According to HDB, its flat pricing strategy is "completely autonomous and independent" expenditures of BTO projects - Tembusu Grand Condo at Jalan Tembusu By City Development Limited (Hot Launch 2022)

Tembusu Grand Jalan Tembusu

Build-to-Order (BTO) Flats are priced keeping affordability in mind, utilizing methods that are “totally distinct and separate” from the development cost as per a press statement from the Housing Development Board (HDB).

Tembusu Grand Jalan Tembusu property is ideally located in the most attractive setting in Singapore due to the spectacular beach views.

The announcement, made together along with Ministry of National Development (MND) It explains the fact that HDB’s pricing model differs from private developers. “HDB’s flat pricing approach based on affordability is distinct from private developers the cost-based pricing method for residential developments that are private, that considers provision for a profit margin” the statement states. HDB declares that it will not make a profit margin on the costs of BTO projects.

HDB additionally reveals that it has development costs due to its home ownership program which is in contrast to profit-making private developers. “This is due to our distinct pricing principles, since HDB price flats in order to guarantee affordability , while private developers set their prices for profits,” it reiterates.

According to HDB the statement was released in response to questions from media about the way BTO flat price is determined, as well as development costs which are incurred by HDB. Nicholas Mak, head of research and consulting for ERA Realty Network, also considers the statement to be an explanation of HDB’s policy to the general public, given the dramatic rise in HDB flat rates for resales. From 3Q2020 until 3Q2022 in the period, the HDB Resale Price Index was up 25.5%. “The last time HDB prices for resales grew in the same manner is when the property boom in 2010 and 2011” he says.

Pricing is based on affordability of housing
To assess affordability of housing, HDB takes into consideration the household income of residents and compares them to the variety of flats and selling prices offered at each BTO launch with benchmarks, such as MSR, or mortgage servicing ratio (MSR).

It reveals that in the 1H2022 period 90% of buyers who took possession of keys to their new apartments on non-mature properties had an MSR of% or less, which means they utilized 25% or less% or less income per month to cover their HDB instalment loan payments The rest of the loan was serviced through the monthly CPF contributions. For flat buyers who resided in mature estates, over eighty% have an MSR that is 25% or less.

The ERA’s Mak points out the fact that it is the general rule of thumb that states you should not have greater than 30% from an individual’s monthly income devoted to the mortgage. “In this way, HDB BTO flats are thought to be affordable to most homebuyers,” he remarks.

Recognizing that every BTO project is unique and has particular characteristics and geographical elements, when the pricing of the new BTO flats HDB states that it will first determines the flat’s value through comparisons with similar resales and taking into consideration the unique characteristics for the apartments.

Subsidies are also applied to estimated market value to help make sure that the project is affordable, with subsidies differing across projects based on the market conditions. When prices for releases rise, HDB will correspondingly increase market subsidies, which are included in the selling price in order to keep BTO costs reasonable.

With these mechanisms in mind, HDB says its flat pricing model is “totally independent and distinct” in relation to the building cost of BTO projects. “By increasing the amount of subsidy that is applied in an increasing property market HDB is able to keep BTO flat pricing somewhat steady. This was the case during the last two years when construction costs have increased by nearly 30%,” it says.

According to HDB the according to HDB, average BTO price on a per-psf basis have been up by 22% for mature estates in the past 10 years. For non-mature estatesthe average prices per square foot for BTOs have increased by 16%. Comparatively, the average household income for a household with a resident was up to 26% between 2012 and 2021.

“On in addition to the subsidy used, HDB provides housing grants to assist targeted populations attain their dream of owning a home and the amount of housing grants has been increasing several times in the same periodof time,” HDB adds.

Costs of development
In light of the huge subsidies given for BTO project, project’ development costs, including land and construction costs are not fully covered by the sale prices, according to HDB.

For FY2021/2022, HDB registered a record deficit of $4.367 billion and $3.85 billion attributed to the home ownership program. This is mainly due to the net loss on flat sales that are completed (where keys are given to buyers at the end of the year of financials) and the disbursement of CPF housing grants to qualified buyers of flats that are resold and the expected loss on flats which were built during the fiscal year.

Particularly, HDB’s expense of flat sales made totaled $5.346 billion. This includes the majority of $3.167 billion for land development costs , and $2.077 billion for development costs. The remainder of $102 million is attributed to the cost of buying flats from flat owners who have sold their properties.

Additionally, HDB highlights that land utilized for housing for the public has less expensive prices than the land that is used as private dwellings in the exact area. HDB is the one to pay the fair market value of the land utilized for BTO projects. The fair market value is determined on an individual basis by the chief valuer.