By Getty Goh (guest contributor)

In Singapore’s recent General Elections in May 2011, various issues on public housing were raised (i.e. the long waiting time as well as the high prices). As the topic on public housing is something very close to many Singaporeans’ hearts, I thought it would be relevant to write an article about it. Specifically, on whether new Housing and Development Board (HDB) flats can be sold at lower prices.

Before I write further, I would like to highlight that, unlike the private property market, HDB does not release historical prices of new flats; the HDB website only releases information on the resale flat market. As such, there is no historical data to draw any direct conclusion from and much of my views are substantiated by circumstantial and anecdotal evidence extracted from press releases, annual reports, etc.

I would also like to emphasize that this article is not intended to criticise the housing policies we currently have in place. Singapore has one of the best public housing systems in the world and the HDB has helped many Singaporeans own their own home. The intent of this article is really to discuss the possibility of having lower HDB prices and the impact (if any) it will have on the property market. To start this article, let us first tackle the question…

Can increasing flat supply lower new flat prices?

In the recent months, the new Minister of National Development, Mr Khaw Boon Wan, has announced a series of new HDB launches to boost available supply of new flats in the market. Based on established economic principles, we would intuitively expect flat prices to drop when supply goes up. Conversely, we would expect the reverse to happen and prices to increase when supply is limited. However, if we were to look at how the Singapore private property market has done, we can tell that increasing supply does not necessarily lead to a decrease in price.

Since 2008, numerous analysts have raised the possibility of a housing crash due to an impending oversupply of private properties over the next few years. Based on URA figures on the available housing stock, the number increased from 236,903 in 2008Q1 to 260,108 in 2011Q1. This translates to an increase of 9.8% within 3 years. On the other hand, property prices saw a rapid recovery after the Global Financial Crisis and the URA PPPI has been on the rise since 2009Q2. Evidently, the property market did not adversely view the increase in supply and there was no damper on housing prices (see Figure 1). As a result of strong demand and high property prices, the URA PPPI even broke the previous peak of 181.4 set in 1996Q2.

Figure 1: URA PPPI and Private Property Supply Volume (2008Q1 to 2011Q1)

Source: URA Realis

This comparison suggests that property prices are influenced by myriad factors and supply is just one aspect to consider. Ultimately, increasing property supply will not automatically translate to lower property prices as prices can still remain high (or even increase) if developers do not feel the need to lower their launch prices and/or banks are prepared to accept high property valuation. By extension, launch prices of new flats are determined by HDB. As a result, increasing flat supply will almost have no impact if launch prices of new flats remain unchanged. This brings us to the next question…

How are HDB flats priced?

At present, HDB does not reveal how it works out the launch prices of new flats. However, if we were to look at some anecdotal examples from previous launches, one would inevitably wonder if there is scope for new HDB flats to be priced even lower.

When Pinnacle@Duxton was first launched in 2004, prices of 4-room flats started at $289,200 while 5-room flats were priced at up to $439,400. However, when the development was re-launched in 2008, the prices of 5-room flats were between $545,000 and $645,800. With a 24% to 47% price increase, one cannot help but to question HDB’s pricing strategy and whether the significant price increase was a true reflection of the increase in material and labour cost or whether it was a veiled attempt by HDB to build a financial surplus in a booming property market.

Based on figures extracted from the HDB annual reports, it is interesting to note that 2006/2007, 2007/2008 and 2009/2010 saw positive surpluses being generated (see Figure 2).

Figure 2: Annual Surpluses and Deficits extracted from HDB Annual Reports from 2005/2006 to 2009/2010

From these figures, does this mean that HDB is actually making profits from the sale of each new flat? And if HDB is making profits, wouldn’t it mean that new flats could be made affordable if the profit margin was lessened?

While surplus generated by HDB is not a bad thing as it could eventually be used to defray costs during the market downturns, I have always thought that HDB, being a statutory board whose main role was to provide affordable public housing,

was a cost centre instead of a profit generator. After all, the purpose of providing the housing grants of between $30,000 and $40,000 is intended to making housing more affordable for Singaporeans. Thus, could the fact that HDB has net surpluses imply that more could be done to make new flats more affordable?

That said, I do not think prices of new flats should be lowered for everyone who is eligible to buy a flat directly from HDB. Instead, any surpluses generated by HDB could be used to help first time home owners by giving them larger subsidies. While Singapore’s economy has evolved, the need for housing, especially for first time home buyers, remains unchanged. For many young Singaporeans, getting married, financing a home and building a family can be very financially taxing. Hence, giving first time flat buyers more subsidies would significantly help them out.


From this article, many questions, such as whether HDB should be profitable and whether more can be done to make new flats cheaper, have been raised. I am not the best person to answer them as I am not privy to some of the considerations that HDB has. Nonetheless, I would not be surprised if HDB already knows the various problems and is working on a solution. Given our government’s track record and effectiveness, I am confident that the HDB will not have any problem lowering the launch prices of new flats. What remains now is whether they will see it through.

By guest contributor Getty Goh, Director of Ascendant Assets, a real estate research and investment consultancy firm. Getty has a MSc (Real Estate) and BSc (Building) from the National University of Singapore.

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