Thursday, November 05, 2009

HDB 'suffers' another deficit ...

HDB released its annual report which shows a deficit of $2B[Link]. That is twice as much as last year. Yes, HDB has 'suffered' yet again.

According to Today,

"HDB said the huge deficit for the financial year ending March was due mainly to more flats being sold. These flats are highly subsidised by the government. Higher construction costs also led to the large deficit. Other reasons that contributed to HDB's loss included upgrading works for lifts and rental flats." - Today

The main reason for HDB incurring a deficit is because all you guys who bought flats from HDB at those record high prices have 'enjoyed' a subsidy. You 'enjoy', HDB 'suffers' and you ought to be thankful.

If HDB incurs the deficit, who makes the surplus? HDB purchases its land from the Singapore govt via the SLA. The land from SLA, acquired or originally owned by the govt, is sold to HDB at the 'market price'. If you want to know where the surplus went to, you should look at the SLA. HDB's deficit is just an accounting gimmick. If SLA is part of HDB, HDB will show a surplus. If land is transferred by the State to HDB at the cost it was acquired, HDB will show a surplus.

At the end of the day are Singaporeans supposed to be impressed and thankful for HDB's 'deficit'? The truth is asset inflation has caused the average Singaporeans household to be heavily in debt shouldering housing loans that last between 20 to 30 years in an economy that provides little job security. Many Singaporeans will not be able to retire well because of the high cost of housing. HDB's 'deficit' is yet another sad spin of a govt whose policies have led to high financial burdens for its citizens. The pain for some Singaporeans cannot be spun away just like that - 7.5% of households with HDB loans have defaulted on payment...that in 1 in 13[Link]....that is not counting the many who struggle by scrimping on necessities to make payment every month.


sgcynic said...

My heart bleeds. Ho Ching makes billions of dollars of losses, do does Mah Bow Tan. Yet they retain their iron, er golden, rice bowls.

Anonymous said...

sure, we believe!

HDB suffers deficit!
Ho Ching is making $$$ for Temasek!
LHL increased GST to help the poor!
HDB flats are affordable!
Selamat's escape was due to incompetence of junior guards!
LKY's golden period was to stay in 2007!

We will not forget to show our appreciation at the next election!

greyfox said...

When there is no press freedom, you can say anything you want. No one can rebut. No one will know what the truth is.

Anonymous said...

How do they decide the land costs for the HDB flats?

Is it based on what can be fetched from sale to private developers?

So if they put a lower value, it means a deficit?

Anonymous said...

If these son of Bxxxhes can smoke their way through "subsidies" based on market rates, they can jolly well try to smoke us with losses according potential gains. What a load of crap. Why dont they declare the earnings from SLA, or for that matter, be transparent with our budget. I say enough is enough, and why isnt there any responsible response for this "loss"

Anonymous said...

This sounds like creative accounting to prevent us from protesting about the sky-high prices. Sounds like a dirty trick. "See? We're making a loss, not even breaking even by selling to you at these rocket prices! How to lower prices?" It's a sham! Can any accountant comment on how the figure is arrived at?

Anonymous said...

i had a good laugh; tks for 'lighting' up my day...

Anonymous said...

Such a report only serves to damage HDB's credibility. That is, if HDB has any credibility.

For years, we have been told that HDB is bleeding red. But who seriously believes them?

Now, it is known that their 'loss' is defined by the so-called market subsidy, instead of selling below cost price.

Everyone knows that HDB is highly profitable. A flat costs less than $100k each to build, but is sold at $300k.

HDB is easily making $200k profit per flat, if we put aside all their creative accounting tricks.

Anonymous said...

It is not a gimmick. This is because the cost of the land has to be priced in and the state does not give 99 year lease free to anyone in all fairness. SLA did not make a huge gain. If I have a stock valued at $1 and I sell at $1, I make no gain. So from an overall Singapore perspective, certain individuals have clearly been subsidised by other tax payers. Just think about it.

Anonymous said...

Just wanna let Lucky know that my canary just lay two golden eggs with yolks made from the purest and clearest blue diamond in the universe.

Anonymous said...


I feel your reasoning is based on a BIG IF...

I understand about the valuation of land cost and such. If I interpret correctly, what you are saying is also the same as what others are saying i.e. if the land was sold at market rate as compared to subsidised rate. That is the same for properties.

However, we are not talking about commercial entities here. In the 60s, HDB was set up primarily to enable Singaporeans to afford housing. That is where parts of the Land Acquisition Act was justified. Acquiring land at less than market prices and having huge powers so that people in general can afford housing. I think your reasoning also stems from private companies perspective. For example, a huge listed company has many subsidiaries or departments. I know that department A provides services to department B. Department B must pay department A for its services despite being in the same company. However in a strict sense, there is no profit or loss. Although it can be a loss if let's say department A services are more expensive than an external provider.

However going back to the reasoning used in Land Acquisition Act and the set-up of HDB, I can only say there are murky grounds to clear. I do not profess to understand all the financial terms. Leong Sze Han in the onlinecitizen attempted to explain using the available balance sheet from HDB. To be frank, I do not quite understand all of it too.

Basically, from a logical standpoint, it is hard to believe that there is a loss. The reasoning as given by others, which to me is quite logical, is that they probably would have compared to market prices that would have fetched and not actual losses.

Think about it, if each flat is sold at a loss, that means it would have cost about $400k for each HDB flat you are living in. That means some of the condominiums and private apartments are undervalued. However given Singapore unique property market where more than 80% of us live in public property. It is quite logical that HDB is the price setter. I studied real estate in NUS and I believe that private developers value their properties primarily on factors such as cost of land acquired from the goverment *main consideration*, prices of HDB flats *valuation of HDB flats are always a secret* and market perceptions.

My own personal observations are that though HDB flats and private properties are substitutes, their movements in prices correlate positively with each other because in Singapore, private properties have a certain prestige *possibly due to rarity?*

To me, it is simply illogical that HDB made a loss unless other costs such as wages, interests incurred and constructions costs are exorbitantly high. If the loss is actually attributed to *what the properties would have fetched in the open market*, that to me, is also fundamentally flawed if you consider all the conditions and situations (i.e. the Land Acquisition Act, HDB and laws etc)

Anonymous said...

To add to the murkiness, not only URA sell lands, other government agencies such as SLA, even the ministries have lands on their portfolio.

When URA invited private developers to tender their bids, the land usually has a minimum price. This minimum land price is also set by the Chief Valuer. The supply of land is also determined by URA.

There are also transactions of land between government agencies and institutions which in turn also complicate the accounting? and valuation of the land.

Whatever it is, I just feel that there are many murkiness. Just to update, another article on the accounting of HDB is on the onlinecitizen. The guy seemed to be account-trained.

Anonymous said...

TO annon 5/11/09 10:56 "It is not a gimmick. This is because the cost of the land has to be priced in .... certain individuals have clearly been subsidised by other tax payers. Just think about it.'



Anonymous said...


"If I have a stock valued at $1 and I sell at $1, I make no gain"

Yes, that is true in the accounting treatment. But the question is if SLA acquired the land for $0.10 or FOC, values it at $1.00 and then sells it to HDB for $1.00. The real surplus will be in SLA wouldn't it?

Anonymous said...

For those who still do not understand how kangaroo creative accounting of HDB is done, here is one simple explanation .

The main point is whatever subsidies given are considered a loss or deficit.

Actual Cost of building a flat = 100,000

The kangaroos want to use free market because it will speculate and rise the price to really "minister-affordable" level.

After Free Market
Cost of flat to buyer = $300,000

So HDB earn in excess of $200,000 profit.

So HDB sell Y number of HDB flats. Among Y number, X number (X) of flats get subsidised by $40,000. Hence, HDB incurred less profit of $40,000X /

But still HDB still obtain a profit of
(200,000(Y-X) + 160,000X),

but rather than choose to announce this profit part, HDB deliberately choose to focus on the superficial loss, that is the subsidised loss, $40,000X, which they take this as deficit and loss.

The increasingly high price of flat will further erode the $40,000 to insignificant level.
What is $40,000 when compare to a flat cost $300,000 compare to the same one that cost $500,000 on the market. The flat increase in price but not the subsidiary. The subsidiary is nothing because it still fall under excess of profit.

So anyone get it ?

The supernormal profit is make to look like a loss, that is how creative is our kangaroo. Don't even think of how to explain the loss of TH and GIC ! More creative accounting !!!!!

Anonymous said...

Since we are still on the topic about land cost, my lecturers in NUS raised this question;

*Are land in Singapore really that expensive?*

Valuation of things, theoritically, is based on what people are willing to pay. In Singapore, we do not see many of these transactions especially for land. URA decided when, how and what to do with the land. They can even decided not to sell the land. Therefore, that makes valuation of the land difficult. Valuation, in the strictest sense, as with other things, depends on huge data. Those of you who study statistics, know that if we got enough data, then the research or confidence level will increase. Thus, for valuation of land and property to be *theoriticall* more of a *true* value, we must have a data bank.

However, Singapore has a unique situation whereby 80% of us lived in public properties. Therefore, market valuation of properties may not be *true* values.

The Chief Valuer wields strong powers and actually influences the property market a lot. Just imagine the entire country property values lie at the whim of one person or a group of person(s).

All these things in Singapore are inter-linked which led to international experts and journalists questioning issues in Singapore.

Other countries may not be much better in terms of influences of land prices and such, but in our situation, we have been totally obedient, docile and accomodating. We do not even question at all. Maybe at the end of the day, the influential and powerful still get their way, but at least in other countries, there is still awareness. When there is awareness, there still lies a chance that something right can be done as compared to being quiet and accepting.

Anonymous said...

THANK YOU to all the Anons here!

You certainly explains things more clearly than the 133th.

One reason why I stopped my subscription 10 years ago...

juncrers said...

In a private organisation, if it keep making deficits and losses, the CEO would have been sacked or replaced long ago. Why is HDB's CEO not being sacked? Why is CEO of Temasek Holding not being sacked? Why is GIC's CEO or Chairman not being sacked?

The answer to the above three questions is clear to most of us but the answer will not be acknowledged by those who wield the power.

Yes, there is no corruption in Sickapore ..... or is it?

Anonymous said...

Anon 10:56 wrote:
"If I have a stock valued at $1 and I sell at $1, I make no gain."

But you did not acquire the stock at $1.

The govt used the Land Acquisition Act to acquire the land at way way below market price.

The govt may have acquired the land back in the 1960s and 1970s for $10 psf or less.

Anonymous said...

Sorry, make a mistake about the definition of valuation.

Valuation is the *true* value and theoritically should be quite close to the market price. In most circumstances, valuation should not fall below valuation price.

The purpose of valuation is mainly to gauge a *true* value about something. However, you can only come up with a better valuation of something with the use of a lot of data and evidence (preferably from market transacted prices).

As written above, Singapore is very unique and the valuation of land and public properties seemed to be from the basis of *out of thin air*. Perhaps it is the ruling government to generate enough data years later to justify whatever issues. Ingenious indeed just like many of the self fulfilling prophecies (from the govt) we are seeing in increasing more events nowadays...

Anonymous said...

Sorry, *valuation should not fall below market price*

Anonymous said...

Pai sei, : P market should not fall below valuation price

Anonymous said...


*So from an overall Singapore perspective, certain individuals have clearly been subsidised by other tax payers. Just think about it.*

Based on the sentence, I think it opens up another can of worms. What do you mean that certain individuals have clearly been subsidised by other tax payers.

Intuitively, are you referring to the 1 rm or 2 rm flat owners or certain segments of the population? If that is the case, then it will be even more contentious as we know about the issues of granting 1 room or 2 rooms to *deserving* people. And can somebody feedback or verify that certain segments of the population are enjoying more or better subsidies than others?

From what I have been reading so far, these issues have been quite contentious and never been adequately addressed by the government or at least I have not read much about it.

Then from a logical perspective, the government says that there is no poverty in Singapore. From the same line of argument, this segment of population enjoying special subsidy should also not result in a $2 billion loss.

Whichever way you look at it, I do not find it logical or have the common sense to understand the loss.

Anonymous said...

I am a taxpayer, and I have no regrets subsidising the needy and the poor.

As such as we are all worried about survival and money, there is still a need for a conscience. That makes us human instead of a mere animal. Of course, I don't speak for everyone here. Some, for the sake a few dollars more, have no qualms about sacrificing others...

HDB has never subsidized us. From the beginning, HDB has always sold us flats that were priced above cost price. That makes HDB profitable. HDB is only subsidizing us when it sells below cost price.

Anonymous said...

Aiyah you people keep on arguing for eons also no use.

don't buy from HDB and what choice do you have???


Either you have to contend with what you have or WORK HARDER FOR MORE.

Anonymous said...

HDB should just stop building HDB flats. WHY BOTHER to build homes for 85% of the population when what you get is just complaints? Just do what other countries are doing - leave it to the private enterprise and only provide rental housing for those who truly needs the assistance.

BTW, HDB cannot price the land at cost. Imagine long.... time ago HDB acquired Tiong Bahru land at $1and Woodlands land at $2. Does it mean Woodlands HDB will be priced more ex than Tiong Bahru? Then all the greedy Gen Y who are the main complainants will fight tooth and nail for the Tiong Bahru property and no one will wanna stay in Woodlands. Those who get Woodlands property will complain govt unfair!!!!!!! Market price (and subsidy) is the way to go.

And to those pampered Gen Y who has not gone through any hardship. Please try to save up before buying your first home. It's not that tough - just spend less on your LV bags lah and expensive holidays lah.

Anonymous said...

Anon 21:44 wrote:
"BTW, HDB cannot price the land at cost."

But SLA can. And SLA made lots of money getting the land at rock bottom prices using the Land Acquisition Act.

SLA makes billions, HDB "loses" billions. It's all creative accounting.

Don't get yourself smoked!!

SLA makes money buying land cheap from us by using Land Acquisition Act.

HDB makes money by selling flats at us ABOVE cost price.

CPF board makes money loaning our CPF to HDB to build the flats. We pay much higher mortgage loan rates than our CPF returns on our savings.

All stat boards that are involved in the home-buildin process makes money from the citizens.

And you wonder how come citizens have hardly any money left in CPF by the time they retire.

Anonymous said...

This all is excluding the interest earn by hdb from most sporean which takes 20 or 30 loans... lower interest than market but huge principles....

Anonymous said...

Forget about 'deficit' or 'surplus'. These are all accounting defined terms anyway and can be manipulated many ways to derive a result.

Just look at HDB's cashflow statement (if they release it that it).

Bet you the HDB doesn't actually pay cash to the SLA at market prices.

But the cash that you use to pay for your HDB flat is real cash that moves from your CPF account to the HDB.

So the HDB is sitting on mountains of cash - your cash.

Kojakbt said...
This comment has been removed by the author.
Kojakbt said...

Ah Goh hinted on a mistake on HDB's part for not factoring in demands from PRs in pushing up the HDB resale prices... HAHA!

contrarian said...

A well analysed and well written piece.

Anonymous said...

To the ignorance of Anny 21:44, while the pampered Gen Y, despise having higher income than in the past generation, nowadays typically need to take up 30 yrs loan just to pay for their 99 yrs lease pigeon hole.

Their father and grandfather only used to slog 10 yrs to afford the same flat.

So who is the pampered one who enjoyed a better life?

Anonymous said...

So we are first world. If we go by first world corporate governance standards, Singapore Inc will be declared 3rd world.

Anonymous said...

My mom bought a 3 room flat in Toa Payoh in 1971 for 7 thousand dollars. Her salary as a hospital amah was $110. Her house was 64 times her salary. She paid about $40 a month thorugh her CPF(40% of 110) for 15 years. The PM's salary was I believe was about 100K a year.

Today a friend works as a hospital attendand, her salary $880. Her salary has increase 7.7 times in 18years. She bought resale 3 room flat direct from HDB for 180K. The flat price has increased 26 times. She cannot afford a 15 year loan. so its 30 years. But her monthly CPF is only S264(30% of $880) and she needs top up cash.
Meanwhile the PM salary is S3.7m, or has increased 37 times.

So HDB prices and the MP salary have shown tremendous growth. But what about the hospital attendent's salary, what about affordability.

So people wake up.

Anonymous said...

@2103 and 2144

From the tone, I inferred that your attitude is that do not complain and work harder. What is the point of talking so much here?

The issue is that everyone of us understands that. People who lived in worse conditions and endured unimaginable situations in other countries; these are the examples listed by the government or so-called more *resillient*, *tough* and *capable* people.

Well, the book animal farm had been cited by many people here and of course the analogy of boiling the frog slowly in water.

If you somehow cannot understand what has been so far in this blog, then I guess nobody can help you.

My intuition is that somehow what we have been discussing has been quite logical, that is why you keep coming back for more! : )

Anonymous said...


But it is inevitable. Our PM and SM have already said that the income gap between the immortals and peasants are supposed to be like that. It is inevitable that the highest income group will increase in wages, whilst the lowest of all income groups will not increase as much. That is inevitable if you want the country to progress.

Catch the irony, if you want the country to progress, some people still have to suffer. But I guess the point is that the middle income group people are also partly to blame, because people usually care for themselves. However, presently, increasingly middle income people are also affected. MPs in parliament also highlighted the problems faced by middle income groups; segregating the group into lower and higher.

Point is that if we do not want to be aware and challenge set notions, we will not have any way to gauge what is better.

Sure, let's be quiet and let everything be status quo; and see for ourselves what is going to happen...

Anonymous said...

*HDB should just stop building HDB flats. WHY BOTHER to build homes for 85% of the population when what you get is just complaints? Just do what other countries are doing - leave it to the private enterprise and only provide rental housing for those who truly needs the assistance*

Precisely, my conspiracy theory...

What started out as an election and populist tool led to something that the government cannot even fathom...

Control the pple's mind by making sure they work harder and got no time to think and complain....then at the same time, tell time how to feel proud of yourself by being so diligent......condemn pple who are a bit irrational and creative by saying that these pple do not work for the collective good......tie pple to 30 years loan.......control the prices since ppty ownership probably make up the largest component of one's income in a hunman lifetime......

So what started out as an right thing to do became something of a tool to manipulate the population...possible?

Actually above conspiracy theory has been going around actively when you talk to uncles in the coffeshops and taxis... : )

Xtrocious said...

If you guys think the HDB's deficit is funny...

What about the government's so-called deficit?

They do not recognise land sales as revenue - this goes directly into the reserves

And they use budget deficit as an excuse to raise GST etc...

Kojakbt said...

> Meanwhile the PM salary is S3.7m, or has increased 37 times.

Compare this:

USA, Barack Obama, US$400,000
Australia, Kevin Rudd, US$330,300
France, Nicolas Sarkozy, US$312,000
Germany, Angela Merkel, US$286,000
Canada, Stephen Harper, US$ 280,000
UK, Gordon Brown, US$243,000
Total of 6: US$1,851,300

S'pore, PM Lee, US$2,000,000

Kojakbt said...

>But it is inevitable. Our PM and SM have already said that the income gap between the immortals and peasants are supposed to be like that. It is inevitable that the highest income group will increase in wages, whilst the lowest of all income groups will not increase as much. That is inevitable if you want the country to progress.

So, how come these countries who are richer than us do not have such a large income gap?

Country(pop),per capita GDP,Gini,Non-citizens %



Anonymous said...

of course our leeders will want to have you know that it is inevitable to have an increasing income gap in singapore.

they are trying to prepare you psychologically for their next astronomical pay increase for themselves.

i swear that if i can't emigrate, i'll help the oppo parties as much as i can... darned

Anonymous said...

It is very weird that our government does not recognize land sales. Their reason is that because land sales income is a one-off thing, and not as consistent as income from taxes and duties.

But the thing is, we are selling land every year! Every year, HDB is building new flats. Every year, we are clearing more land for condos.

And income from the sales of land runs into the billions. It isn't loose change.

So, land sales income should be included into official government revenue.

Which means that in fact, our government most likely had never run a real deficit before in its entire history.

Anonymous said...

HDB flats are real AFFODABLE. IS there anyone being priced out and live in the street, homeless?

Tell them there is and it will be done right!

Don't worry, they are already taking into this into consideration. There can be no harmony if the price is beyond what us can shoulder... I am 'grapeful' and waiting for any new measures.... HOPEFULLY BEOFRE THE ELECTION...

Anonymous said...

To 21:44
"HDB should just stop building HDB flats. WHY BOTHER to build homes for 85% of the population when what you get is just complaints? Just do what other countries are doing - leave it to the private enterprise and only provide rental housing for those who truly needs the assistance."

I agree with your point, HDB or rather the govt shouldn't build for the ungrateful Gen Y who pays our ministers highest salary to do nothing.

"And to those pampered Gen Y who has not gone through any hardship. Please try to save up before buying your first home. It's not that tough - just spend less on your LV bags lah and expensive holidays lah."

You have a very good point. We should not even buy a LV bag or go expensive holidays, perhaps we should lit candles at night and eat plain bread too. And walk to work instead. Maybe in that way, we may save enough money to buy a HDB flat in 10 or 20 years time. Maybe its not that tough coz your father is rich. Perhaps you want to lend me some money to buy my flat?

Anonymous said...

It's time the HDB stop insulting our intelligence. Do they actually define their "deficit" as the difference in sales price between HDB and a similar apartment built by private developer? This is a very fundamental issue. If HDB thinks they should have sold their flats at private market price then HDB does not deserve to exist. What prompted HDB to come into existence 50 years ago? It was a noble mission to provide good and affordable housing for Singaporean. It is a fundamental duty of a statutory organisation created by the government. HDB makes profit on every unit that's sold, you don't have to be a "ministerial material" to figure that out. HDB has forgotten its original mission and has somehow through the years started to regard itself as a " developer".
Here's another very important issue which nobody seemed to have paid attention: Can some body calculate the monthly service/maintenance fee HDB is collecting every month throughout the whole of Singapore? Maintenance collected and not used up is a surplus!