By “It won’t be helpful or meaningful to” provide the breakdown of the development cost for flats built by the Housing Development Board (HDB), said Ms Indranee Rajah.
This shocking answer was provided by the Minister in the Prime Minister’s Office and Second Minister for Finance in response to a Parliamentary Question filed by the Leader of the Opposition, Pritam Singh on Monday (7 Nov).
The Workers’ Party Secretary-General had asked if 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.
Ms Indranee noted, “So Mr Singh’s question was, would we give a breakdown for all new flats henceforth.”
“It’s not meaningful because you will be just comparing this one with this one. And, you know, prices in one area may not be the same as the other. So that is the answer. My straightforward answer is it won’t be helpful or meaningful to do so.” said Ms Indranee.
Explaining to Ms Indranee why it would be meaningful to do so, Mr Singh said:
“So since the introduction of the prime location housing (PLH) of bleached flats last year, it suggests to me at least or provides an example why a detailed publication of HDB subsidies actually warranted. A HDB PLH flat buyer upon selling his PLH flat after ten-year MOP (Minimum Occupancy Period), will have to return the quantum of additional subsidies provided as a percentage of the original assessed market value of the flat and the subsidy recovery will apply to the resale price.”
He added, “That is a reflection of the prevailing market value regardless if the flat is sold at a gain or loss. Another reason I would suggest to the Minister to publish the dollar value of the subsidy is to scrutinise and track the amount of subsidies being diverted for homeownership purposes.”
“This is particularly in view of the Ministry of National Development’s 2011 decision to delink BTO prices from the rising resale market than the median price of a 4 room and larger HDB resale flats has increased 26% between 2017 and 2022, with resale prices reaching record highs today and therefore pushing up the market price of land. Increasing the size of the subsidies under the current HDB policy would appear to be the main way through which BTO prices will be kept affordable.”
In view of these new reasons, Mr Singh asked what is preventing HDB from publishing the dollar value of HDB subsidies for new BTO flats.
Ms Indranee retorted saying, “With respect to prime location housing. It actually doesn’t really change my answer because at the end of the day, the question is what is affordable to the person who’s buying? And in that, we have made no secret of the fact that for prime location housing, you will have to have a greater subsidy.”
“So that’s the key thing. So it comes back to the same question, why would you have to disclose or put out the development costs of every single project? It’s just not meaningful.”
“The key thing is to the buyer, is this affordable? And that’s what HDB does.”
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.
At this point, the late Mr Lee Kuan Yew was the then-Prime Minister of Singapore.
In response, Mr S. Dhanabalan provided exact details of the breakdown in a written reply 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 under the PAP government headed by Mr Lee Hsien Loong, son of late LKY.
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.
With Ms Indranee’s answer to Mr Singh, we can safely say that it would be very unlikely to see a response from the government like what we got from the minister under late LKY under the current PAP government.