The URA's annual report for fiscal year 2021/2022, released on October 31, showed that the Home Ownership Scheme deficit reached $3.85 billion as of the end of March this year, nearly twice as much as in the previous fiscal year.
The Housing Authority issued a statement explaining that this deficit is mainly caused by three segments, one of which is the estimated loss of housing units still under development, accounting for $2.262 billion.
This is due to a 66% increase in the number of pre-purchase level purchase projects that began development last year compared to the previous year, as well as an increase in subsidies provided by the government and home purchase subsidies offered to homebuyers.
Faced with the impact of the epidemic on the construction industry, the URA provided various financial assistance to contractors, such as sharing the cost of increased equipment rental due to project delays.
The authorities also took measures to cope with the disruption in the supply of construction materials due to the global border restrictions, which pushed up the estimated losses from the development of HDB flats.
Two other factors contributing to the deficit on home ownership were the gross loss from the completion of the sales process of flats ($659 million) and the CPF purchase allowance paid to buyers of resale flats and executive condominiums (EC) ($849 million).
Completion of the condominium housing sales process means that the authorities hand over the keys to the purchasers. In the last fiscal year, 13,506 units were sold, up from 8,124 units in the previous fiscal year.
Since FY 2019, HDB's construction costs for new projects have increased by about 30 percent, with most of those costs borne by the Housing Development Authority. Even with the cost increase, new units are still priced based on affordability, not development costs.
On October 31, the HDB issued a statement in conjunction with its latest annual report, saying that in light of the widening deficit over the past two years, the HDB has invested more subsidies in the housing program and also provided CPF subsidies to homebuyers to keep new apartments at affordable prices.
With the recent heated debate over housing prices, the government has again responded to concerns about whether HDB flats remain affordable by making it clear that pre-purchase HDB flats are not priced to recover the cost of development. This development cost includes the cost of construction and the cost of land.
In other words, the pricing of new flats is not pegged to the purchase price of the land. Even if the land price rises, the pricing of the buildings will not increase accordingly.
At the media briefing, Housing Authority Secretary General Chan Ming-lai pointed out that the new flats are highly subsidized and priced according to affordability, that is, taking into account the function of household income and the price of various types of housing. The Housing Authority is also providing housing subsidies to eligible first-time home buyers and more assistance to those most in need.
Therefore, new HDB flats are not priced according to the total development cost of the pre-purchased HDB flats, i.e. the construction and land costs. In general, the Housing and Development Board receives less than the total development cost from HDB sales in each fiscal year.
When pricing new units, the authority first considers the prices of similar resale units in the vicinity, as well as the characteristics of individual units and current market conditions, to determine their market price, and then puts a significant subsidy on top of that to ensure that buyers can afford them.
Two additional 99-year-old sites in the Toronto area have been tendered by developers for an estimated 1,005 additional residential units.
On Oct. 31, the URA Urban Redevelopment Authority (URA) launched two sites in the Lundo area for developers to bid on for the government's land sale program later this year.
The site in Lentor Gardens is on the active selection list. It covers an area of approximately 235,371 square feet and has a gross floor area of approximately 494,290 square feet. It is capable of building 530 residential units.
Another smaller lot near Lentor Gardens is also deeded in '99, and it is on the waiting list for developer application applications. It has an area of approximately 158,264 square feet, with a total floor area of approximately 443,139 square feet, and can be developed with 475 residential units.
Bidding for the Rondout Gardens site will close at 12:00 noon on April 4, 2023.
