The Ministry of National Development and the Housing Development Board (HDB) responded to media inquiries on December 7, disclosing for the first time the total development cost of pre-purchased HDB flats and explaining that the sale prices of new HDB flats are based on affordability and are not linked to development costs.

HDB revealed that the total development cost of pre-purchased HDB flats to be delivered in fiscal year 2021/2022 amounted to 5.346 billion yuan, with various costs accounting for the following.

Land cost 3,167 million yuan (59%); construction cost 2,077 million yuan; and other costs of 102 million yuan, such as the HDB to buy back the flats from the owners for special reasons.

HDB delivered 13,506 pre-purchased HDB flats in the last fiscal year, which means that the average development cost per flat was $396,000.

HDB's procedure for pricing new HDB flats is to

First refer to the selling prices of similar resale HDB flats in the vicinity.

Consider the characteristics of individual units and current market conditions.

Giving a substantial allowance to ensure that the selling price of new HDB flats is affordable to buyers.

According to HDB's annual report, the average selling price of each unit delivered in the last fiscal year was about $365,700, and after deducting the CPF housing subsidy provided by HDB, the average unit selling price was further reduced to about $347,000.

HDB also pointed out that among the buyers who received the keys in the first half of this year, 90% of the buyers of new HDB flats in non-established areas only needed to use 25% of their monthly salary or less to repay their mortgage.

This percentage is 80% of the buyers of HDB flats in mature areas.

In other words, these buyers only need to use a small amount of cash or can pay off their mortgage entirely through their monthly CPF contributions.

What are the factors that make a HDB flat labeled as "unaffordable"?

When people talk about the affordability of government HDB flats, they generally consider the price of pre-purchase HDB flats and resale HDB flats as one and the same, and if we just look at the price, the price of pre-purchase HDB flats is definitely higher than the price of new HDB flats 20 years ago.

Resale HDB prices are also a factor in HDB's pricing for pre-purchase HDB flats.

One of the main reasons why resale HDB flats prices are on the rise so far is that sellers want to make a profit on the sale of HDB flats, and as long as buyers find the price reasonable and can afford it, they can close the deal.

On the other hand, supply and demand has always been the iron law that determines the price. Among the three rounds of pre-buy HDB sales this year, the lowest application rate was still 3.2 in May, which means that there were more than 3 applicants for each HDB flat.

The oversupply may be due to the fact that the times have progressed and people want to have a more spacious and ideal living space.

After some careful arrangement, the owner of this HDB flat will be able to enjoy the unparalleled sea view while working at home.

For those who are old enough to have spent their childhood in HDB flats, they may remember that in the 70s and 80s, it was quite common to have 4 or 5 people living in a 3 or 4 bedroom HDB flat.

But that was decades ago, and today, the average household size is 3.15 people, and lifestyle changes, such as the prevalence of home office, have increased the demand for pre-purchased HDB flats.

All these factors have pushed up the prices of HDB flats, so HDB has to price new HDB flats at affordable levels, unlike private developers who aim to make a profit.