HDB DBSS: 76%, 25% or 15%?

Leong Sze Hian /

I was surprised to read the blog posting by Minister of National Development Mr Khaw Boon Wan, ‘Startling But False‘. Allow me to explain why.

The blog posting states,

“I was startled when I read the front page article in the Business Times “Profit margins for DBSS developers ‘look high’” (Jun 30). It alleged that the DBSS developer’s profit margin for Centrale 8 was 76%, even after it had reduced its highest selling price by over $100,000.

I thought it could not be right and had it checked. Sure enough, the article was fraught with serious errors.”

What I find startling, in my view, is that with all the debate that has been going on in the media, everyone may be “barking up the wrong tree”. In my view, the obvious question was never asked.

Image from cozyhome.sg

HDB’s profits?


How much money did the HDB make from selling land to the highest bidder? How much more did Singaporeans have to pay over the years because of such HDB policies?

Where do such profits go? Even if we agree with the policy of the HDB selling land to the highest bidder, shouldn’t the profits derived be used to subsidise public housing, particularly for the lower-income?

Based on these figures alone, the profit margin would have been 26%, not 76%. But even the reduced figure was wrong, as the article had excluded key cost items such as financing, marketing and administrative costs. These are significant costs and when included, would have further lowered the profit margin for all the DBSS projects listed in the article.

I suspect that the biggest item in quantum missing from the “costs” puzzle, may be the profits made by the HDB from the land sale.

The puzzle then becomes even more puzzling, because according to the article “DBSS profit margin: Developers clarify report” (ST, Jul 2), “The profitability of their projects should thus be measured by their net profit margins, the firms added, which range from 15% to 18%”.

So, is it 76% according to the Business Times article, 26% according to the National Development Minister or 15% according to the DBSS developers?

Anyway, I don’t think we should be focusing on how much the developers made, because they are in the business of making profits, and have to take risks in undertaking such projects.

Image from ChannelNewsAsia.com

HDB: Be more transparent?


“I have been in MND for 5 weeks, and not sleeping well. I am working my guts out to try to calm the market, for the good of all Singaporeans. But I can’t do it alone. I need all to help.”

Perhaps the Minister may be able to sleep better, if there is more transparency from the HDB, such as the question above on how much the HDB makes from DBSS land sales and the number of HDB loans and HDB bank loans in arrears, etc.

“I hope our media can do their part too. There is some panic buying out there, by people worried that prices will continue to rise. Sensationalised articles will merely feed the frenzy. If only BT had verified the facts, the misleading article could have been avoided. Please help to circulate this blog to your friends.”

If the HDB is more transparent in the first place, there may be no need for the media or Singaporeans like me to speculate and alarm the market further.

So, the ball’s in the HDB court now – be more transparent, because your lack of transparency may be fueling the frenzy in the market.

More downgraders?

Whilst I applaud the Minister for disclosing so many never-before-disclosed HDB statistics, such as the breakdown of who were the buyers of resale flats, the most important statistic on how many are downgraders and upgraders is still not disclosed.

Given that 8% of those who bought resale flats were private property owners, 37% of the 34% second-timers bought 3-room and smaller flats, plus an unknown number of BTO downgraders, I believe there may be an emerging trend of more Singaporeans downgrading than upgrading, particularly if these statistics are further broken down into Singaporeans and permanent residents (PRs).

Having your cake and eat it too?

What the latest data may indicate is that despite all the cooling measures, the HDB Resale Price Index rose to a three-quarter high of 2.9% from the last quarter’s 1.6%, and the median Cash-Over-Valuation (COV) has also risen to an all-time high of $32,000 from the first quarter’s $22,000 from preliminary data from property firms (“Stiffer rules put fewer flats on market”, ST, Jul 2).

“HDB is setting BTO prices carefully to help guide the market.”

What exactly does this mean? Does it mean that the HDB is tweaking its Market Subsidy Pricing policy that pegs BTO flats to resale prices?

As long as the Government sets high reserve prices for land auctions, allow private developers to bid for land under DBSS and Executive Condo (EC), cooling measures may not work because its like trying to have your cake and eat it too!

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