Lawrence Wong fails to give straight answer to WP on land cost tabulation in sale price of new HDB flat

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Minister for National Development, Lawrence Wong, failed to give a straight answer to the parliamentary question of Workers’ Party (WP) asking how is the land cost amount which is included in the sale price of a new HDB flat tabulated.

land costMr Wong in answering WP Member of Parliament Faisal Manap’s question on land cost tabulation in sale price of new HDB flat said:

“The key consideration in the pricing of HDB flats is to keep public housing affordable. That is why new HDB flats are priced substantially below the prices of comparable resale flats. In particular, the average monthly instalment to income ratio for first-timer families buying new flats in non-mature estates is less than a quarter of applicants’ monthly income. This means that homebuyers will require little or no cash outlay.

The selling prices set by HDB for new flats cannot cover their development costs, which include construction and land costs. That is why HDB incurs significant deficits every year in its home ownership programme.

On top of the subsidised selling price, HDB also provides housing grants of up to $80,000 to give more help to lower and middle income families buying their first home.”

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This is not the first time the Government has refused to give a straight answer on how land cost is computed in the sale price of new HDB flat.

In what has been referred to by some as the “most significant debate ever in Parliamentary history” – in 1988, and in responding to a question by Mr Chiam See Tong, the Government asked the veteran politician what is the point of giving the breakdown of land cost.

Mr Chiam asked the then-Minister for National Development:

“…would the Minister be willing to announce or make public the market value of all the land in the housing estates used by the HDB? Now the Minister has come out quite forthrightly, unlike his predecessor, to say that the pricing of HDB flats, in fact, includes the land cost at market value.

This market value is a very volatile concept or a very unsure one because market value can mean really anything, depending on what the HDB would like to peg the market value on. If the HDB could give an indication, then I think the public would know how much their flats really cost. Because successful tenders of construction cost are usually gazetted, so we have information on that. But up to now, the land cost has been a complete mystery. I think the Minister should have this cost of land value because he put up a table which was distributed yesterday, and this table does not really give any details of how the price of each individual flat is arrived at.”

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The then-Minister for National Development S Dhanabalan in responding for the Government, told Mr Chiam that there is no purpose in trying to pursue the point about land cost. He added that HDB has used the market value as a guide to price its flats. And that it was” very obvious and quite conclusive from the evidence I gave yesterday that 98% of the flats are priced below what they are worth on the market.”

Mr Dhanabalan said:

“What is the point of giving a breakdown? The point is, as I said, 98% of the flats are subsidized, in the definition which I have given and which I have stated is the only rational and logical definition. It is very easy to talk about making profits, book subsidy and be irresponsible. I would ask the Member for Potong Pasir who, I think, usually is quite rational and quite reasonable, to go back and think carefully about the method that we have adopted which is not to make the purchaser pay the full cost.

“We have never said that the purchaser has paid the full cost. But the market value is a guide towards which we must finally arive at. Maybe the Member for Potong Pasir thinks that there is a fairer and better way of ensuring that we do a proper allocation of our housing resources for the present generation as well as safeguard future generations’ interest. If after he has studied carefully what I have said and he still wants to bring up new arguments, I am prepared to entertain them when we come to the subhead on the HDB, if there is time.”

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