HDB said that with many BTO projects launched every year in different housing estates, new flat selling prices will not be uniform, and will have to take into account the different attributes and location of the flats on offer.
“This also ensures fairness for the different buyers as these HDB flats can be bought and sold in the resale market after the five-year Minimum Occupation Period (MOP), and the locational and other flat attributes will be reflected in the resale prices then and any benefits will accrue to the flat owner/seller.”
It then applies a “significant subsidy” to the assessed market values to ensure that new flats are affordable for flat buyers.
Besides the varying attributes of new flats, market conditions may also fluctuate between BTO launches, hence the extent of market subsidies applied by HDB will vary across BTO projects in different launches.
Varying the market subsidies protects homebuyers from market fluctuations and ensures that BTO flats remain stable and affordable, HDB said.
“When the resale prices move up, HDB will, in tandem, need to increase market subsidies to keep BTO prices affordable,” it said.
It uses a similar approach for the Prime Location Public Housing (PLH) projects, but PLH flats are priced with additional subsidies, on top of the market subsidies for all BTO flats.
“For parity with other BTO flat owners who are not accorded these additional subsidies and to reduce windfall gains, PLH flat owners will need to pay a fixed percentage of the higher of the resale price or valuation of the flat to HDB, upon sale of their flats, to reduce any excessive windfall gains,” it said.
HDB uses resident household incomes and Mortgage Servicing Ratio (MSR) to determine affordability. MSR is the proportion of monthly income used to service mortgage instalment payments.
“To determine affordability, HDB looks at the resident household incomes, and compares them with the range of flat types and selling prices on offer at every BTO launch,” it said, adding that the MSR is used as a benchmark.
It also said that it considers a range of different household incomes, both above and below the median household income level, to meet different housing needs and budgets.