HDB’s deficit nearly doubles to $4.367b amid sharp increase in number of BTO projects started

The current house price to income ratio for BTO flats offered in non-mature estates is around five or less, says HDB. ST PHOTO: LIM YAOHUI

SINGAPORE - The Housing Board’s deficit climbed to a record $4.367 billion in the financial year ended March 31, about 86 per cent higher than the $2.346 billion the year before.

The bulk – $3.85 billion – was due to the expected loss for flats being built, disbursement of Central Provident Fund housing grants and a gross loss on the sale of subsidised flats under the home ownership programme, said the HDB on Monday.

The loss incurred under the programme is almost double the $1.95 billion in the previous year, as 66 per cent more Build-To-Order (BTO) projects began development in 2021 and more flats were sold, which translates to more subsidies and grants provided to buyers, the board added.

The HDB held a media briefing last Friday prior to the release of its annual report on Monday, unlike in past years when it simply issued the report. This comes on the back of growing concerns over housing affordability, with home prices increasing in the last two years.

In September, Facebook page The Alternative View was issued a correction direction under the fake news law after implying that the HDB profits from the sale of flats at an Ang Mo Kio BTO project, where a five-room flat cost up to $877,000.

Addressing the matter in Parliament, National Development Minister Desmond Lee said the total loss on the project amounted to about $270 million. Claims that the HDB profits from the development and sale of BTO flats are false, he said.

Since then, the Government has also issued correction directions to former GIC chief economist Yeoh Lam Keong and The Online Citizen website over false and misleading statements about Singapore’s past reserves and losses made by the HDB.

On Monday, Mr Lee said the HDB’s substantial deficit under its home ownership programme shows “in real terms” the Government’s commitment to ensuring public housing remains affordable, accessible and inclusive.

At the briefing, HDB chief executive Tan Meng Dui said the record deficit is largely due to the subsidies applied on new flats, the disbursement of housing grants, more units commencing development and increased construction costs due to the Covid-19 pandemic.

He said BTO flats are not priced based on the total development costs incurred by the HDB, which comprise construction and land cost. Instead, the HDB determines the market value of new flats from comparable resale flats nearby, and applies a significant subsidy to keep them affordable based on household incomes and the pricing of various flat types on offer, he added.

The current house price to income ratio for BTO flats offered in non-mature estates is around five or less, said the HDB, which means the purchase price is five times the annual household income or less. The mortgage servicing ratio (MSR) for most new flat buyers taking HDB loans is around 25 per cent or less, meaning they spend a quarter or less of their monthly income on their mortgage.

The Straits Times has asked the HDB for corresponding figures for BTO flats in mature estates.

Under current rules, the MSR is capped at 30 per cent of a borrower’s gross monthly income.

Of the $3.85 billion deficit incurred under the home ownership segment, about $2.262 billion stems from the expected loss for flats being built due to higher construction costs, which have increased by about 30 per cent since the 2019-2020 financial year. The HDB said it has largely absorbed these costs.

It incurred a gross loss of $659 million for the sale of flats, up from $356 million the year before. In the 2021-2022 financial year, 13,506 flats were completed and handed over to buyers, up from 8,124 units the previous year.

CPF housing grants amounting to $849 million were disbursed to buyers of HDB resale flats and executive condominiums, compared with $791 million the year before.

The HDB also incurred a $392 million deficit for upgrading programmes such as the Home Improvement Programme and Lift Upgrading Programme. Another $352 million was spent on works such as improvement of carparks and reconstruction of drains.

Help for home owners, such as the suspension of late payment charges, amounted to $15 million, while rental waivers for shop owners cost $115 million.

The HDB incurs a deficit every year and receives a grant from the Ministry of Finance to cover its deficit. In the latest financial year, it received a grant of $4.4 billion, up from $2.346 billion the year before. In all, the HDB has received $42.97 billion in grants since its establishment in 1960.

Its deficit has grown every year, except in the 2020-2021 financial year when it dropped to $2.34 billion from $2.66 billion the previous year, as the pandemic hampered construction.

Mr Tan also gave an update on the backlog of BTO projects delayed by the pandemic, saying the proportion of such projects is around 50 per cent now, down from 80 per cent a year ago.

The median waiting time for BTO projects is now between four and 4½ years, slightly down from four to five years at the peak of the pandemic.

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