SINGAPORE — The Ministry of National Development and the Housing Development Board (HDB) have been taking out full-page advertisements on the national broadsheet, ensuring the public that Build-To-Order (BTO) flats are indeed very affordable to Singaporeans.
The recent saga on the affordability issue of HDB BTO flats came about when the Facebook page, The Alternative View, was issued a Protection from Online Falsehoods and Manipulation Act (POFMA) correction direction last September for suggesting that HDB profited from the sale of the Central Weave BTO flats at Ang Mo Kio.
At the time, MND said that HDB would incur a loss from the project as the estimated amount to be collected from the sale was lower than the estimated total development cost, which included the land cost.
However, it took persistent enquiries from Non-Constituency Member of Parliament (NCMP) Leong Mun Wai to force Minister for National Development Desmond Lee to later reveal in the Parliament that the estimated land cost for the Ang Mo Kio Central Weave BTO project was actually S$500 million. This is the amount HDB paid to the government for buying the land used in the project.
The issue of HDB making a profit or a loss through the sale of HDB flats has been the subject of POFMA correction directions by the government.
Indeed, one of the POFMA notices was addressed towards a TOC article last October. The government said that TOC has falsely conveyed that the government’s sale of land to HDB for the Ang Mo Kio Central Weave BTO project will lead to an increase in Singapore’s reserves.
“When HDB requires land to develop flats, the land has to be taken out of the Past Reserves. HDB has to purchase the land by paying fair market value for the land, and the money goes into the Past Reserves,” the POFMA statement said.
“If the Government arbitrarily prices the land below its fair market value, such as at the historical price that past Governments had paid to acquire the land, or at just a nominal $1, then it is not putting back fully what it has taken out from Past Reserves. This is equivalent to drawing down the Reserves…”
Sim Ann: BTO flats are affordable
But many Singaporeans remain unconvinced of the argument since they know that the government has acquired land at much lower prices through the compulsory acquisition of private land via the Land Acquisition Act. Hence, there have been non-stop postings on social media criticising the government’s method of pricing HDB flats.
On social media, PAP politicians and opposition MPs have also been engaging in non-stop sparring over the issue.
For example, when NCMP Leong wrote on social media proposing that land cost should be taken out of the pricing of HDB flats last December, Senior Minister of State for National Development Sim Ann rebutted him on her Facebook page. Ms Sim said, “Essentially, Mr Leong wants the Government to price BTOs much lower, disregarding land costs if necessary.”
But she assured everyone that the government has kept BTO flats affordable for Singaporeans and said that for most Singaporeans, the home price to annual income (HPI) ratio is only about 4 to 5 times. “In comparison, in global cities HPIs range from 8 times to well over 20 times,” she added.
MND and HDB advertise to tell S’poreans BTO flats are affordable
Since then, the MND and HDB have been actively embarking on marketing campaigns telling everyone that BTO flats are affordable.
In the Sunday Times (15 Jan), their full-page advertisement gives three examples showing how their BTO flats are affordable:
Example 1: Couple A with a household income of $3,000 buying a 3-room BTO flat at Yishun:
Sale Price: $200,000
Grant: $ 65,000
Actual Price: $135,000
Monthly CPF Instalment: $431
Monthly Cash Payment (specially highlighted by MND and HDB): $0
Example 2: Couple B with a household income of $5,000 buying a 4-room BTO flat at Tengah:
Sale Price: $350,000
Grant: $ 45,000
Actual Price: $305,000
Monthly CPF Instalment: $1,067
Monthly Cash Payment (specially highlighted by MND and HDB): $0
Example 3: Couple C with a household income of $7,000 buying a 5-room BTO flat at Bukit Batok:
Sale Price: $465,000
Grant: $ 25,000
Actual Price: $440,000
Monthly CPF Instalment: $1,575
Monthly Cash Payment (specially highlighted by MND and HDB): $0
In their examples, the home price to annual income (HPI) ratios are found to be:
Couple A: 135,000/(3,000 x 12) = 3.8
Couple B: 305,000/(5,000 x 12) = 5.1
Couple C: 440,000/(7,000 x 12) = 5.2
“Severely Unaffordable”
However, according to the Demographia International Housing Affordability Survey 2022, published by the Urban Reform Institute and Frontier Centre for Public Policy, any HPI ratio of more than three is considered unaffordable.
The Urban Reform Institute is a think tank based in the US focusing on the study of cities as generators of upward mobility while the Frontier Centre for Public Policy is an independent Canadian public policy think tank whose mission is to explore options for the future by undertaking research and education that supports economic growth and opportunities.
The Demographia International Housing Affordability Survey rates middle-income housing affordability using the “Median Multiple”, which is the median housing price divided by the median household income.
The Median Multiple is widely used for evaluating housing markets and has been recommended as an affordability indicator by the World Bank and the United Nations. In particular, the survey also ranked Singapore 53rd in affordability out of 92 markets.
In any case, based on the survey, it is “Severely Unaffordable” for couples B and C in the examples to buy their dream BTO 4-room and 5-room flat respectively.
Even for the low-income couple A, at an HPI ratio of 3.8, it is considered “Moderately Unaffordable” for them to buy their 3-room BTO flat.
To be considered “Affordable”, the HPI ratio needs to be 3.0. That means in the examples depicted in the advertisement, the 3-room, 4-room, and 5-room BTO flats have to be sold at $108,000, $180,000 and $252,000, respectively.
And let us not forget that HDB flats are public housing, not private properties.
