By Leong Sze Hian
Straits Times Editorial calls for clarity?
I refer to the Editorial “Town councils: Time to clear the air” (Straits Times Editorial, May 20).
It states that “Clarity on these (safeguarding of assets, disclosure of interests, tender process, restrictions on party officials being given contracts, etc) would help restore confidence in town councils”.
Clap! Clap! Fully support the call for clarity?
I fully support and concur with the above. But, in the interest of “clarity” – why stop at just looking at town councils?
Clarity should be extended to HDB as well?
From the perspective of residents, S & CC is just tens of dollars a month (some may call this peanuts) – the real biggie is arguably, HDB flats which cost hundreds of thousands of dollars.
So, what do you think most Singaporeans would like more clarity (transparency) on – the breakdown of the cost of building HDB flats (which some may say is costing them an arm and a leg – for 30 years!)?
Breakdown of flat costs in 1987?
A reader, ES, sent me a document (Parliament report dated 15 June 1981) which shows the cost breakdown of a 4-room (4A) new HDB flat in Pasir Ris in FY86/87 – FY87/88 to be as follows:
Selling price $56,300
Cost of construction $53,000
Land cost $17,800
Land cost $17,800 in 1987?
So, the land cost of this example of a 4-room flat was only $17,800 in 1987.
Cheapest 4-room in 2011 – $294,000?
Fast forward to today – a 4-room BTO flat in Pasir Ris (Costa Ris) – same area of Pasir Ris in this example – was $294,000 (cheapest) in May 2011.
“Investigative statistical snooping”?
Since nobody wants to tell the breakdown of flat costs in the last two decades or so, we can try to do a bit of “investigative statistical analysis”.
If we assume a 5 per cent per annul increase in the land cost, the $17,800 land cost in 1987 would be $57,407 in 2011 (24 years).
Cost of construction – $236,953?
Now, surely the cost of construction for the 4-room BTO flat in 2011 cannot be $236,953 (selling price $294,000 minus land cost $57,407)!
Cost of construction around $150,000?
I have been told and understand that the cost of construction in 2011 of a 4-room flat was probably around $150,000 or thereabouts.
If we assume $150,000 for the cost of construction – how can the land cost be about $144,000 (selling price $294,000 minus cost of construction $150,000)?
4-room price range $294,000 to $347,000?
And I am using the cheapest flat in the May 2011 BTO to calculate this example – the price range for 4-room was $294,000 to $347,000!
Market subsidy pricing?
So, how can HDB flats be said to be subsidised?
Top secret statistics?
No wonder, despite questions in Parliament and the newspaper forums over the years – there is no answer!!
Land pegged to 1973 prices?
In this connection, the late President Ong Teng Cheong was quoted as saying – “The government continued to peg compensation rates for acquired properties at 1973 prices because it wants to prtvide cheap housing for the people.
Cheaper land meant lower prices for Housing Board flats, Mr Ong Teng Cheong said yesterday” (Straits Times, May 28, 1984).
So, to conclude – any land acquired at low prices like the 1973 prices quote above, were subsequently sold – and priced at around $144,000 like in the above 4-room flat example?
Chicken rice analogy?
Allow me to end with a chicken rice analogy:
You sell chicken rice at $3
You say it is very reasonable because the 5-star restaurant sells at $5
You say you lose money ($1) on every plate of chicken rice that you sell, because your cost is $4
Because you have to buy the rice from your brother at $3 although your chicken only cost $1
But, you operate a joint account with your brother!
Lose money on every flat?
Is this possibly why we lose money on every HDB flat that we sell – to the tune of about $1 billion a year?
By the way, it was $2 billion a year a few years ago, when we were presumably selling less flats than now.
– Sell more flats lose $1 billion, Sell less flats lose $2 billion?
Here’s another funny analogy for you:
Kind of like make software for $23.8 million – sell away software’s IP (intellectual property) rights for $140,000 to a $2 company – spend another $16.8 million to make another one – which you don’t even own but have to lease?
Back to AIM?
Oh! I almost forgot. Let’s get back to the main issue – AIM.
I’m sorry – but one can easily get distracted by diversionary tactics that can be quite distracting!