HDB dogged for decades on 'subsidising new flats'

The question on whether new flats offered by the HDB are really subsidised or not has dogged the board for decades now, and has even continued to be the subject of argument between opposition politicians, cyber-critics, and writers to the Straits Times Forum.

Their primary disagreement is that the 'market subsidy' system of the HDB for pricing its new flats doesn’t provide a real subsidy to any of its buyers.

Unlike the usual subsidy, wherein buyers are given a discount on the product cost, HDB seems to work differently. First, the board determines the market price of a new flat by taking into consideration the similar flats’ resale prices. After doing so, it gives buyers a 'discount' based on that market value.

The cost of land is also viewed as the main issue. Mostly, the cost of one flat is composed of the cost of construction and the cost of land. In Singapore, which has land scarcity, the cost of land makes up the major part of the price of the property'.

The accounting system of HDB ensures that the money received from capital gains is returned to the national accounts. The Government holds all the acquired lands. Then it releases plots to the board at market price if the board needs land for its new flats.

Liu Yunhua, an economist from Nanyang Technological University, thinks that the system of the HDB is fair due to its assurance that all citizens – not just those people who buy a flat – receives an equal share of the wealth of the nation.

”The capital gains should go to the Government, because the money that goes to the Government will be shared by the whole country,” says Yunhua.

Professor Kim Kyung-Hwan of Singapore Management University has no doubt that the board offers real subsidies.

However, he added by saying, “It's not the way it is priced; what really matters more is the amount of the subsidy.”