Pricing Policy of HDB's BTO Flats

8 Mr Gan Thiam Poh asked the Minister for National Development (a) whether the pricing policy of HDB's BTO flats remains the same in using the average mean income of each income group as a reference and not the prevailing market price; (b) what is the pricing policy for BTO flats in mature estates and whether there is a difference; and (c) whether there is a plan to address the pent up demand as a result of record sale prices crossing a million dollars in mature estates.

The Minister for National Development (Mr Desmond Lee): Mr Speaker, when pricing new flats, HDB first establishes the market value of the flat by considering factors such as the price of comparable resale flats nearby, the individual attributes of the flat and prevailing market conditions. A subsidy is then applied, so that new flats are priced at a significant discount to the market. The pricing approach is the same for Build-To-Order or BTO flats in mature and non-mature estates.

On top of the subsidised price, HDB also offers first-time flat buyers, the Enhanced CPF Housing Grant or EHG, of up to $80,000, to give more help to lower to middle income households buying their first home. The EHG was introduced in September last year, with no restriction on the flat buyers' choice of flat type and location.

These significant subsidies keep HDB flats affordable. Today, HDB BTO flat prices remain at less than five times of median annual household income or less, compared to other major cities in the world, where the ratio can be nearly 10 or 20 times. The vast majority of first-timer families are able to buy BTO flats in the non-mature estates and service their monthly mortgage instalments using CPF, with zero or minimal cash outlay.

Apart from BTO flats, some buyers also look to the resale market, where there is a wide range of flat choices. While there have been several resale flats with attractive attributes that are transacted at headline prices of over a million dollars. These transactions are a small minority, representing less than 0.3% of the total resale transactions this year. So, in absolute figures, it is 38 out of more than 14,400 resale transactions so far this year.

The Government will continue to monitor the housing market closely and ensure that Singaporeans have access to affordable public housing.

Mr Speaker: Mr Gan Thiam Poh.

Mr Gan Thiam Poh (Ang Mo Kio): I thank Minister for the reply. The underlying concern is that because of the million-dollar transactions that we have seen recently, there is a concern that that might create anxiety. There might be a pent-up demand and as a result, anxiety. How would HDB review and manage that?

Mr Desmond Lee: I thank the Member. Certainly, when there are these headline-grabbing articles which talk about HDB flats transacting at those prices, it may cause people to have the impression that overall there is a very, very high demand and that prices are escalating significantly. But I have said, it is 0.3% of total resale transactions each year that are in that category.

HDB, as I have said, continues to monitor closely housing affordability for both the BTO market as well as the resale market. For the BTO segment last year, we built 14,600 new flats; and this year, we are aiming to build 16,700 flats. And so, each year, we will calibrate the number based on demand.