HDB Loses 1 Billion Dollars a Year – Why We Should Care

HDB Loses 1 Billion Dollars a Year – Why We Should Care

http://www.moneysmart.sg/money-talks/hdb-loses-1-billion-a-year-and-why-you-shouldnt-care/

Been seeing this article doing the rounds on cyberspace and needed to debunk it.

This blogger argues that HDB makes a loss because it buys land from SLA at market rates and it does not matter since it is from one government account to another.

The alternative to buying land from SLA at market rates is NOT buying land at market rates. Some have even argued that land costs should not be included in HDB prices.

This is fine if we are starting to build HDB flats all from new.

The challenge is that there are many existing HDB flat owners, especially from the baby-boomer generation who have benefited tremendously from their HDBs increasing in price. This asset price includes land price which has become increasing valuable as Singapore developed.

If we take away land costs or if HDB buys HDB flats at a discounted rate from SLA, the new HDB flats will cost a lot cheaper than existing HDB flats, whose prices include land cost.

This will also cost existing HDB flat prices to deflate leaving current HDB owners with massively devalued property.

Young people are understandably upset that HDB prices are spiralling upwards.

But those who clamour for massive deflation of HDB prices selfishly forget that this will be at the expense of the older generation who already own HDBs and whose savings and nest eggs are locked in their property, which can be unlocked when needed.

The government needs to balance the needs of people who have yet to buy homes who need them to be affordable, and those who already own homes who do not want to see their assets deflate in value.

People who argue that it shouldn’t matter that HDB loses 1 billion a year are extremely short sighted.

If HDB has to lose so much money buying land at market rates to build affordable homes , it means that it is increasingly difficult to balance the needs of the young generation with the older generation.

We shouldn’t care? On the contrary – we should be extremely concerned.