Re: How HDB Flats are priced - Is this correct?
- From: "Kolongson" <kolongson>
- Date: Thu, 4 May 2006 01:52:26 +0800
"Joe Bloggs" <eslim@xxxxxxxxxxxxxx> wrote in message
Just read this from this message group:
It has been rightly described that our private home prices are
"obscene" while HDB flat prices are "sky-high". Indeed, the
exorbitant cost for something as basic as a roof over our heads is a
major factor behind our high cost of living.
Some 90% of Singaporeans (ranging from managers to low-salaried
workers) are thus resigned to living in HDB flats. Hence, they have
every right to know whether HDB flats are priced with a true cash
subsidy or a cleverly-disguised profit.
Over the past five years, various writers in newspaper forums have
rightly questioned why a new HDB 5-rm flat is priced upwards of
$200,000 when its construction cost is around $50,000 (as revealed from
actual HDB construction contracts).
As HDB flats are now built higher and closer together i.e. many
units occupying a tiny plot of land, it is a lame argument for the HDB
to say that the hugh difference of $150,000 is accounted for by land
cost and other related costs.
The HDB's standard dodgy reply has been that a so-called "market
subsidy" is provided for new HDB flats to make them "affordable" i.e.
they are priced below their equivalent market value.
This is how the "market subsidy" pricing approach works. The HDB
will first look at the prevailing market value of a 5-rm resale flat
(say, $260,000) and then "pluck from the air" a slightly lower figure
(say,$200,000) as the selling price of the 5-rm new flat --- never mind
even if its total breakeven cost is probably around $120,000!
The HDB can then boast that the new flat buyer is getting a
$60,000 "market subsidy" --- when there is actually no "true cash
subsidy" at all.
Instead, from the example given, the HDB is raking in a handsome profit
of $80,000 for each new flat sold.
Indeed, this ingenious "market subsidy" approach had resulted in
new flat prices and resale flat prices chasing each other in an upward
spiral --- to the detriment of all buyers of both new and resale flats.
During this election, our educated thinking voters were not
amused (much less impressed) by the never-ending nagging and nitpicking
over an administrative form-filling issue.
Compared to this childish hullabaloo, how HDB flats are priced is
certainly a larger national issue related to First-World transparent
Mr Mah Bow Tan should thus seize this golden opportunity to
demonstrate to our citizen-voters his ministerial mettle and justify
his handsome remuneration in providing simple honest answers to these
Since HDB flats are supposed to be low-cost mass public housing, why
is the HDB not helping our citizens in home ownership by passing on to
them the cost-savings from economies of scale in massive HDB
through pricing new flats on a cost-recovery breakeven no-profit basis?
Are HDB new flats priced with a "true cash subsidy"?If the answer is No, say so directly and openly.
If the answer is Yes, convince the people with detailed numbers
and indicate the amount of the true cash subsidy.
Can anyone verify about the "true cash subsidy"?
Inspite of failing to get an answer, we can know by how much did HDB charge
monthly for an open air car park? Take it as $65/- The latest size of a
4-room HDB flats has the size of about 13 parking car lots. For every month
and up to 99 years, the leasing cost of this small land area should be $65/-
x 12 x 13 x 99 = $1,003,860/- Now a 20 storey high block is going to stack
up on this area which make the cost for each unit of flat at $1,003,860/-
divided by 20 or $50,193/- So after sharing it out, land cost per unit flat
is only $50,193/- Lets reasonably assume a cost of $80,000/- for material,
services and administration charges are need for one unit. At most a 4-room
flat would cost only $50,193/- plus $80,000/- or $130,193/- Yet HDB is
selling you at a "subsidized" rate of more than $200,000/- ?? Where does all
the money gone to?
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