The Housing & Development Board (HDB) released the cost breakdown of new flats (BTO). This is a rare opportunity for us to dig into the numbers.
On one hand, some are worried about the affordability of public housing given that prices have been rising, even for new flats.
The average selling price per square foot (psf) for BTO flats in mature estates rose by 21.9% from 2012 while it was a 16.4% rise for non-mature estates in the same period.
In particular, a 5-room BTO in Ang Mo Kio was going for as much as S$877,000. Is this affordable? Many have questioned.
On the other hand, we see a record of public housing sold for S$1 million or more. Last year it was 36 of such flats. This year the record was broken again, 45 million-dollar flats were transacted in just the first nine months of 2022.
If public housing isn’t affordable, there shouldn’t be million dollar flats transacted? Which is which?
HDB explained the pricing of the new flats.
Costs are not a factor as the flats are not built for profit motive.
Pricing is based on the comparable resale flats nearby and a significant subsidy is applied to ensure the flats are affordable according to household income and mortgage servicing ability.
Although the average cost per unit of a completed BTO flat for the past few years have risen…
FY2021/22: S$396,000
FY2020/21: S$377,000
FY2019/20: S$352,000
The new flats are subsidized to the point that HDB reports losses every year.
HDB posted a record high deficit of S$4.4 billion in FY21, whereby S$3.9 billion was caused by subsidizing new flats. It is expected that the losses will be larger in the coming years.
And new flat owners have been making money when they sell their flats after fulfilling their minimum occupancy period.
According to stackhomes’ calculations, a BTO (2004 to 2012) owner made a profit ranging from $237,129 to $593,270.
These profits are essentially paid by the tax payers – because HDB gets budget from the government to subsidize these new flats.
If the BTO prices are brought down further, more profits will be made by those who successfully bought and sold a BTO flat.
Hence, it is fair that the BTO prices have to go up or get subsidized less if the resale prices in the vicinity is high.
Otherwise the whole country is subsidizing a group of BTO buyers’ profits. It is not about affordability anymore.
And for those who really cannot afford the higher priced BTO flats, they can go for the cheaper ones in the non-matured estates.
From an individual perspective, if you can qualify for a BTO and are willing to wait for years for the unit to be built, it is one of the surest ways to make a profit.
