total development cost, which includes construction and land costs, 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.”, said the Statutory Board on its website.
An earlier Correction Direction was also issued to a Facebook page, The Alternative View (TAV) on 3 September after it published a Facebook post suggesting that HDB had profited from the sale of the AMK BTO flats in the Central Weave project.
