BTO Flat Pricing Takes Into Account ‘Affordability’, Not Simply Profit-Driven: HDB

BTO Flat Pricing Considers ‘Affordability’, HDB Emphasises Importance Of Accessible Public Housing

As inflation takes a toll on our spending power, some people have raised concerns over the affordability of new Build-To-Order (BTO) flats.

In response to such concerns, the Housing & Development Board (HDB) issued a statement on Wednesday (7 Dec) saying that the pricing of new BTO flats takes “affordability” into account.

Source: Desmond Lee on Facebook

This is apparently in contrast to the pricing structure in the private sector, which is driven by profit.

HDB says BTO flat pricing is separate & independent of project costs

Citing an HDB press release, Channel NewsAsia (CNA) reported that keeping public housing affordable is a “key national priority” for the housing board.

As such, they price new flats with “affordability in mind”, unlike in the private sector, where prices are profit-driven.

Source: Desmond Lee on Facebook

HDB also said that they do not “apply a profit margin on costs” and that their approach to flat pricing is “totally separate and independent” of the costs incurred when developing BTO projects.

Illustrating this point, HDB pointed out that they increased subsidies to keep flat prices stable amid a period where property prices and construction costs were rising, reports The Straits Times (ST).

Market value determined by price of comparable resale flat in the vicinity

HDB also went to great lengths to explain the process they follow when pricing BTO flats.

According to the housing board, they first determine the market value of the flats by accounting for comparable resale flats nearby.

The market value is determined by prevailing market conditions, as well as the flats’ attributes. Some of these include:

• Location
• Floor height
• Tenure
• Nearby amenities

Naturally, BTO flat prices across different projects will vary.

After establishing the market value, HDB then applies a “significant subsidy” to ensure that the flats are affordable.

Similar to the characteristics of BTO flats, the grants available also vary across BTO projects and launches. This is designed to shelter homebuyers from market fluctuations and ensure BTO flat prices are stable and affordable.

Increase in BTO selling price lower than rise in household income

Though BTO flat prices have risen over the past decade, HDB said that the increase is still below the growth in household income over the same period.

From 2012 to 2021, average selling prices (per square foot) of  BTO flats in mature and non-mature estates increased by 22% and 16% respectively.

Within the same period, the median resident employed household income grew by 26%.

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Featured image adapted from Housing & Development Board on Facebook.