THIS question has dogged the Housing Board for decades, and has continued to be a source of contention among opposition politicians, Straits Times Forum writers and cyber-critics.
Their main argument is that the HDB’s ‘market subsidy’ system for pricing new flats does not give buyers a real subsidy.
Unlike a typical subsidy in which a discount is given off the cost of a product, the board works the other way around. First, the HDB determines the new flat’s market price by taking into account resale prices of similar flats. Then it gives a ‘discount’ based on this market value.
The main issue is the cost of land. The cost of a flat is mostly made up of the cost of land and construction. In land-scarce Singapore, land cost makes up a major part of a property’s price.
So the questions that arise are: If prime land is acquired cheaply by the state, should prices of flats built on it reflect the cost of acquiring the land or the market value of the land? Who should reap the benefits of capital appreciation when land that was acquired cheaply 10 years ago is now highly coveted? Continue reading
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