HDB sells flats based on market price instead of cost because this is the fairest way of pricing new HDB flats. All new HDB flats are sold with a generous market subsidy.
HDB first determines the equivalent market price of a flat by taking into account various factors such as location, finishes of the flat and other attributes.
This price reflects the value of the flat at the point of purchase.
It is what people are willing to pay on the open market for such a flat.
HDB then sells the flat at a significant discount, which is the subsidy given by the Government.
Market-based pricing is fairer to all buyers. They receive similar levels of subsidy regardless of how the market moves or how much flats cost to build.
Mr See states that the Pinnacle@Duxton flats were recently relaunched at an average selling price 'which is $180,000 higher than initial launch prices (in 2004)'.
If HDB were to sell the flats today at 2004 prices, as Mr See suggests, it would essentially be giving today's Pinnacle buyers an additional subsidy of $180,000.
This would not be fair to those who are buying other HDB flats today or, indeed, to taxpayers.
A market-based pricing approach ensures that all groups of buyers at any point in time enjoy similar discounts to the market.
With a market-based approach, HDB is able to recover costs for some projects, while incurring significant losses with others.
Overall, the sale of new flats is heavily subsidised by the Government.
In the last three years, HDB has incurred an average deficit of $530 million a year in its home-ownership programme, as can be seen in HDB's annual reports.
Mr Ignatius Lourdesamy
Acting Deputy Director
(Marketing & Projects)
Housing & Development Board
