Are HDB flats really affordable? - Part 2 #hdb #bto #singapore #publichousing

Key Concepts:

• Resale Flats: HDB flats sold on the open market by existing owners.
• BTO Flats: Build-To-Order flats, new flats sold directly by the HDB.
• Market Value: The price a property would likely fetch in the open market.
• Market Discount/Government Subsidy: Reduction in price applied to BTO flats compared to resale flats.
• Affordability Outcome: The government's focus on ensuring BTO flats are affordable for buyers.
• Housing Grants: Financial assistance provided to eligible home buyers.

Resale Flat Affordability Perception:

The perception of HDB flat unaffordability is often linked to resale flats, particularly the emergence of million-dollar resale flats. While these million-dollar flats constitute a small percentage of the overall resale market, they contribute to the perception of unaffordability. The resale market is driven by willing sellers and willing buyers, making it less controllable by the HDB.

HDB's Limited Control over Resale Prices:

The HDB acknowledges that resale prices influence the market value of BTO flats, which in turn can affect BTO prices. The government has attempted to decouple these prices, but complete decoupling is impossible because both resale and BTO prices reflect the value of the location. Therefore, the prices of HDB resale flats and BTO flats will move in tandem.

BTO Pricing and Market Discount:

While BTO values are linked to resale flat prices, buyers do not pay the full market value due to a market discount or government subsidy, in addition to housing grants for eligible buyers. The government focuses on the affordability outcome for new flats, applying an appropriate market discount to each project. This discount can range from 20% to as much as 35% of the full market value.

Market Value vs. Purchase Price:

The full market value of an HDB flat is represented by resale flat prices. However, BTO buyers do not pay this full open market price due to the applied market discount.

Conclusion:

The affordability of HDB flats is a complex issue influenced by both resale and BTO prices. While resale prices contribute to the perception of unaffordability, the government uses market discounts and subsidies to ensure BTO flats remain affordable for eligible buyers. The prices of resale and BTO flats are linked due to location value, but BTO buyers benefit from significant discounts compared to the open market resale prices.