I REFER to the letter, "Since when did resale prices decide cost of HDB flat?" (BT, Nov 30) by Lu Keehong.

The prices of new HDB flats are based on the market prices of resale HDB flats, and not their costs of construction. In order to provide affordable housing to Singaporean families, new HDB flats are priced below their equivalent market values. In this way, new flat buyers can enjoy a substantial subsidy. This point has been explained in Parliament and reported in the media on many occasions.

As resale prices move up, so do new flat prices. Similarly, when resale prices move down, as happened during the property market downturn in recent years, the prices of new HDB flats were also reduced significantly.

By selling new flats with a market subsidy, HDB has been unable to recover the development cost of new flats. HDB has incurred an average deficit of $457 million a year in its home ownership programme in the last five years. These figures are reported in HDB's audited financial statements, which are available to the public.

HDB periodically reviews its building programme, and makes adjustments to respond to and anticipate changing market conditions. With the increased demand for new HDB flats, HDB is gradually stepping up its building programme to ensure a steady flow of public housing supply to meet the needs of present and future generations of Singaporean families.

Kee Lay Cheng (Ms)
Deputy Director (Marketing & Projects)
For Director (Estate Administration & Property)
Housing & Development Board

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