HDB reports S$2 billion deficit in latest financial year as fewer flats sold

The Housing and Development Board (HDB) saw its annual deficit rise to nearly S$2 billion in the 2018/19 financial year from S$1.7 billion the previous year, with the number of new flats sold falling significantly.

According to its annual report released on Wednesday (Oct 23), HDB recorded a deficit of S$2.4 billion from its housing programmes, which was offset by a S$462 million surplus from “other activities” – which include rental and other commercial businesses – resulting in a S$1.99 billion deficit.
READ: Commentary: A look at HDB flat affordability after recent housing policy moves

The Housing Board incurs a deficit every year, which is fully covered by a grant from the Ministry of Finance.

The bulk of the deficit comes from its home ownership segment, which covers the development and sale of public housing flats.

The segment saw a S$1.4 billion deficit in the latest financial year, same as the previous year. This comprises loss on the sale of flats, disbursement of CPF housing grants and expected loss for flats that are currently under development.

A total of 16,608 new flats were sold in FY2018/19, a 38 per cent decline from the 26,857 sold the previous year.

HDB also disbursed S$532 million of CPF housing grants to eligible buyers of resale flats and executive condominiums, up from S$466 million the year before.
READ: More buyers to consider buying resale flats with new HDB grants

A total of 15,300 new flats across 18 projects were launched in FY2018/19, including 1,620 flats in the new Tengah town. About 6,400 flats were also offered for sale in the two Sale of Balance Flats exercises and 1,300 flats under two Re-Offer of Balance Flats exercises.

Meanwhile, the number of resale flats sold rose 7 per cent, with 23,476 flats sold in FY2018/19 compared to 22,005 in the previous year.

Analysts told CNA that these numbers were “not surprising”.

ERA Realty’s head of research and consultancy Nicholas Mak said that HDB’s deficit “comes usually from selling the flat below market price”.

“One interpretation of (the deficit) is to say that they have given larger discounts to the BTO (Build-To-Order) flats – the new flats that they sold,” he said.

In September, HDB announced that they would raise the household income cap for those looking to buy a BTO flat. There will also be enhanced grants for first-time home buyers.

Dr Steven Choo, chairman of real estate consultancy VestAsia Group and Adjunct Associate Professor at the National University of Singapore’s School of Design and Environment, said that it is common for numbers to “fluctuate every quarter” in the development industry, and HDB was “no exception”.

Recent delays in BTO launches could also have contributed to the higher deficit this financial year, he added.

The August sales exercise had been delayed to September to allow home buyers to benefit from the raised income ceiling and enhanced grants.

“Because of the social mission of HDB, it is recognised that a deficit of this nature will occur. It is a recurring thing, so that’s not surprising,” said Dr Choo.

Source: CNA – 23 Oct 2019

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