HDB, Housing Development Board

Just a few days ago, Minister for National Development Khaw Boon Wan highlighted calls for the Housing and Development Board (HDB) to return to basics and the original mission of providing affordable housing for Singaporeans. This prompted him to define what “returning to basics” means. He mentioned that the HDB’s primary mission (to provide affordable public housing) remains unchanged, and a potential target could be an affordability ratio of 4 in non-mature estates. In other words, BTO prices of such flats would be four times median annual income, compared to the current nine or higher.

But how does that compare to the yesteryears? Some comparisons have used graduates in the Seventies, who were earning about $1,000 a month, when new HDB flats cost $17,000, $20,000 and $35,000 for three, four and five-room flats respectively. That placed a five-room flat nicely under an affordability ratio of three.

Likewise in the Nineties, fresh graduates were earning $2,000 a month, with a new five-room going for $70,000, so the affordability ratio was still under three.

In contrast, a fresh graduate earns $2,678 a month on average, which is a real stretch to pay for current new HDBs that cost $300,000 or $380,000.

However, one must remember that a graduate in the Seventies was quite a rare animal, and $1,000 a month was considered a handsome some in those days. Even in the Nineties, graduates were quite uncommon, so a $2,000 starting pay was considered quite high.

In these highly-educated days, graduates are the norm, and the $2,678 monthly salary is reflective of a much more average qualification than the Seventies or Nineties. In light of this, we feel that an affordability ratio of four, which roughly translates to about $130,000, is a good target.

However, we also suspect that this target number will be for a four or even three-room HDB flat, and not the five room benchmark of the past. Of course, we could be wrong, and if Minister Khaw guns for the $130,000 five room flat, we would be highly impress with his resolve. That would undoubtedly have a positive effect on the resulting affordability of the older resale flats. We look forward to seeing innovative and fresh ideas coming from MND to address this issue.

It remains to be seen what Minister Khaw has up his sleeve in order to make this goal a reality, however. Stay tuned for our follow-up article, where we explore the many options he may take to bring affordability back to the HDB market.



  One Response to “Minister Khaw Tackles Affordability – Back to Basics?”


    From GeBiz awarded HDB tenders, the average cost to build a HDB unit in a BTO is about $130K. So HDB can actually sell at close to this amount, maybe add another $5K to $10K for admin charges.

    As for land costs, it is misleading as unlike condos, HDB doesn’t sell the strata-title rights to HDB buyers. i.e. ownership of the land still vests in HDB. Which is why for HDB “owners” who are still scratching their heads why they don’t have title deeds even after paying off their HDB mortgages — you can stop scratching, there is no such thing as title deed for HDB flats.

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