The study on the underpricing of HDB BTO developments

• Main Authors: Chan, Tsu Hsien, Guay, Zheng Xiong, Tan, Ken Jing Xian
• Other Authors: Tang Cheng Keat
• Format: Final Year Project
• Language: English
• Published: Nanyang Technological University 2022
• Subjects: Social sciences::Economic development::Singapore
• Online Access: https://hdl.handle.net/10356/156698
• Institution: Nanyang Technological University

Since the introduction of the Home Ownership for the People Scheme in 1964, the government has tried to price the flats within the reach of the majority of the flat buyers (HDB, 2022). One of the measures the government utilises is by “subsidising” the HDB BTO by pricing it below the market rates. However, the amount of subsidies provided by the government via underpricing is not visible to the public. Despite the drastic increase in housing prices over the past decade and the growing debate on housing affordability, there is limited existing literature to tap into. Existing research is largely qualitative and not supported by empirical evidence and data. In our research, we seek to contribute to the existing research by providing empirical evidence by quantifying the underpricing by the government for the new HDB BTO. Using Difference-in-Differences regression models, results show that on average the under-pricing is about 55.8% of the housing price, in other words, the subsidies that the HDB have provided for BTO flats. The estimates are further broken down into different flat types. The under-pricing for 2-Room, 3-Room, 4-Room and 5-Room BTO flats is 70.41%, 60.78%, 47.29% and 47.91% respectively. These findings suggest that HDB did price its BTO projects below the market with a significant subsidy while accounting for different factors.