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MUMBO-JUMBO HDB REPLY ON FLAT PRICING / HDB: Taking away your lifelong savings

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    MUMBO-JUMBO HDB REPLY ON FLAT PRICING by See Leong Kit 23 July 2004 [ Note for Readers: Please circulate this analysis as widely as possible, especially to HDB
    Message 1 of 1 , Jul 27, 2004
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      MUMBO-JUMBO HDB REPLY ON FLAT PRICING
      by See Leong Kit
      23 July 2004

      [ Note for Readers: Please circulate this analysis as widely as possible, especially to HDB flat owners/buyers --- who have been "taken for a ride" for all these years!!! If anyone knows Mr Chow, please alert him as well.]

      1 Mon 12 Jul 04 ST Forum Page letter "How does HDB price its flats" by Mr Douglas Chow Tuck Kheong.

      Mr Chow had rightly asked the HDB to explain why new four and five-room flats are priced at $200,000 upwards when the construction cost per unit is only about $50,000 --- i.e. a whopping difference of $150,000.

      2 Fri 23 Jul 04 HDB reply "What goes into pricing of HDB flats" by Tay Boon Sun [HDB Snr Public Relations Officer].

      The two main "nonsense" arguments in HDB's mumbo-jumbo reply and my compelling rebuttals in brackets:

      (a) The construction cost per unit figure of $50K provided by Mr Chow did not take into account other construction-related costs, such as piling works, consultancy and project-management fees.

      [ EVEN if the related costs are included, it CANNOT account for the whopping difference of $150K!!! We, Singaporeans, Not Stupid! We were not born yesterday and we are not 3-year old kids. So the HDB had better stop insulting our intelligence with such stupid arguments! ]

      (b) HDB sells flats with a "market subsidy" by pricing NEW flats "below" the price of comparable RESALE flats i.e. since comparable resale flats are selling for around $240K (say), the HDB then decides to "pluck from the air" the round figure of $200K as the selling price of the new flats!!! So that our beloved PAP Government can then boast to its people and the whole world that each HDB flat-buyer is getting a big fat $40K so-called "market subsidy"!!!

      [ WOW, since when did the HDB, as a government agency set up to "supposedly help" its citizens own their homes, thought of such a "clever" approach to "suck monies" from the people??? ]

      3 In the PRIVATE SECTOR, the selling price of private property is based on the following cost-plus approach:

      Selling Price = land cost + construction cost + misc costs (admin,marketing,financing,etc) + developer's profit margin (anything from a few percent to say 20 percent, depending on market conditions)

      To be fair to its flatbuyers, the HDB should thus be following such a "cost-recovery" approach. And if the PAP Government is really SINCERE and GENUINE in helping our people regard Singapore as HOME (both literally and figuratively), it should adopt such an approach to compute the selling price of HDB flats with the following provisions:

      (i) Impute land cost on a nominal basis rather than market value (which will then provide a "true subsidy" ). While private developers have to recover full land costs, the Government [as owner of some 90% of the land in Singapore] can do this. After all, HDB land are all on just 99-year lease.

      (ii) No developer's profit i.e. sell the HDB flats AT BREAK-EVEN COST.

      THROUGH THE ABOVE APPROACH, the Government is then really "helping" the people purchase their own homes "at the lowest possible cost" through reaping the economies of scale in the large-scale development of HDB estates. The HDB flatbuyers will then be getting a "true subsidy" and the HDB will not be "making profits out of the buyers" [In essence, the HDB will be something like a big housing co-operative, providing a "home building service"]

      4 HOWEVER, THROUGH THE CURRENT "MARKET SUBSIDY" APPROACH as stated in the above HDB reply,

      (i) HDB flatbuyers are not really getting a "TRUE subsidy" but an "INVISIBLE market subsidy"

      (ii) The HDB is also actually making "big fat profits" out of its flatbuyers.

      [ Taking the example given by Mr Chow,

      actual construction cost $50K + construction-related costs + nominal imputed land cost + misc/admin costs = break-even cost (say, $80K?)

      Against selling price of $200K, HDB's "big fat profit" = $120K FOR EACH FLAT!!!

      ------------------------------------------------------------------------------------------

      http://www.newsintercom.org/index.php?itemid=43&catid=2

      HDB: Taking away your lifelong savings?

      Posted by DEARCHER in the Sintercom Forum:

      HDB leased flats - our personal asset or liability? Provision of a
      home is an asset, the overcharging is a liability that eats away your
      retirement fund and puts you in debt.

      Calculation of HDB's OBSCENE profit - new flats and resale levy:

      There is only one word to describe it - evil!

      Between 1991 - 2001, HDB built 280,826 new flats [see below].
      Assuming each flat average $100k net profit for HDB, they would have
      amassed S$28.0b net profit from sale of new flats. Using statistics
      (1998-2001) showing that for every single new flat sold, 1.7 resale
      flats would have changed hands, the Resale levy would have raked in
      at least S$19.0b (flats built x 1.7 x $40k*) into HDB coffers for
      doing NOTHING. All these billion$ are deducted from our CPF savings
      within PM Goh's first 11 years in office.

      {Total net income to HDB not less that $47b in just 11 years! - where
      does this money come from? Our savings!)

      *S$40k being average 20% levy on a average flat sold for a
      conservative $200k assumption.
      ** Note: Construction cost per 5-room flat is below $80k.
      ** Note: The $28.0b will be the CPF savings you had paid to HDB, plus
      your future *debt* if you are still paying installments.
      ** Mortgage interest not factored into purchase calculation.
      ** Tenancy lease depreciation (99-year lease) not accounted for.

      This explains why we have to work our asses off our lifetime, just to
      pay for the pigeon hole, and why you can never have enough left
      behind in CPF for retirement use. What happened to the $b's in HDB
      profit, as I didn't see it in the HDB surplus account published last
      month?

      Comments?

      STATS: WWW.HDB.GOV.SG
      2001/2 Yearbook - Dwelling Units.

      1991 / 10452 units built
      1992 / 18482 units built
      1993 / 17888 units built
      1994 / 25987 units built
      1995 / 26185 units built
      1996 / 27484 units built
      1997 / 31312 units built
      1998 / 36609 units built, Resale units 60459
      1999 / 34836 units built, Resale units 57955
      2000 / 27678 units built, Resale units 38828
      2001 / 23913 units built, Resale units 41059

      Stats prior to 1991:

      1960-1965 / 53777 units built
      1966-1970 / 63448 units built
      1971-1975 / 110362 units built
      1976-1980 / 130981 units built
      1981-1985 / 189299 units built
      1986-1990 / 119708 units built

      This message was forwarded to you from Straits Times Interactive (http://straitstimes.asia1.com.sg) by mellaniehewlitt@y...

      Comments from sender:
      Singapore Govt's idea of "subsidised housing take the form of the worlds most
      expensive pigeon holes.

      By artificially inflating the price of land sold to developers, the Singapore
      Government has also contributed to escalating cost of living.

      New HDB 5-room flats too small for their price

      I DISAGREE that HDB five-room flats are too big ('Why buyers shun 5-room, exec
      flats'; ST, March 18). The new flats in Sengkang and Punggol are being shunned
      precisely because they are too small for their price.

      I am the owner of a five-room flat in Punggol that measures a miserly 110 sq m,
      compared to my parents' flat in Clementi, which is spacious at 130 sq m.

      I live with my parents-in-law and my sister-in-law, which makes the average
      living space per person only 22 sq m. Should a baby come along, we would have
      to move to a larger flat in a mature housing estate.

      Many friends I know would rather settle for a four-room resale flat than a flat
      in Punggol, as the size of a four-room flat is about 95 sq m, only slightly
      smaller than a 110 sq m five-room flat. The flats are going for about 60 per
      cent of the price of a new five-room flat, but are smaller by only 14 per cent.
      And they are often in mature estates with better amenities.

      Another complaint about flats in Punggol and Sengkang is the out-of-this-world
      layout. One friend's Sengkang flat has a living room framed by five walls, and
      a triangular kitchen.

      As the new five-room flats are so small, they should be sold at a price
      slightly higher than that of four-room flats.

      ELIZA YEONG (MRS)
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