With the slowdown of the coronary disease epidemic, the launch of more pre-purchase HDB projects, and the increase of home purchase allowances, the HDB's net deficit for the last fiscal year jumped 86% to $4.367 billion, a record high. The vast majority of the deficit stems from the Home Ownership Scheme.
The HDB said in a statement that the deficit stems from three main sources, one of which is the expected deficit in the construction of new HDB flats, with a net increase of $2.262 billion.
This is due to the fact that 66% more pre-purchase HDB projects were launched last year than the year before. In order to keep the price of new HDB flats below the market price, the authorities increased the allowance for the sale price of new HDB flats, as well as the CPF housing allowance.
Other factors that contributed to the expected losses of new HDB flats include the financial assistance provided by HDB to contractors during the epidemic, such as sharing the increased costs due to construction delays, and the measures taken by the authorities to cope with disruptions in the supply of building materials, such as the use of alternative sites for the production of prefabricated components.
The other two areas that contributed to the deficit in the Home Ownership Scheme were the actual deficit in the delivery of new HDB flats ($659 million) and the CPF Home Purchase Allowance ($849 million) granted to buyers of resale HDB flats and Executive Condominiums (EC).
A total of 13,506 new HDB units were delivered last fiscal year, up from 8,124 in the previous fiscal year.
In response to concerns about the affordability of the HDB flats, HDB reiterated that the pricing of the new HDB flats is not intended to recover development costs. In other words, the pricing of the new HDB flats is not linked to land prices, and even if land prices rise, the new HDB flats will not be more expensive.
Speaking at a media briefing on the annual report, HDB Secretary Michael Chan said that new HDB flats are highly subsidized and priced according to affordability, which is related to household income and the price of various types of housing.
In addition, the authorities provide a home purchase allowance for eligible first-time buyers, and the allowance is progressive to ensure that those most in need receive the most assistance.
As such, new HDB flats are not priced according to the total development cost of the pre-purchased HDB project, i.e. the construction and land costs," said Chan Ming Rui. Overall, the amount HDB collects from the sale of HDB flats each fiscal year is less than the total development cost paid."
Because of this, even though construction costs have gone up by about 30% since FY2019, most of these costs are borne by the HDB.
The authorities have also ensured that HDB pricing is affordable through the Home Ownership Scheme, increased subsidies on the sale price of new HDB flats and the granting of CPF home purchase allowances.
The HDB statement also quoted National Development Minister Lee Chee Siong as saying that the government is committed to ensuring that people can afford and buy public housing, which is an important national priority and the foundation on which Singaporeans build their families, raise their children and build strong communities.
Lee Chee Seng said, "This is exactly why we continue to build and sell new HDB flats at below-market prices, increasing the market allowance to keep pre-purchase HDB prices relatively stable during this period, as well as providing home purchase allowances to eligible buyers of new and existing HDB flats."
HDB has previously explained on several occasions how the new HDB flats will be priced.
The authorities will first determine the market price of the new HDB flats based on the selling prices of similar resale HDB flats in the vicinity, as well as the characteristics of individual flats and current market conditions, and on this basis give a substantial allowance to keep the selling price of the new HDB flats below the market price.