HDB: new flats sold at “significant discount”
September 20th, 2009 | 
Author: From our Correspondent
In a desperate attempt to quell rising disgruntlement on the ground over exorbitantly priced HDB flats, the state-controlled media released a short “disclaimer” from HDB in the Sunday Times today.
HDB explained that a new flat’s equivalent price is based on the recent transacted prices of resale units nearby.
The HDB then sells it at a “significant discount”, which is the subsidy given by the Government. The HDB sells flats based on market price instead of cost as this is the fairest way of pricing new flats.
HDB did not elaborate on the reasons why this is the “fairest” way of pricing new flats instead of the old system of pricing it based solely on costs.
There is a difference between a subsidy and discount. A subsidy is money paid by the government to make prices lower. However if HDB is already making a hefty profit from the sale of new flats, then the “subsidy” given become a “discount” like those offered by private developers at pre-launches.
This begs the question whether HDB is entitled to make a profit from the sale of new flats to Singaporeans since they are supposed to be low-cost public housing meant to be easily affordable to the masses.
HDB said it is “not tenable” for the HDB to price flats according to their development cost, which fluctuates depending on factors such as site conditions, material price and tendered construction price.
However, the old system has been in place for over 30 years from the 1960s to the 1990s and has served Singaporeans well by providing relatively affordable public housing.
On the contrary, it is not tenable for HDB to price flats based on the recent transactions of resale flats because their prices are kept artificially high by the influx of foreigners.
According to latest figures released by the Ministry of Home Affairs, there were over 90,000 PRs and 10,000 new citizens last year. As PRs are only able to purchase private and resale flats, many of them opt for the latter which is much cheaper thereby leading to the price inflation.
The prices of new flats will go up exponentially if HDB continues to price them based on resale flats. Given that construction costs seldom go up by much within such a short period of time, this means that HDB is profiteering from ordinary Singaporeans.
It is the duty of the incumbent government to provide cheap and affordable public housing to its people. In other developed countries, the government leaves it to the private sector where fierce competition helps to keep prices down.
In Singapore, the government is the largest landlord and property developer at the same time. With its monopoly over the public housing market, it can fix the prices as high as it wants to the detriment of Singaporeans who are plunged increasingly into debt.
Thought Singapore has one of the highest home ownership in the world, the public housing are mostly bought on credit at the price of private housing elsewhere.
The citizens of Singapore have the right to demand the government to reveal the accounts of HDB: how much does a new cost to construct, how much profit is HDB making and where is this sum of money going to?
Posted in Editorial
PAP should take heed of not be too greedy
身后有余忘缩手 眼前无路想回头
世人都晓神仙好，只有功名忘不了！
古今将相在何方？荒冢一堆草没了！
世人都晓神仙好，只有金银忘不了！
终朝只恨聚无多，及到多时眼闭了！
世人都晓神仙好，只有姣妻忘不了！
君生日日说恩情，君死又随人去了！
世人都晓神仙好，只有儿孙忘不了！
痴心父母古来多，孝顺儿孙谁见了
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Because they also get ‘discounted’ pay by pricing themselves to the top earners in all profitable professionals in Singapore.
Paying themselves 2/3 of top earners means their pay are always amongst the highest. While real professionals get retrenched, fired, the PAP ministers are free to enjoy a sure thing.
Hypocrites can play with words, but their calculation only shows how they have lost torch with the people.
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When you start paying people salaries of millions, it is not anymore a “duty” for civil service. This has become (if you are still stupid enough not to spot it) a business, purely for commercial profits.
Now, if this is commercial profits oriented, then it is wise to put things like “A or B, whichever is higher price”…
There, mystery solved.
If you have the guts to sell it, have the guts to admit it.
We cannot blame anyone but ourselves, for being part of the problem. We are greedy also, it is just that we are not MPs. Money Please Singapore.
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I can understand the psychological angst of the article.
What has happened. It is the credit system that has been given green light to expand. Who gave the green light. The govt. Why? the credit system is contracting. The need to sustain the credit creation will give way to depression. Do note this problem has caused major unemployment in USA and Europe. There is no green shoot or return to the old time. So Spore will see a major meltdown and resulting unemployment of resource.
http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?i=56123582&id=217999782
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It’s quite ridiculous!
It’s just like saying because the market price for a plate of chicken rice sold in our food courts is around S$4.00 a plate, but if I decide to sell it @ S$3.00 a plate then I am actually offering my customers a 25% subsidy, never mind that :-
1) my actual cost per plate is only S$1.50 per plate, which means that I am actually already making a 100% profit (S$3.00 minus S$1.50)
2) I don’t have to pay rent because I own the shop and
3) my chicken rice shop is the biggest monopoly capturing 90% of the market.
What is really so difficult to give a detailed breakdown of the actual costs ? Unless of course if they have so many secrets to hide from the public such as :-
- there is no real subsidy from HDB and our Ministers are not truthful ?
- the only funds that they provide are really the HDB loans originating from on our CPF funds ? Plus guaranteed profit margin of 0.1%
- the bigger flats you choose, the more profit they make ?
- the more popular flats you choose, the more premium you pay ?
- the HDB is damn unproductive ? Especially during the downturn years since more or less the same no. of staff is paid to produce less output of flats (unless they start retrenching their staff)
It seems like we are the ones paying for everything. The subsidy thing is only on paper and it has all been a big lie ?
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Very soon, they’ll privatized HDB and as such, it will no longer be accountable to the government. It’s purpose will be to generate profit and not to provide affordable housing to the public. Another of the Lee family – grandchildren, cousins, friends, in-laws will run the privatized the HDB…
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SG = Screwed-up Gabra-men [not Singapore Government]
BUG = Bloody Useless Government [not the H1N1 flu bug]
MSG = Money-Sucking Government [not MonoSodium Glutamate]
PAP = Pay And Pay
PUB = Pay Until Bankrupt
HDB = High Debt Bankrupt
[ bloody hell, HDB new/resale flat prices so bloody costly, no thanks to that bloody shorty $2m Minister Mah Bow Tan! ]
MBT = Minister who Bullshit in Tampines ward
[ in reference to Minister Mah's "half-truth" statement in Parliament that HDB new flats are "heavily subsidised with a market subsidy" ]
TCM = Talk Cock Minister [not Traditional Chinese Medicine]
WKS = Won’t Kena Sacked
[ in reference to $3m DPM Wong Kan Seng, accountable for the Mas Selamat Great Escape Monumental Fiasco --- that led to Singapore becoming the "Laughing Stock of the International Community" ]
PAP say: Pay Peanuts, and you will get Corrupt Monkeys!
S’poreans say: Pay Big Bananas, but still get Incompetent Chimpanzees !!!
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The HDB yardstick for affordability is the debt-to-income ratio of below 30%. However, this yardstick is incomplete without taking into the account the amount of time it takes to clear the debt.
Say, for example at the current median household income of 5k, we fix the length of time it takes to clear the housing loan as 15 years.
Each month the maximum amount to use for loan is 30% of 5k, which is 1.5k.
Ideally, an affordable house would be 12 times 15 times 1.5k which goes to 270k, if we neglect the interest rate. If HDB interest rate of 2.6% is accounted for, an affordable house must be priced cheaper than 270k.
The truth is that a resale 4 or 5-room flat is now way above this value.
Therefore, HDB used an inappropriate yardstick for affordability resulting in its illusion that housing is still affordable.
We need to make them see this point first before any fruitful solution can be found.
The influx of PRs into the resale market has already open the floodgates for resale flat value appreciation. We need to think of a way to ensure that even with PRs competing to purchase resale flats, genuine local Singapore first-timer citizens who really save money and not take loans for luxury items like cars and designer clothes, can still have a large advantage over them in resale flat purchase. But how?
I feel that demanding this and that without considering the repercussion, and not think of a solution that would really be for the good of Singaporeans is not right.
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By revealing the building cost of HDB flats, it will be a catalyst for locals to vote PAP out during the elections. Who would think PAP is so stupid to kill the cash cow?
By refusing to show us the actual numbers, there is nothing anyone can do about it. Until we have enough opposition members in the parliament to force the change. Same goes for Temasek and GIC accounts.
Funny thing is – there will be some “stupid” (quote Li Ao) Singaporeans who will vote them in, since they did not see the actual truth.
Do you think this government cares about us? It is so desperate to hold on to its position and thus getting millions in pay check.
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well what then is the opposition doing? hiding somewhere? sigh
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By importing large number of PR and new citizen, the government created great demand for HDB flat and by limiting the supply of new flat, of course it will cause the resale price to shot up as the price is determined by demand and supply. The high resale price is a clear evident that the government and HDB are not doing their job.Whatever HDB explained is just making excuse but is completely not convincing!!!!!
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Where on earth, other than Singapore, is public housing is make available to non citizen like PR ???????
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There are so many “NKF” in the current govt stat boards. Not difficult to guess who is the mastermind behind all these profiteering establishments.
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HDB, Mai Sian lah ! You control the price of resale price and stop talking rubbish!!!!!!
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I am a duppie – depress urban professional. I worked in finance sector for 6 years and got retrenched. I stay with my parents because I cannot afford to buy HDB flat. My wife takes care of our toddler full-time as she is unable to find a job due to her health problem. My parents are both retired.
My household income is zero and living expenses high. I visit temasek review because this website shares my views. I love my country, this is my home, but as a citizen of a democratic society, I never got the chance to vote.
When I was studying, govt promoted IT. I majored in IT but 9 in 10 of my classmates are out of the industry as we were told 1 SG programmer is enough to hire 3 Indian programmers. Foreign talents are willing to take up jobs for lower pay because of a stronger SG currency compared to their own. They take our jobs and send money back home until they had enough and go back home.
We as Singaporeans have to face extreme high costs of everything. Even our wet markets and food centres are upgraded and upgraded again for the govt to earn more rental. It is very depressing to pay for $4 hao jian and find only 3 tiny oysters or $5 jiang cong fish slice rice and only find 3 miserable slices of fish. We don’t even have street food culture as it is depressing.
HDB flats are so expensive and unaffordable to many and the govt keeps slapping our mouths recently. It is also very small thats why we have the biggest myopia problem around the region. We welcome 100,000 new PRs / citizens in SG but we only built 10,000 HDB flats to house them. That means every 10 of them stay in one flat? That’s excluding our own Singaporeans’ need for new flats!
Transportation is also another problem. Our buses and trains are like sardine tins and expensive too. To take public transport we pay high prices to become sardines. Taxi fares are very high compare to our neighbours. If you own a car it is even worse. Road tax, ERP, season parking, coupon parking, radio license, insurance, we pay for all that to be stuck in traffic jams, even in your own carpark, don’t forget, we are so tiny we can’t even see ourselves in the world map. Private or public, we are paying for shit.
The biggest failure of the government is to chase after progress and ignore matters of the heart. The PMs challenges us to choose between a kampung or a modern city. If living in a modern city is as depressing as it is now, I would rather live in a kampung, where I have multi-racial neighbours, have my own garden to grow my crops, rear my own chicken and pigs, go fishing every other day and spend more time with my family.
In Singapore, we have no choice but to follow. We have many things to say but nobody listens. We want change but we don’t even get the chance to vote. And by change I necessarily mean a change of govt. I mean more voices to be heard. Even that is seemingly impossible now.
That is why I am depressed.
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wow…election is really getting close…You know it’s polling soon cos the Gahment is starting to “listen” to the people…
But once the election is over….ah well…you know the drill…It’s like a washing machine…rinse, cycle and repeat.
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Using HDB argument, during NATAS Travel Fare, all travel agencies are subsiding those who sign up for discount packages!!!!
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Any thinking person would know that ’subsidy’ is misleading. Question is, why does the government persist in using that word?
I predict that the government’s next move will be to start building more HDB flats at slightly lower prices – problem solved.
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[...] if you’re poor – TOC: Disillusioned with trying to purchase a HDB flat – The Temasek Review: HDB: new flats sold at “significant discount” – Hard Hitting in the Lion City: Singapore Property Prices – Recruit Ong: Andy Xie: What We Can [...]
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Note that the PAP has changed their original stance that HDB flats were “subsidized” to their “being affordable”. Who are they trying to fool?
I suppose it is because the gahmen is unwilling to provide us the actual cost of building or constructing the HDB flats, and therefore revealing the massive profits that they are making in selling the “affordable” housing to gullible Singaporeans.
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Actually the HDB clearly states the construction cost of HDBs in the older HDB Annual reports.
It is just lazy Web-rabble-rousers who are too incompetent to compute the numbers.
And HDB loses money each year…. because they pay high prices for the land …..owned by Singapore Land Authority.
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Aargh!!! And HDB loses money each year…. because they pay high prices for the land …..owned by Singapore Land Authority.
GOOD CREATIVE ACCOUNTING. Yang gj, are you a great genius scientist who would be foreign of accounting concepts? Land owned by Singapore Land Authority (SLA) – how much the land cost to SLA. My old landed house was acquired in 1982 and my family was compensated slightly over $7,000. On this land and other adjoining houses similarly acquired and compensated, they build a high rise block of HDB. In land area, probably 4 to 5 acquired land and houses sustained one HDB block. Total acquisition costs to SLA – maybe S$30,000.
If SLA marked this to market now of say $300 million and HDB may be sustaining “accounting” loss BUT FANTASTIC PHYSICAL CASH FLOW PROFIT PASSED ON AND HIDDEN IN THE ACCOUNTS OF SLA.
Maybe that is how HDB “subsidised” public housing, all the “profiteering” got channelled from lefthand side of HDB into the right hand side pocket called SLA. And the magician smiling from ear to ear is the incumbent Government?
The slieght of the hand is very fast – hidden in creative accounting, can’t you understand that?
But thanks for keeping us lazy bloggers informed. I was not aware previously of SLA but aware that my compensation were peanuts and those who bought HDB on my acquired block paid “market prices” (previously called subsidy) now called “affordable” prices.
The word subsidy is now less fashionable – does not quite fit to be associated with socialism in this new era of market prices capitalism nearly comparable to private low end condos.
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Reading these blogs makes me wonder if the bloggers are naive or if they know what’s the economic reality. Btw, I’ve no poitical affiliations.
Where land is scare. I believe Singpore is scarcer being a city-state.
Look at Japan and HK (given the right price, HK can now expand into the mainland much easier than prior to 1977) for example. The price per unit area of housing is definitely much, much higher than Singapore.
I shd know because I have worked in both these countries. As a manager, my space in Tokyo, is not bigger than your 3-bedroom HDB flat.
Check it out. How your government does it let alone housing 85% in HDB flats is a really a marvel. No wonder you have a long stream of foreign dignitries coming here to study your impressive public housing.
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First of all, someone mentioned on “where are the opposition”,, and guess what, u dont get to see them because they are not that influential due the the pro-gov media. And sometimes i was just wondering is that “Democracy” society that we are living in?
Pls dont fool on saying HDB is affordable using the 30% debt-income ratio. If the number of years can be stretch to 85 years old, then the debt ration can be as low as 10%. But who the hell in the world would do that. Pls dont ignore the fact that number of years on loan repayment is damn long. And in Singapore, a typical housing loan will normally be 30 years or more (which most other country like our neighbour usually only take 20 years loan).
Understand that singapore has not enough land. Then make the flat higher. We are not as crowded as HK and Tokyo. And even so, the houses in HK is private own! Compare them w the rules and terms of HDB pls.
Singapore offer resale HDB housing to PR just because it is more ‘profitable’.
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