HDB: “affordability” and “market-based land costs” redefined”?

In Political governance, Property on 27/10/2011 at 5:51 pm

“Mr Khaw said that a typical two-room Build-To-Order flat, which has an income ceiling of S$2,000, would cost less than three years of income, factoring in the grants available. Meanwhile, larger four or five-room flats – with an income ceiling of S$10,000 – cost less than five years of income,” it was reported last Friday. (Translated into $. 2-room flats: $72,000, 5-room flats up to $600,000.  All before subsidies.)

Err who can devote 100% of monthly salary for 3- 5 years to pay for flats? More likely kanna strech payments for 30 years (Comrade Mah’s assumption). So talking of the cost of flats in terms of salaries for 3- 5 years sounds like another variation of Minister Mah’s, “No cash outlay” where he forgot to mention the more and for a longer duration money is deducted from CPF accounts, the less home owners have to retire on.

Remember Minister’s Mah rants about “reserves being raided” if the land on which HDB flats were built were not valued at “market-based land costs”? Well Minister Khaw may have redefined “market-based land costs”, without the “reserves being raided”.

The possibility that there is a new definition of “market-based land costs” was spotted and commented on by a ST journalist, Li Xueying (Good for her).In a piece on 20 October 2011, “Chance lost on clearing hows and whys of flat pricing”, she wrote, Mr Khaw spoke of how, since May, the Government had stabilised the prices of 13,000 flats in three [Build-to-Order] launches. This, even as prices in the private and resale market rose, albeit at a slowing pace … ‘We have moderated price changes such that after adjusting for differences in location, amenities and other physical attributes, the May, July and September BTO prices were roughly comparable to the prices of similar units in the April BTO launch.’

The BTO launch next month will repeat this pattern, he promised … ‘As long as construction costs do not rise dramatically, the BTO prices will stabilise.’

As long as construction costs do not rise dramatically. This raises a question.

What about the second component that the Housing Board factors in in pricing its new flats, that is, land costs?

More specifically, market-based land costs – a formula that has drawn so much angst in the past, given that it is pegged to the gyrations of the private market.

(Market-based pricing of land is done based on prices of state land located within HDB estates sold to the private sector.) …

But it is telling that Mr Khaw also spoke of how his ministry had moderated the prices of the BTO projects such that the prices of those launched last month were comparable with the prices of those launched in April, even though prices in the private market rose over the same period.

Has the market-based pricing formula been quietly tweaked behind closed doors? Or did the Government just decide to deploy an interim measure of pegging new prices to April’s levels, given the unhappiness over spiralling flat prices? …

But the speed with which the minister has done so – never mind the market – does raise questions on how exactly the Government prices its flats.

… MP Zainudin Nordin also queried this, calling for the pricing formula to be as transparent as possible.

Doing so will assure Singaporeans that ‘the Government is not out to make a profit through the sale of public housing’, he said.

Unfortunately, Mr Zainudin and his colleagues did not manage to seize the opportunity to seek this clarification from Mr Khaw yesterday.

She ends with remarks that the prime minister especially should take heed of, Going ahead, the need to be more open and transparent with information will continue to be an imperative that the Government has to struggle with, given a more questioning electorate.

Voters no longer want to be told just the answer – the what. They also want to understand the hows and the whys.


  1. Ha ha. In the first place, HDB is not strata-titled. HDB lessees do not own real property other than the concrete pigeon hole in the sky. You do not own any share of land and have no land rights. That’s why you are called LESSEE and not owner. Rather like the serfs of old who have to rent their kampongs from lords and pay lifetime of rent.

    And becoz HDB lessees have no land rights, the true land owner i.e. HDB i.e. govt has the right to declare SERS anytime on you and pay you whatever “market value” for your pigeon hole that the govt lawyer and govt valuer deems HDB/govt to be able to get away with. And of course, as non-land owner, HDB lessees cannot call their own enbloc.

    Hence by logic and by rights, HDB prices should not factor in land costs. That’s why it’s called PUBLIC FLATS. And that’s why it’s wrong to allow foreigners i.e. PRs to purchase HDB flats.

  2. All I know is this – That they will not be paying a cent to the spirits that are currently lying beneath the cemetery of bukit brown. They would rather not pay to acquire some private lands, and have no qualms to raid the tombs of the dead. Is a very sorry, sad and shameless state.

  3. what Khaw is talking about is price-to-income ratio (income being median household income). In the US, this ratio has historically been around 3, and rose to 5 during the bubble. See:
    So you could well find the MIW/MSM crowing about how “affordable” HDB prices are.

    But of course as other posters have pointed out, its not comparing apples with apples. A nice house where you own both the land and the building is a very different prospect to pre-paying rental for a box in the sky…

  4. Two points –

    Minister Mah would have been right about “reserves being raided” had he acquired the land at market value. But it was the government raiding private landowners, paying them pittance for their lands.

    The government is raiding your retirement savings to pay for your housing. If housing is affordable, people would have saved enough to retire at 65, given that Singapore has the highest retirement saving rate among the developed countries. It’s a zero sum game.

  5. […] Housing – Thoughts of a Cynical Investor: HDB: “affordability” and “market-based land costs” redefined”? […]

  6. re khaw’s claims on how few years of income r needed to pay off the price of your hdb flat: hahaha. the bullshit begins again…

  7. Actually it is rather untypical of the Pap govt not to rebut public allegations of profiteering in the sale of HDB flats with bare facts and figures says a lot about the accountability of our govt. There is simply no reason for our Pap govt not being able to prove there is a subsidy when there is really none. In fact it is even reasonable to deduce that all those housing grants are coming out of profits derived from selling the flats at much higher marked up prices themselves.

    They just simply can’t find a way out to prove they are not profiteering from the sale of the public housing flats.

  8. If you analyse HDB tender awards in GeBIZ (which I had been doing since 2006), the cost of building a new 5-rm flat is about $130K (used to be just $90+K in 2006). This amount not only covers the unit itself, but also the surrounding infrastructure e.g. carpark, landscaping, walkways, internal driveways, playground, multi-purpose halls, BBQ pits etc etc. Just like condo where your condo price of course includes paying for the amenities too. But UNLIKE condo, HDB shafted you becoz you DON’T own these infrastructure. They are PUBLIC PROPERTY. Any Tom Dick Harry from across Singapore or JB can come and use them. And you need to pay extra to use these such as multi-purpose halls, BBQ pits and carpark.

    OK, it costs $130K to build a 5-rm HDB flat unit. What about the land cost? As I said before, you don’t get the land when you buy HDB. The land ownership still belongs to HDB/govt. HDB 99-yr lease is as different from condo 99-yr lease as LKY to LHL — same surname & supposedly similar genes but very different persons. With 99-yr condo you get Title Deed with land rights good for 99 years. With HDB you simply get Lease Agreement for your pigeon hole good for 99 yrs. So by legal logic, land cost SHOULD NOT be a cost component in HDB pricing. Of course you have opportunity cost as govt can use the land for other things or sell to condo developers. But that’s why you call it PUBLIC FLATS and is a PUBLIC GOOD.

    OK ok, let’s just whack the land cost in. How much will the land cost. By today’s standard, maybe $300-$350 psf of buildup area. But if govt were to really sell all HDB land to HDB buyers, the cost will probably fall to $200-$250 psf becoz of the huge supply. Let’s take a conservative $250 psf. A generous floor size for a new 5-rm flat is 1,200sf (most are now smaller). That gives a land costing of $300,000. Add in the construction cost and the total cost is $430,000.

    New HDB 5-rm BTOs are being priced at over $500+K. Do you see the SUBSIDY?? Maybe, becoz you need to fork out $600+K for a resale HDB nearby. That’s market subsidy.

    As for the $2B loss on HDB’s books?? It’s called mark-to-market accounting, as they are selling new HDB to you bozos for $500+K when they should be selling you at $600+K.
    What about HDB’s cashflow statement?? At $100K profit a unit and at 25,000 units a year, that’s $2.5B. OK, make it $2B. Gotta pay multi-million dollar bonuses to MND minister and HDB CEO and related honchos, you know.

  9. I think LHL, in his recent parliament speech, pretty much summed up how they see “public” housing:
    “The most important thing we do for Singaporeans, of course, is to help every family own a home – the HDB flat. The house is much more than a secure roof over their heads. The house in Singapore is also a major way for us to level up the less successful and to give them a valuable asset and a retirement nest egg. We are using the HDB flat as a means to give every Singaporean household a stake: This belongs to me, this is what I work for and help pay for, this is what I am proud of, this is what I will defend and this is what I really should keep until retirement. That’s why we are making sure that HDB flats are affordable even to lower-income households.”

    They are not interested in keeping housing costs low. Its simply a albatross they want to tie around our necks.
    Notice he said its “the most important thing we do”

    • In this regard, LHL is the same as LKY. Or more accurately LHL is regurgitating what LKY was chewing. LKY said the exact same things in the late 1960s and 1970s. He kept saying this in the 1980s and up to mid-1990s. During asian financial crisis and SARS, he suddenly kept quiet about HDB. Except to criticise the previous MND minister for building so many HDBs and to bring in MBT to turn HDB into a money spinner again.

      He waited until 2007, after HDB prices recovered 100% from the 2002 lows, before he started to preach the same sermon again.

  10. breakdown of built-up flats please. land cost, actual construction cost breakdown, consultancy fees, etc, etc, etc.

  11. MP Zainudin Nordin said that ‘the Government is not out to make a profit through the sale of public housing’.

    The following facts implies otherwise.

    According to an article in 2010 in Property Guru, “HDB has awarded a contract worth $99.8 million to Sim Lian Construction Co. for the building works at Queenstown Redevelopment Contract 30, which will have a total of 774 housing units, according to business weekly, the Edge.”

    The construction cost of the HDB flats works out to be only about S$130,000 each on average, which is then sold to the public for $300-450k. If this is not profit, then what?

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