Pricing Mechanism under Build-to-Order Flats and Sale of Balance Flats Exercises

3 Mr Low Thia Khiang asked the Minister for National Development what is the pricing mechanism of Build-To-Order (BTO) flats compared to unsold BTO flats released under a Sale of Balance Flats (SBF) exercise that results in the BTO price for the same flat exceeding the SBF price in some cases and not in others.

The Minister for National Development (Mr Lawrence Wong): Mdm Speaker, new HDB flats offered under the BTO and SBF exercises are priced using the same methodology, which takes into account the prices of comparable resale flats in the vicinity, as well as the specific attributes of the flats, such as storey height and design.

However, the prices of SBF units may differ from that in the BTO exercise for several reasons. First, the SBF price may be slightly higher as the units are closer to completion. Second, the SBF prices may also be updated if there is a change in prevailing market conditions. For example, in cases where the prices of comparable resale flats in the vicinity have softened since the time of the BTO launch, the prices of balance flats may be lower than their original BTO prices.

Regardless of whether the flats are sold under BTO or SBF exercises, HDB gives a generous market discount to ensure that new flats are affordable to buyers. On top of the subsidised prices, eligible first-timer families can also receive up to $80,000 in housing grants to help them purchase their flats.

Mr Low Thia Khiang (Aljunied): A clarification for the Minister. People understand, generally, that SBF flat prices are generally higher than BTO prices. But there are cases where SBF prices were lower, for instance, for the Punggol estate's Matilda Edge project. Some units were quite significantly lower in prices during the SBF exercise in 2016, compared to the BTO prices in 2013. Certain units at the lower floors were actually lower in price.

So, the question now is: under what circumstances and considerations does HDB lower the price and, by doing so, is it fair to those who had bought the BTO flats in the same cluster?

Mr Lawrence Wong: Madam, first of all we should compare like for like. As I had mentioned, pricing can differ due to various reasons − a higher floor unit will be more expensive than a lower floor unit, and there are different characteristics of location as well.

So, let us take all of that aside. Because if you take all of that aside, and you take, say, an SBF unit and a BTO unit in the same block, same floor, most of the time, they will be similar. But there may be instances, as I have explained earlier, where the SBF unit is sold at a later stage and if, indeed, the market has softened − it does not happen very often because our market is generally quite stable − but if indeed market conditions have softened, then HDB may sell that SBF unit at a later stage, due to market conditions, if the general market has softened, it may be sold at a slightly lower price than the original BTO price. That is the reason that I have stated earlier.

I think that is fair to all home buyers because the transaction is done at the point of sale. If the market has come down, then we charge it at a slightly lower price. This is not a new practice. We have been doing it all this while. BTO batch by BTO batch, sometimes the prices differ because of market conditions. Balance flats, as the market adjusts, we also update the pricing. This has been the practice of HDB's pricing all this while.