The following is a letter to the ST Forum by See Leong Kit which was rejected for publication:
I refer to your report, "Market-based pricing fairest for new HDB flats: Mah" (ST Nov 19).
The HDB has yet to rebut forum writer Tan Kim Chuan's contention that it is "either over-pricing its flats or is profiteering from the property boom".
Our private property market is now in a downturn. But the HDB resale flat market is still firm due to Permanent Resident buyers pushing up prices.
Thus, HDB's pegging its new flat prices to similar resale flat market prices had resulted in prices of new flats and resale flats chasing each other in an upward spiral that is detrimental to buyers of both new and resale flats.
The Total Breakeven Cost of a new flat comprise Construction Cost(CC), Land Cost(LC) and Other Related Cost(ORC).
Its [email protected] project has 1,848 units cramped into 50-storey blocks occupying a small plot of land.
From available public tender information, the actual CC component is $150,000 per unit. The onus is now on HDB to publicly disclose the remaining LC and ORC components.
A quick estimate of LC plus ORC is around $80,000, leading to an estimated Total Breakeven Cost of $230,000 per flat.
When launched in 2004, average Selling Price was $370,000 (actual range: $288,000 to $450,000), which translates to an average profit to HDB of $140,000 per unit sold.
428 unsold units were recently relaunched at average Selling Price of $550,000 (actual range: $450,000 to $645,000), which is $180,000 higher than initial launch prices. This arose from the HDB market-based pricing approach as market prices of similar resale flats in the vicinity were between $593,000 to $670,000.
Applicants of HDB new flats are mostly young Singaporeans wanting to get married, move into their own homes and produce babies, which will alleviate our declining birth rate.
Why then is the HDB not doing the right thing as a not-for-profit low-cost public housing developer by passing on to such citizens the economy-of-scale cost savings in its huge developments through pricing new flats on a cost-based break-even basis?
A recent Ministry of Trade and Industry Forum reply on the huge electricity price hike had stated that "the Government's approach is to price goods and services at their full cost". Why then the double standards in the HDB statement that "the prices of new HDB flats are based on the market prices of resale HDB flats, and not their costs of construction"?
For the average Singaporean, his HDB flat is the single most expensive purchase item in his lifetime. Thus, it is important for HDB to clear the air once-and-for-all by providing transparent replies to the above two simple questions, and disclosing detailed cost figures for its Pinnacle project.
See Leong Kit
Read also: Fed up with statistics (Part One) by Leong Sze Hian.
And: Reaching for the Pinnacles the profitable way by My Singapore News.