HDB incurred a record deficit of S$4.367 billion in FY 2021, 86% higher than previous year

HDB announced on Monday that it has incurred a record deficit of S$4.367 billion in the financial year 2021 (ended 31 March 2022). This is 86% higher than the deficit in the previous financial year at S$2.346 billion. This is also the highest-ever deficit recorded since the inception of public housing in Singapore.

88% of deficit incurred was for the Home Ownership segment

S$3.85 billion (88%) of the deficit incurred mainly came from the following components:

  • Expected loss for flats under development: S$2.262 billion
  • Gross loss on the sale of flats: S$659 million
  • Disbursements of CPF housing grants: S$849 million

HDB shared that the expected loss for flats under development was due to more subsidies and housing grants provided for BTO flats, as 66% more projects commenced development in 2021. Other costs include assistance measures for contractors/consultants (eg. co-sharing the increase in construction costs) and managing supply chain disruptions (eg. securing alternative sites to produce some precast components).

HDB building

The press release also noted that more sales were completed last year (i.e. keys issued to buyers) at 13,506 units, translating to a gross loss on the sale of flats at S$659 million. In comparison, the sales of 8,124 units were completed in the previous financial year, translating to a loss of S$356 million.

S$849 million in CPF housing grants were also given out to resale flat and Executive Condominium buyers. Resale flat buyers are eligible for a maximum grant amount of S$160,000, while the maximum grant amount EC buyers can get is S$30,000.

New HDB flats are not priced based on total development costs

HDB highlighted that it determines the market value of new flats based on comparable resale flats nearby, before applying subsidies to ensure they are affordable.

Therefore, new flats are priced below market rates. Tan Meng Dui, CEO of HDB, also reiterated during a background briefing that the new flats are not priced based on the total development costs (which include construction and land costs) of the BTO projects.

The house price to income ratio for new flats in non-mature estates is currently around five or less. This means that the price would be five times the annual income or less. (On the other hand, HDB did not mention the ratio for new flats in mature estates.) The mortgage servicing ratio (MSR) is around 25% or less for most new flat buyers taking HDB loans.

Ramp up in supply of BTO flats

HDB is slated to launch around 9,500 new flats in the November 2022 BTO launch. It added in the press release that it will launch up to 23,000 flats per year in 2022 and 2023, an increase of 35% from the 17,000 flats launched in 2021.

Before the August 2022 BTO launch, HDB has also increased the BTO allocation quota for first-timers applying in non-mature estates, with at least 95% of the 4-room flat supply set aside for them.

What do you think of the record deficit incurred by HDB? Let us know in the comments section below.

If you found this article helpful, 99.co recommends Latest Q3 2022 property stats: Condo and HDB rents up 20.8-20.9% over past 9 months, +7.5-8.6% this quarter and 1,001-sqft Pinnacle@Duxton flat sold for S$1.37m at record S$1,369 psf – most expensive 4-room HDB resale in Singapore.

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