Speaking in Parliament today (20 Jan), National Development Minister Khaw Boon Wan said that HDB’s net deficit will continue to be high in the next few financial years.
He said this was due to the completion of HDB flats launched in the ramp-up phase in FY2013. He was responding to a question regarding the implications of HDB’s net deficit in FY13/14 and the deficit trend in future years.
Mr Khaw explained that the bulk of the deficit is due to the Home Ownership Programme, which comprises:
losses on the sale and development of HDB flats
disbursement of CPF Housing Grants to eligible buyers
The spike in HDB’s deficit in FY2013 was due to the ramp-up in flat building and upgrading programmes, he said.
The deficit in future years will depend on factors such as housing demand, HDB’s building and upgrading programmes, and developments costs and policy changes, he added.
During the ‘Our Singapore Conversation’ in 2013, Mr Khaw also told the audience that HDB loses “hundreds of millions” of dollars when constructing HDB flats. He said that HDB is losing money for every flat it sells.
He said, “Every year, hundreds of millions of dollars of losses were incurred by the HDB and that’s why MOF has to give the HDB an annual grant, otherwise the HDB will be in the red. It cannot be forever in the red, because there’s no way it can make money. Because every unit that we sell, we lose money. HDB loses money. The accounting for the HDB is deficit accounting. So if you incur a $300-million loss, there is a grant of S$300 million that covers it. That is how we operate the HDB.”
“Let us not perpetuate this talk about HDB is making money out of building houses because if it was so simple, life would be straightforward, but that’s not the case,” he added.
Is the Govt really losing money over HDB flats?
The HDB pays market rate for its land and construction costs. When it prices flats below market rate, it incurs a housing deficit. A recent report indicated that the deficit is now in the region of about $1 billion a year, including other costs such as upgrading.
However, what Mr Khaw did not tell everyone is how much money the Singapore Land Authority (SLA), a statutory board under Ministry of Law, is making. SLA may be selling land to HDB at market rate, causing HDB to lose hundreds of millions of dollars for selling its flats, but SLA is certainly making much more from the land sale to HDB.
Hence, if one were to put SLA and HDB together, overall, the Govt would still be making money. The analogy as aptly put by a netizen goes like this:
http://www.tremeritus.com/2015/01/20/khaw-hdb-will-continue-to-lose-money-next-few-years/
He said this was due to the completion of HDB flats launched in the ramp-up phase in FY2013. He was responding to a question regarding the implications of HDB’s net deficit in FY13/14 and the deficit trend in future years.
Mr Khaw explained that the bulk of the deficit is due to the Home Ownership Programme, which comprises:
losses on the sale and development of HDB flats
disbursement of CPF Housing Grants to eligible buyers
The spike in HDB’s deficit in FY2013 was due to the ramp-up in flat building and upgrading programmes, he said.
The deficit in future years will depend on factors such as housing demand, HDB’s building and upgrading programmes, and developments costs and policy changes, he added.
During the ‘Our Singapore Conversation’ in 2013, Mr Khaw also told the audience that HDB loses “hundreds of millions” of dollars when constructing HDB flats. He said that HDB is losing money for every flat it sells.
He said, “Every year, hundreds of millions of dollars of losses were incurred by the HDB and that’s why MOF has to give the HDB an annual grant, otherwise the HDB will be in the red. It cannot be forever in the red, because there’s no way it can make money. Because every unit that we sell, we lose money. HDB loses money. The accounting for the HDB is deficit accounting. So if you incur a $300-million loss, there is a grant of S$300 million that covers it. That is how we operate the HDB.”
“Let us not perpetuate this talk about HDB is making money out of building houses because if it was so simple, life would be straightforward, but that’s not the case,” he added.
Is the Govt really losing money over HDB flats?
The HDB pays market rate for its land and construction costs. When it prices flats below market rate, it incurs a housing deficit. A recent report indicated that the deficit is now in the region of about $1 billion a year, including other costs such as upgrading.
However, what Mr Khaw did not tell everyone is how much money the Singapore Land Authority (SLA), a statutory board under Ministry of Law, is making. SLA may be selling land to HDB at market rate, causing HDB to lose hundreds of millions of dollars for selling its flats, but SLA is certainly making much more from the land sale to HDB.
Hence, if one were to put SLA and HDB together, overall, the Govt would still be making money. The analogy as aptly put by a netizen goes like this:
http://www.tremeritus.com/2015/01/20/khaw-hdb-will-continue-to-lose-money-next-few-years/
