HDB EXECUTIVE FLATS IN NORTH-EAST ZONE (Selling price)

Mr Low Thia Khiang asked the Minister for National Development (a) why is the selling price of executive flats in the North-East Zone for the first quarter of 1998, as announced by the Housing and Development Board (HDB), lower by more than $12,000 compared to the last quarter whilst at the same time the selling prices of four-room and five-room flats are increased by $8,200 and $9,100 respectively; and (b) what contributed to the much higher selling price of HDB flats in the North-East Zone compared to other zones.

The Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, the prices of new HDB flats vary according to the location, floor area, design features and finishes. In addition, factors like good view, proximity to MRT/LRT stations and commercial centres, etc, are also considered in the pricing of the flats.

Let me first explain the price differences for the 4-room and 5-room flats in the 1st quarter 1998 compared to the 4th quarter 1997. In the 4th Quarter 1997, only flats from Sengkang were available for booking whereas in the 1st Quarter of 1998, flats from both Sengkang and Hougang Towns are being offered for booking. As Hougang is a more developed town with more established amenities than Sengkang, the selling prices of the new flats in Hougang are higher than those in Sengkang. This accounts for the slightly higher average selling prices of the new 4-room and 5-room flats in this zone in the 1st Quarter 1998 offer.

As for the Executive flats, those in Sengkang that were offered for booking in the 4th Quarter 1997 are located closer to the proposed Sengkang MRT station and Town Centre. They were therefore more attractive and command higher prices compared to those offered for the 1st Quarter 1998.

For the second part of the question, flats in the North-East Zone enjoy greater popularity than flats in the North and West Zones. This is reflected in the higher resale prices of the flats as well as the demand for these flats. In the queue for the new HDB flats, 57% of the applications are for flats in the North-East Zone. In view of this, flats in the North-East Zone are priced relatively higher compared to similar units in the other zones.

Mr Low Thia Khiang (Hougang): Sir, is the Minister saying that if the flats in any specific area are more popular, they will accordingly be priced higher? Is that one of the factors that the HDB prices its flats?

Mr Lim Hng Kiang: If an area is more desirable, this should be reflected in the higher land prices. HDB pays for the land price and this would then be reflected in the pricing of the HDB flats and therefore reflect the higher prices.

Mr Jeyaretnam: May I ask the Minister when did HDB acquire the land? Was it not acquired many, many years ago? Or was it just recently acquired?

Mr Lim Hng Kiang: The land on which HDB flats are built comes from different sources: some are acquired, some are reclaimed, while some are crown land reverted to the Singapore Government. HDB purchased land from Land Office at the market rate, based on the location, size and density that we are allowed to build. So every year, HDB will buy land from the Land Office and the land prices will reflect the attributes of the site and location.

Mr Jeyaretnam: Does the Minister agree that most of the land for HDB flats was acquired three or four decades ago at a pittance?

Mr Lim Hng Kiang: The Government has a land bank built up of land from different sources. Let me take an example. Recently, Gillman Camp has been reverted to the Government. Gillman Camp was an old army camp and it is on crown land, so it was given to the Government at $1. Does that mean that we will price the land at $1?

Mr Jeyaretnam: Why not? It is public housing.

Mr Lim Hng Kiang: In which case, HDB flats built on Gillman Camp will cost only $100,000 per unit whereas HDB flats built in Jurong West or Punggol which are on reclaimed land and at a very high cost would cost $300,000 or $400,000. How do you then allocate flats in Gillman which would only cost $100,000? The Workers' Party can do that.

Mr Jeyaretnam: It is not a question of Workers' Party or not. It is a question of properly accounting to the public. How do you arrive at the costs?

Mr Speaker: Mr Jeyaretnam, can I remind you not to engage in outbursts of this nature? This is Question Time and you should rise to ask questions.

Mr Low Thia Khiang: Is the Minister aware that based on the Internet version of the HDB's final tender results, for Sengkang Neighbourhood 3 Contract 1, Neighbourhood 2 Contract 28 and Contract 27, the average price for building and electrical work is about $88,000 per unit, consisting, I suppose, of 4- and 5-room flats. The average selling price of a 5-room flat, for instance, is about $285,000. Would the Minister explain further and give details as to how HDB flats are being priced? Besides the construction cost, how much is the land cost, and whatever costs like design that command a premium?

Mr Lim Hng Kiang: What the Member is quoting probably constitutes the building contracts that we gazette or publicize upon receipt of the tenders. There are several components that go into the pricing of HDB flats. First, the land cost which today constitutes about 50%-60% of the total cost of HDB flats. Secondly, infrastructure to build up the town. Before we go for building contract tender, HDB acts as an agent for Government, putting in the major roads, major sewerage pipes, major water pipes, etc. The Government gives a grant to HDB. So HDB acts like the PWD for the Government, building the roads and all the facilities. Once the land is prepared, then HDB will tender the land. And what the Member is quoting now is the building contract prices. Beyond that, of course, will be the administration cost. HDB also employs architects, project managers, etc. and that would add another 5%-7% of building supervision and administration costs. So that will constitute the total development cost of the HDB flats.

Mr Low Thia Khiang: The Minister mentioned land cost of 50%-60%. Would it not be lower in terms of unit price calculated based on land cost? Because the plot ratio is now higher in building HDB flats compared to previously, and also the floor area of HDB 5-room flats is relatively smaller now. Would it be a cost saving in that case?

My second supplementary question is: does the HDB also take into account the infrastructural development, for which it receives a grant from the Government? Is it a factor in the pricing of HDB flats?

Mr Lim Hng Kiang: The approximate contribution of the land cost that I quoted just now, 50%-60%, is on a per square foot built-up area basis. The HDB operates as an agent of Government and the infrastructure cost is part of the work to develop a town. As you know, most HDB towns are green field sites. Some are even sea that we have to reclaim and put in all the infrastructure. And from there, a town is built up. All these constitute the total development cost of HDB flats.

Mr Low Thia Khiang: Has the infrastuctural development cost of the town been all the while taken into account as part of HDB's selling price of flats? Or was there a change in policy for taking that into account?

Mr Lim Hng Kiang: The costing of HDB flats and the way the HDB accounts are built up have been in place since 1985. As you will remember, we had consultants like Price Waterhouse, etc, to come in and build up the HDB accounts. There has not been a change since that basic structure was built up in 1985.

Mr Low Thia Khiang: What about before 1985? Was the infrastructural development cost of the town taken into account as a factor in the pricing of HDB flats?

Mr Lim Hng Kiang: As you know, before 1985, HDB operated more like a Government department by using cash accounting. In 1985, we decided that the HDB should present its accounts on an accrual basis, like most statutory boards. And on that basis, we moved from cash accounting to accrual accounting, and we built up the cost structure of HDB and how to determine the total development of each HDB flat on that basis with the help of outside consultants.

Mr Low Thia Khiang: May I clarify with the Minister whether before 1985 the infrastructural development cost was taken into account in the pricing of HDB flats? Was it taken into account as a factor in the pricing of HDB flats?

Mr Lim Hng Kiang: Before 1985, on a cash accounting basis, whatever HDB spent in its development was expensed off in that year. And the pricing of HDB flats was based on how much subsidy you want to give out. So there was no clear attribution of how much each HDB unit would cost. Because like all cash accounting, whatever you spend that year, in 1979, you would expense it.

Mr Low Thia Khiang: Does the Minister agree that after 1985, once you take the full costing of the flat, the price of the flat would increase because of the different factors in costing?

Mr Lim Hng Kiang: It is not so. I think the whole objective of the 1985 exercise was to give HDB management and Government a better evaluation of what goes into the construction and the development of HDB flats. As you know, we had a big debate between Mr Chiam See Tong and the late Mr Teh Cheang Wan in the early days on how much HDB flats were subsidised. And there was no way you could explain to Mr Chiam unless the accounts were presented every year in a generally accepted practice of accrual accounting. Today, whether you like it or not, the cost that goes into each HDB flat is clearly reflected, clearly explained and totally accountable for. Therefore, what it costs, what we sell the flats for, and how much subsidy per unit are reflected in HDB accounts every year.

Mr Low Thia Khiang rose ---

Mr Speaker: Order. Mr Low, your supplementary questions seem to be drifting further and further away from the subject under discussion. Can we get back to this matter? If you are talking about a different subject, please raise it under another Question.

Mr Low Thia Khiang: Yes. I have supplementary questions relating to the original question.

Mr Speaker: Can we get back to this subject? Otherwise, I will have to rule you out of order.

Mr Low Thia Khiang: Yes. Would the Minister make public the details of the pricing components of the selling price of flats in Sengkang for this quarter?

Mr Lim Hng Kiang: HDB's accounts are published every year. And from there, he will know what are the selling prices.

Mr Low Thia Khiang: The details.

Mr Lim Hng Kiang: He wants the details of the flats in Sengkang.

Mr Low Thia Khiang: Components of the selling prices.

Mr Lim Hng Kiang: Then file a Question and we will give you the numbers.