In my postings "The Property Bubble and Investment Trap Part VI and VII", I have demonstrated generically why purchasers of HDB DBSS and EC purchasers are made to bear high land cost arising from an inherent weakness of the land bidding system and also construction costs which is non- transparent to the buyers.
Analyses of the land bids showed that there was always a ridiculously high bid (about 30% higher) which won. I had highlighted that land cost was chasing after the high contruction costs till a peak was reached in 2008 due to high steel prices. Although steel prices had consolidated substantially since 2008, and fallen from US$1,150/ton to about US$700/ton, some 35~40%, we have not seen construction costs falling to give us lower property pricing. Quality finishes such as Italian marble and designer tiles should also have fallen with the shrinking Euro$. Averaging it out, real costs should have gone back to just its historical base., but why do we still have to pay ridiculous prices for DBSS, EC and mass market condo at between $550 psf ~ $830psf ?
I was curious that no question was reported as raised by our MPs to the MND Minister in the Parliament sitting on 15 September 2010 on the land bidding system, and more specifically; its implications on DBSS pricing, in the light of the anti-speculation measures taken recently.
To answer my own curiosity, I searched the Parliamentary Q and A link in the MND website, and I was proven wrong. There you are, Question 549 by Mdm Ho Geok Choo (See Reference # 2 below) and we have another "Missing the point Minister" who had earlier been "Caught-Off-Guard" :-
Part (b) and (c) reads :-
(b) whether there will be an increase in the prices of DBSS flats; and
(c) how will the Ministry ensure that there will be enough DBSS flats and their prices are within the means of all those who are eligible.
And see how the MND Minister skirted the issue in his oral answer before the House :-
"The large supply will help ensure that DBSS developers set their prices at reasonable levels. They have to bear in mind that DBSS flat buyers have alternative options such as resale flats, ECs and private condominiums, and even Build-to-Order (BTO) flats for households earning under $8,000. If prices are set too high such that the flats are not affordable to the target group, the developers face the risk of not being able to sell their flats."
The Minister assumed that by increasing supply of lands for DBSS and EC, the price of DBSS flats will automatically be lowered and made affordable. The HDB does not set the prices of DBSS flats. The developers and contractors who won the lands will set the price. When the land bid is high, developers and contractors still has to recover all land and construction costs. High land cost constrains the budget for construction costs and in total, they will manifest in higher sale prices for DBSS flats or EC. Managing land supply alone will not solve the problem by itself. This explains why certain analysts thought it will be "wishful thinking on anyone's part to think prices will correct anytime soon".
With the raising of monthly household income cap to $10,000, there will be more demand for DBSS flats, although some may opt to wait for mass condo market prices to consolidate. The effective thing to do is review the land bidding system. However, this shrinks and hurts the GOVT's pockets and so the MND Minister would certainly skirt the issue and left it for the market mechanism to "fight-it-out" and cure its own woes. The Transport Ministry could come up with complex formulas to calculate "distance-based" fares for SMRT and Transit Link, so why is the GOVT (HDB and URA) not doing anything to cure this inherent ill of the land bidding proces?
The Minister seemed more concerned about his "eco-farming" projects in China" rather than to watch over our property "homeland security" industry and affordability issue while keeping the Govt's purse fat. Point that the Govt. has no obligations to help HDB dwellers upgrade to private properties is noted. But if property prices spiral, the Govt. has a certain responsibility to ensure that it is not indirectly supporting "speculation".
Reference#1:-
Reference#1:-
Straits Times Online
Sep 16, 2010
By Amanda Lee
TWO new residential sites were released for sale on Thursday by the Urban Redevelopment Authority (URA).
The sites at Sembawang Greenvale (Phase 3) and Stirling Road can potentially yield about 560 housing units, offering home-buyers with more housing choices.
Located along Sembawang Road, Sembawang Greenvale is a new housing estate planned by URA and is close to Sembawang Park and Beach.
Phase 1 and phase 2 of Sembawang Greenvale were sold in October 2007 and April 2008 respectively, the remaining 14 land parcels will be for sale under Phase 3 and is launched for sale under the confirmed list.
The site at Stirling Road is made available for application for sale under the Reserve list of the second half of 2010 Government Land Sales (GLS).
Centrally located, it is close to Queensway and Alexandra Road as well as Queenstown MRT station. It will be released for sale if the criteria for triggering of the site are met.
Reference#2:-
Oral Answer by Ministry of National Development on the supply of Design, Build and Sell Scheme flats and Executive Condominiums
15 SEPTEMBER 2010
Question No. 549
Question by: Mdm Ho Geok Choo
Mdm Ho Geok Choo: To ask the Minister for National Development (a) whether there will be enough Executive Condominiums and flats under the Design, Build and Sell Scheme (DBSS) to cater to the needs of those with a monthly income of $8,000 to $10,000; (b) whether there will be an increase in the prices of DBSS flats; and (c) how will the Ministry ensure that there will be enough DBSS flats and their prices are within the means of all those who are eligible.
Answer
1 We have widened the housing options of first-timer households with monthly incomes between $8,000 and $10,000. In addition to Executive Condominiums (EC), they can also buy new flats under the Design, Build and Sell Scheme (DBSS) with a CPF Housing Grant of $30,000.
2 To cater to the demand from these households, HDB is ramping up the supply of land sites for DBSS and EC development. In 2010 and 2011, HDB plans to release land sites for about 7,000 DBSS flats and 8,000 ECs. These numbers are significant. In two years, we will almost triple the current stock of 4,000 DBSS flats and double the current stock of 10,000 ECs that have been launched for public sale since the inception of these schemes.
3 The large supply will help ensure that DBSS developers set their prices at reasonable levels. They have to bear in mind that DBSS flat buyers have alternative options such as resale flats, ECs and private condominiums, and even Build-to-Order (BTO) flats for households earning under $8,000. If prices are set too high such that the flats are not affordable to the target group, the developers face the risk of not being able to sell their flats.
Date: 15 September 2010
Reference#3:-
TODAY Sep 16, 2010
Instead, says Mah Bow Tan, Govt making things more equitable for both them and HDB flat owners, alike
By Esther Ng
Part abstract
~~~~~~~~~~ As for MP for West Coast GRC Ho Geok Choo's question on whether there would be enough executive condominiums (ECs) and flats under the Design, Build and Sell Scheme (DBSS) to cater to the needs of those with a monthly income of $8,000 to $10,000, Mr Mah said HDB was ramping up the supply of land sites for DBSS and ECs.
HDB plans to release land sites for about 7,000 DBSS flats and 8,000 ECs in 2010 and 2011.
In two years, HDB will triple the current stock of 4,000 DBSS flats and double the current stock of 10,000 ECs that have been launched for public sale since the start of the scheme. ~~~~~~~~~~
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