facebookBTO Development Cost Revealed: How Are BTO Flats Priced & Subsidies Determined?

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BTO Development Cost Revealed: How Are BTO Flats Priced & Subsidies Determined?

profileJoel Koh

Looking to get a Build to Order (BTO) flat for your first home?

Then you’ll want to pay attention to this news. On Wednesday (7 Dec 2022), the Housing and Development Board (HDB) issued a joint statement with the Ministry for National Development (MND), providing a detailed breakdown of the development costs for recently completed BTO flats for the first time.

Source: Giphy

In addition, HDB revealed how it determines the prices of BTO flats and the amount of housing subsidies available for each BTO launch.

This statement came after a heated debate in Parliament between the Leader of the Opposition, Mr Pritam Singh and the Minister in the Prime Minister’s Office and Second Minister for Finance, Ms Indranee Rajah, about the development costs of HDB flats last month.

Here’s what Singaporeans need to know.


TL;DR: HDB Reveals BTO Development Costs & How BTO Flats Priced & Subsidies Are Determined

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HDB Development Costs

For the first time in its history, HDB has released a detailed breakdown of development costs for flat sales from FY2019/20 to FY2021/22:

~Breakdown of Cost of Sales for Sales CompletedFY2019/20FY2020/21FY2021/22
Land Development Costs (1)$2,349M$1,816M$3,167M
Building Development Costs (2)$1,598M$1,161M$2,077M
Other Costs (3)
Largely from cost of flats acquired from ex-flat owners
$142M$88M$102M
Total Cost of Sales of Completed Flats (1+2+3)
Number of flats where keys have been issued to buyers
$4,089M
[11,609 units]

Average Cost Per Flat = $352,227
$3,065M
[8,124 units]

Average Cost Per Flat = $377,277
$5,346M
[13,506 units]

Average Cost Per Flat = $395,824

If you noticed, land costs make up the bulk of development costs. HDB clarified that (emphasis are mine):

On land costs, HDB pays fair market value for land that is developed into public housing. The fair market value is determined independently by the Chief Valuer in accordance with market conditions and established valuation principles. Land used for public housing is meant for providing affordable homes to Singaporeans, and buyers of public housing flats are subject to more restrictions than flats sold in private residential projects. It is lower compared to the land price for private housing in the same locality. This differential reflects the more stringent eligibility criteria and conditions that buyers of public housing must meet in terms of income, citizenship, minimum occupation period etc.
Proceeds from HDB’s land purchase are paid back into the Past Reserves, which are in turn invested to generate returns for future generations of Singaporeans.

For context, ex-GIC chief economist Yeoh Lam Keong was issued a Protection from Online Falsehoods and Manipulation Act (POFMA) order as he posted two Facebook posts on 4 October 2022 alleging that HDB’s $270 million loss made on the August 2022 BTO project Central Weave@AMK was a “rather disingenuous and misleading analysis” and that the published figures were an “accounting sleight of hand.”

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HDB Incurs a Deficit

HDB has stated that the total development cost of HDB flats, which includes construction and land costs, cannot be fully covered by the selling prices of BTO flats which are highly subsidised. That is why HDB incurs significant annual deficits in its Home Ownership Programme, which are reflected in HDB’s Annual Reports found on the HDB InfoWEB.

For example, as seen in HDB’s Financial Year 2021/22 (FY2021/22) annual report, HDB recorded a deficit of about $3,85 billion in its Home Ownership Programme segment:

Source: HDB | HDB’s FY2021/22 annual report

More specifically, this $3.85 billion deficit is comprised mainly of the:

  • Gross loss on flat sales completed (i.e. where keys are issued to buyers in the FY)
  • Disbursement of CPF housing grants to eligible resale flat buyers
  • The expected loss for flats that commenced development in the FY.

Also, here’s the Home Ownership deficit from FY2019/20 to FY2021/22:

FY2019/20 FY2020/21 FY2021/22
Home Ownership Deficit

[Mainly from the Gross loss on flat sales completed (i.e. keys issued to buyers), CPF Housing Grants for resale flats and expected loss for flats under development.)*

$2.23 billion $1.95 billion $3.85 billion

*The provision for expected loss is based on the estimated selling prices, CPF Housing Grants for HDB flats, land development costs and building development costs of projects which have commenced or are still under development. The provision for the expected loss will continue to be adjusted over the course of the construction period due to contract variations etc., and the finalized loss will be reported as a gross loss on flat sales completed (when the keys are issued to buyers).

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How HDB Prices BTO Flats and Determines Housing Subsidies

As you would know, not all BTO projects are created equal. Some projects are more desirable and thus more expensive due to location and other individual attributes like floor, layout etc.

When pricing new BTO flats, HDB will determine the market value of the BTO flat by evaluating the prices of the HDB resale flats in the area, which are affected by prevailing market forces and individual attributes.

To level the playing field, HDB will then provide buyers with a considerable subsidy on the assessed market values to keep new flats affordable for prospective homeowners.

Thus, the difference in prices between the comparable resale flats and subsidised flats broadly reflects the market subsidies provided for the new flats after accounting for differences in attributes, which include years left on the lease.

Thus, knowing the amount of subsidies for new flats is vital, as back in 2011, the MND made the decision to de-link the price of new BTO flats from the resale market.

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About Joel Koh
History student turned writer at Seedly. Before you ask, not a teacher. I hope to help people make better financial decisions and not let money control them.
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