Thursday, February 13, 2014

L.A.M. on How Much Does it Cost to Build a HDB Flat

I refer to the Today article which states that a Singapore-listed construction group has won a contract worth $98m to build HDB flats at Vine Grove @ Yishun. The BTO project will involve the construction, completion and maintenance of 5 13-storey blocks and one seven-storey block, comprising 696 residential units in all.

Now this article along with some sleuthing has provided very good fodder for me to determine whether the government is profiting extensively from construction of "government" housing.

Now lets do some simple math:

Costs of Building Construction:                                                                                       $98,000,000.00

Selling and Administration Costs:                                                                                est $2,000,000.00
Housing Rebates: Assume rebates of 15K per unit                                                          $10,440,000.00


Total Costs:                                                                                                                    $110,440,000.00








HDB Revenue:                        
2 Room Flat Type 1 (48 Units, average price of 85.5K)                                                    $4,104,000.00
2 Room Flat Type 2 (132 Units, average price of 106K)                                                 $13,992,000.00
3 Room Flat (192 Units, average price of 180K)                                                             $34,560,000.00
4 Room Flat (324 Units, average price of 285.5K)                                                          $92,502,000.00
Total                                                                                                                               $145,158,000.00

IRAS Revenue( Buyer Stamp Duty):
2 Room Flat Type 1 (48 Units, average price of 85.5K)                                                         $41,040.00
2 Room Flat Type 2 (132 Units, average price of 106K)                                                      $139,920.00
3 Room Flat (192 Units, average price of 180K)                                                                  $345,600.00
4 Room Flat (324 Units, average price of 285.5K)                                                             $1,266,840.00
Total                                                                                                                                   $1,793,400.00

Total Revenue:                                                                                                                $146,961,400.00

Net Income:                                                                                                                       $36,511,400.00
Operating Margin:                                                                                                                         33.06%

Note that the above has not taken into account any land sales costs (which I assume is a left pocket to right pocket arrangement between HDB and SLA). Based on the above, I would say that the margin made by HDB+IRAS isn't exorbitant at 33.06%.

Is HDB making money off Singaporeans? I can't say for certain but it is definitely much higher than Koh Brothers Group which has an profit margin of only 5.39% (based on information from macroaxis.)

However, if we were to take land costs into consideration, then HDB would definitely be making a loss as a similar plot of land in Yishun would cost more than 36 million. So in a sense, Khaw Boon Wan wouldn't be completely wrong if he complained about how HDB is making a loss but the bigger question is whether SLA should be charging HDB so much on land costs, if the land is used for public housing. Similarly, would SLA charge Mindef so much for the large amounts of land they occupy?

PS: The above analysis is based on publicly sourced information. Where information is not available, I have made assumptions such as ignoring land sales costs as well as the selling and administrative expense. If you feel that there is anyway in which the analysis can be improved, please leave a comment below.

L.A.M.

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2 comments :

Anonymous said...

Your total units for 3 room and 4 room units are wrong from the sheet you attached. There is a vast difference in th number of units built versus your calculating figures!!

John Lam said...

The number from the picture includes Angsana Breeze. i.e. it is Angsana Breeze + Vine Grove. Whereas, the numbers from my analysis are for Vine Grove only