SINGAPORE - As the chief supplier of homes, the Housing Board should set the price of public housing, rather than take its cue from the resale market.
No longer will HDB let "the tail wag the dog" as it did for decades when it used a market-based approach to price its Build-To-Order (BTO) flats, said National Development Minister Khaw Boon Wan.
This resulted in soaring new flat prices as the resale market spiked 80 per cent over the last six years. Mr Khaw put a stop to this by "delinking" BTO prices from the resale market after he took over the housing p ortfolio in 2011.
"(Being) led by the private sector (is like) a tail wagging the dog. We should be the price-setter, not be the price-follower... The social objective is to ensure home ownership and affordability," he said in an exclusive interview with The Straits Times.
Even before he stepped into this job, he was clear about wanting to make use of HDB's dominant market leadership position to influence prices, he said, adding: "I can't set market prices in the private sector, but I can influence them."
He dismissed worries that delinking new flat prices from the resale market would mean indefinitely increasing the subsidy that taxpayers give to HDB buyers, as the property market moves in cycles and "what goes up must come down".
HDB pays market rate for its land and construction costs. Hence, when it prices flats below a market rate, it incurs a housing deficit - now in the region of about $1 billion a year, including other costs such as upgrading.
In the wide-ranging interview ahead of housing-themed sessions of Our Singapore Conversation, Mr Khaw also spoke of his plans for the future.