Mr See Leong Kit had sent a letter to the Today newspaper on the pricing of HDB flats (16 Sept). The HDB responded to his letter on 25th Sept. (See links to both letters below). The Today newspaper, however, has declined to publish the follow-up letter by Mr See in response to the HDB’s letter.
See Leong Kit
HDB’s response “Why we peg to market rates: HDB” ( TODAY Sept 25) to my earlier letter has necessitated my right of reply.
Instead of merely accusing me of being “misleading and illogical”, HDB is expected to be transparent in disclosing fully the actual breakeven cost of new flats in all its projects. After all, these are public housing developed with public funds.
These exasperating remarks of a couple wanting to start a family sums up the genuine frustrations of young Singaporeans at the sky-high prices of public housing: “How to live in cheaper Woodlands when work is in Shenton Way and parents are in Tanah Merah? The Government must come up with more practical solutions!”
Let me now summarise these two main issues:
Root cause behind high prices of new and resale flats.
In the 1970s, at HDB Marine Parade Estate, prices of 3-room, 4-room and 5-room new flats were $17,000, $20,000 and $35,000 respectively.
In 1990, 5-room new flats cost around $70,000. Such prices then reflected a “cost-based” pricing approach.
But, following the 1994 property bull run, HDB switched to a ”market-based” pricing approach. It confirmed that ”the prices of new HDB flats are based on the market prices of resale HDB flats, and not their costs of construction”.
In 2000, the total breakeven cost (comprising construction cost, land cost and other related costs) of a 5-room new flat was an estimated $120,000.
However, under the market-based pricing approach, HDB will first look at the prevailing market price of, say $260,000 of a 5-room resale flat. It will then pick a slightly lower figure of, say $200,000 as the selling price of the new flat – regardless of its actual breakeven cost of $120,000.
HDB will then proclaim the new flat buyer is getting a so-called ”market subsidy” of $60,000, the difference between resale flat market price and new flat selling price. There is really no “cash subsidy” given to the buyer, and HDB is actually making a profit of $80,000 for each flat sold.
The losses reported in HDB financial statements could well come from ”transfer pricing” accounting between HDB, Singapore Land Authority and Ministry of Finance.
HDB’s “market-based” pricing approach is the root cause of prices of new flats and resale flats chasing each other in a never-ending upward trend.
A plate of chicken rice cost $3 in HDB coffeeshops and $20 at hotel coffeehouses. It is both illogical and ridiculous for HDB to proclaim that every person eating chicken rice in HDB coffeeshops is getting a “market subsidy” of $17 per plate!
Are HDB new and resale flats really affordable?
It is misleading for HDB to merely state that “first-time flat buyers use 17 to 29 per cent of household income for their loans, below the international benchmark of 30 per cent” without disclosing the assumptions used.
HDB has since confirmed to me that a 30-year loan period was assumed.
Of course, if you stretch a home loan to as long as 30 years, even private property will become ”instantly affordable”.
For a couple with a combined $8,000 monthly income, a HDB loan of $500,000 at 2.6 per cent interest and a monthly loan instalment of $2,000 may appear affordable. But at the end of the 30 year loan period, they would have coughed up some $800,000 in total capital and interest repayments.
A sensible home loan period would be around 15 to 20 years.
—–
Mr See’s first letter to the HDB: It’s not all about the numbers.
HDB’s response: Why we peg to market rates.
—–
101) stanzza
we need more like you in TOC to put things in perspective.
Stanzza, tell the world your party affiliation.
End of story
104) Lee Humpty
Have one to be party affliated to have views?
It is not an either/or situation.
It is not black or white, but a cotinuum of different shades of grey.
Let the story continues.
101) stanzza
interestingly we are now discussing if our posts will be deleted,
and the tile of this topic looks awfully apt
: )
Sorry guys, I am back for 1 last post as I had some surprised finding. I was searching under the author name online as I had trouble opening his 1st letter to Today and found some related other post…
1. http://groups.yahoo.com/group/Sg_Review/message/2242
2: http://www.sgpolitics.net/?p=3095#more-3095
3: http://disgruntledsporean.blogspot.com/2006/04/critique-of-pap-govt-by-mr-see-leong.html
Judge for yourself..
“A plate of chicken rice cost $3 in HDB coffeeshops and $20 at hotel coffeehouses. ”
If the $20 chicken rice is recognized to be much tastier (because of the chef’s skill) by the majority of people or has special expensive ingredients, it is called capitalism.
If it is the same quality as the coffeeshop one, its called stupid consumerism.
107) Omega Lee
Consumer behaviour is highly illogical as Mr Spock will say.
The $20 plate of chicken rice is not necessarily 7 times better than the $3 plate.
The more expensive the car you buy the smaller it gets.
A $50,000 watch tells the same time albeit more accurately, but by how much?
A Prada handbag functions for exactly the same purpose as a $5 lelong handbag.
What drive this highly illogical behaviour is branding.
That make a product cost so much more than its worth because they have managed to convince the consumers to believe that is is worth that much more.
I am trying to find a home to build my nest now.
5 room 400k+
4 room 350k+
3 room around 300k
I started paying attention to prices since 1 year ago and prices have kept escalating…despite the economic downturn. In 1 year, prices seem to have gone up 10-25 percent.
My heart is really turning cold at the prices. I truly feel the PAP will not stop until they drain us of every cent we have.
Even if we are willing to take loans, HDB is no longing providing lower interest loans as it used to. Guess they feel that they could use the money for their bonuses instead.
Even if I am willing to settle in a ulu ulu place, I end up losing much subsidies for not living near parents. Am I better off?
Sometimes, I look around me, and I feel like crying. I feel compelled to join everyone in the mad scramble for money like the incumbent is doing…and run away from this melting-pot as soon as we possibly can.
Perspectives or Propaganda?
By all MEANS,
throw in more statistics;
compare apple with orange;
divert attention;
To an END,
negating the social security role of a government.
Go on and duplicate the regime of our Main Stream Media here, online. One only needs a heart to just simply go back to the basics of ‘GOVERNMENT’.
“I merely noted that emotions and unpleasantness can be stirred up by such misinformation judging from the comment, thus commented. Don’t really care if my post is deleted or not. Understand that people are unhappy, thats a fact. But still we have to think and analyze clearly.”
Then have one super-know-all employed at public expense (ain’t going to cost millions) to correct such misinformation lah.
Analyze clearly ? Just provide the facts (transparency) and let people (give them the necessary education) draw their own conclusion.
“I started paying attention to prices since 1 year ago and prices have kept escalating…despite the economic downturn. In 1 year, prices seem to have gone up 10-25 percent.
My heart is really turning cold at the prices.”
Let me give you some professional non-emotional reply (trying to parrot someone), we will always keep it affordable.
http://www.3in1kopitiam.com
From: makapa 2:46 am
To: ALL (1 of 5)
21575.1
http://www.chipengseng.com.sg/administration/NewsReports/4844a959-7d98-4594-b6ed-6ff2eebb9b5e_CESCL_Results_Presentation_1HFY2009_12Aug09.pdf
HDB Contract at Sembawang
• 471 units, contract value $49 million
=> $104k Per Unit
The Pinnacle@Duxton
• 1,848 units in seven 50-storey residential blocks
• Contract value $289 million
=> $156k Per Unit
• HDB Contract at Queenstown
• 1,394 units w/facilities, contract value $188 million
=> $135k Per Unit
• HDB Contract at Sengkang
• 698 units with facilities, contract value $124 million
=> $178k Per Unit
• HDB Design & Build Contract at Punggol West
• 729 units with facilities, contract value $156 million
=> $214k Per Unit
Please read this article
http://www.reuters.com/article/GCA-GreenBusiness/idUSTRE59B2OX20091012
Declining population may not really be bad. At least the environment benefits from it.
HDB flat are never hot, Just our useless government under built, BTO is a stupid scheme like ERP.
If the HDB were to go back to ‘cost price’ based approach , will we see drop in the market price of HDB resale too? Buyers both new and resale will be happy.
Will sellers who see a decline in their HDB resale price be happy too?
I believed many (even those who post here) has profited from selling of their HDB based on the market price approach..the same goes with COV .What an irony!!.
Kick the papies out. And the sooner the better.