In FY2021, HDB posts a record deficit of S$4.4 billion

Nov 01, 2022

The net deficit before government grant of the Housing and Development Board (HDB) nearly doubled to a record high of S$4.4 billion in its fiscal year 2021, owing to a shortfall in its public housing programme.

According to its annual report, which was released on Monday (Oct 31), the deficit from its home ownership programme alone amounted to S$3.9 billion, which included the expected loss for flats currently being built, gross loss on flat sales, and Central Provident Fund (CPF) housing grants disbursed.

In the previous fiscal year, the deficit incurred as a result of the home ownership programme was approximately S$2 billion.

The rising deficit was attributed to an increase in development projects, as well as the accompanying subsidies and housing grants for these projects, as well as measures to relieve contractors' financial pressures and address supply chain disruptions in the construction industry during the pandemic. This amounted to S$2.3 billion of the S$3.9 billion deficit in home ownership.

HDB launched 17,322 new flats in four batches in FY2021, and it plans to sell another 23,000 new flats in 2022 and 2023.

HDB said in a press release that more CPF housing grants were distributed to eligible buyers of resale flats and executive condominiums, up about 7.3% to S$849 million from S$791 million in FY2020.

Flat sales increased by 66% in the fiscal year under review, reaching 13,506 units from 8,124 units the previous year. This resulted in a larger gross loss of S$659 million in FY2021, compared to SS$356 million the previous year.

Desmond Lee, Minister for National Development, stated that the "significant deficit" in HDB's home ownership programme demonstrates the company's commitment to keeping public housing "affordable, accessible, and inclusive" for Singaporeans.

"That is why we continue to build and sell new HDB flats at below-market prices, increasing market subsidies over this period to keep BTO flat prices relatively stable, and also provide housing grants to eligible buyers of both new and resale flats," he said.

According to the statement, HDB determines the market value of new flats by comparing them to comparable resale flats nearby, "and applies a significant subsidy to ensure affordability based on household incomes and prices of various types of flats offered by HDB."

According to HDB, the current house price to income ratio for new flats offered in non-mature estates is less than five times, and the mortgage servicing ratio for most new flat buyers taking HDB loans is less than 25%.

According to HDB, the median price of BTO flats launched in non-mature estates in the first three quarters of the year was S$228,000 for three-room flats, S$347,000 for four-room flats, and S$473,000 for five-room flats.

In its most recent BTO exercise, which began in August, HDB offered nearly 5,000 new flats, roughly half of which will be built in mature estates such as Ang Mo Kio, Bukit Merah, and Tampines, and the rest in non-mature towns such as Choa Chu Kang, Jurong East, and Woodlands.

Prices for new five-room flats in Ang Mo Kio begin at S$690,000 after grants, while such flats in Tampines begin at S$490,000 after grants. After grants, a five-room apartment in Choa Chu Kang starts at S$345,000.

In FY2021, HDB provided S$15 million in financial assistance to homeowners who were behind on their mortgage and upgrading costs. It also waived S$115 million in rent for 8,500 qualifying tenants in HDB shops and social-communal facilities.

HDB stated that increased subsidies and housing grants, combined with rising construction costs, which have increased by 30% since FY2019, have widened HDB's deficit over the last two years.

"As a result, most first-time buyers use less than a quarter of their monthly income to service their housing loans, and nearly 90% of first-timer families service their HDB loans using CPF with little or no cash payments," it said.

On the estate improvement front, 53,792 units were subjected to the Home Improvement Programme, which addresses maintenance issues in ageing flats, and six housing projects were subjected to the Neighbourhood Renewal Programme, which carries out precinct and block-level improvement works.

Under the Lift Upgrading Programme, work was also completed across three blocks to provide direct lift access to approximately 140 households, with work on another six blocks currently underway.

Residential ancillary functions, such as car park management, also posted a larger deficit of S$352 million in FY2021/2022, compared to S$307 million the previous fiscal year.

According to HDB, the upgrade works resulted in a S$392 million deficit, up more than 60% from the S$242 million deficit in FY2020.