Thursday, 21 April 2011

An illegal raid on the reserves? Mr Mah Should Explain About Ballooning Land Costs

Mr Mah said that :-

the Worker's Party's proposal to lower flat prices by paying less for the land is an illegal raid on the reserves.

Mr Mah had written a series of special articles for TODAY and compiled them into a handbook. But many are still astonished by the "ballooning" cost of land he used to price his HDB flats.

Perhaps, Mr Mah should explained to the Electorate how lands that were cheaply acquired  in the early 1970s for the HDB, and in the Govt's land bank; through the Compulsory Land Acquisition Acts, could balloon to its current market value "according to objective market conditions and established valuation principles".

Let me also take visitors of this Blog a step back into history of Singapore. Not history about Lanfang Republic or the Sultanate of Demak by PAP new candidate MG (Ret) Chan Chun Sing. They are extinct. Singaporean voters are alive. You can view a video of his "army-styled" speech (100 years and beyond for Singapore) here and a verbatim written copy here.

I managed to dig up some interesting old information and it is available here [the interested parties' names had been blanked out for confidentiality]. It shows the actual land cost the HDB / Govt had paid for a plot of land for the "Development of Clementi New Town" way back in June 1975.

Amount paid by HDB for the acquisition of Freehold Land : S$360,000.
Title : Freehold
True Area of the Land : 12 A 0 R 03.00 P [ 12 Acre, 0 Rood or Rod, 03.00 Perch ]

I was not conversant with the Imperial Land Area units and did a quick check here (See Reference #02 below). The true land area could be converted to square foot (sq ft) as follows :-

12 acres = 12 x 43,560 = 522,720 sq ft
0 rood = 0 sq ft.
03.00 perch = 3 x 272.25 sq ft = 816.75 sq ft.

Total Area = 523,536.75 sq ft.
Cost paid by HDB for land acqusition = S$0.6876 per sq ft (psf) or nearly 70 cents per sq ft (psf).

So what HDB paid for a 523,536 sq ft Freehold piece of land in June 1975 @ S$360,000 can only buy you a 5 Rm HDB 99 year Leasehold flat today. And imagine HDB is building higher and higher, 30 to 40 storeys high, at gross plot ratio of "greater than 2.8". You can refer to the "Table: Revised GPR / Storey Height Typology" here. [This could have been raised further for a bigger population and density].

So if you allow only half of the above plot 523,536 sq ft for building HDB flats and half of it for open spaces, roads,  carparks, etc, - half  for actual building area = 261,768 sq ft X gross plot ratio 2.8 = GFA of at least 732,950 sq ft or equivalent to at least 619 nos. of 5-Rm flats @ 1,183 sq ft.

Hence, S$360,000 divide by 732,950 sq ft = S$0.49 psf GFA or $580 for a 5 Rm flat. If land cost had appreciated 25 times since 1975, then for a 5 Rm flat present value of land = $580 x 25 = $14,500. Not forgetting that HDB flat is just Leasehold and not Freehold.

As a trained pro QS I believe a construction cost of $150 psf GFA is fair and achievable for a high rise HDB block. Hence for a 5 Rm flat, construction cost is about $150 x 1,183 sq ft = $177,450.

Total Cost for 5 Rm unit = cost of land (@25 times 1975 purchase price) + construction cost = $14,500 + $177,450 = approx. S$191,950.

But the HDB is selling a 5 Rm HDB flat (BTO) to you at S$360,000 or a mark-up profit of about 46%.

So what does Mr Mah means by "current market value according to objective market conditions and established valuation principles". Does it mean current market condition is to earn a profit of about 46%.

Even if I allow land cost at 30 X 1975 prices and construction cost at $200 psf, the total cost of a 5 Rm unit is only 580 x 30 + 1,183 x 200 = S$254,000. At sale price of $360,000, the mark-up is 29%.

So what has HDB and the Govt subsidised you?

If the Worker's Party's proposal to lower flat prices by paying less for the land is an illegal raid on the reserves, then Mr Mah could have raided your pockets for the past decades or soon to raid. No wonder MG (Ret) Chan Chun Sing ended his speech to his PAP comrades, "100 years, here we come - united as one!"

MG (Ret) Chan Chun Sing  also said, "The shared perspectives/values must include what our forefathers have practice - that we put the interests of the country and the people before our own - always".

Yes, indeed. Our forefathers had ceded their land rights cheaply to the PAP Govt.

To quote our 4G-core Minister-to-be or even PM-to-be, MG Chan; again,

"I am not pessimistic or fatalistic."

"With gumption and creativity, we will stay together, stay alert, stay alive and overcome the odds of history".

Please overcome these odds of history - By not raiding our pockets and those of our future generations legally. Not forgetting the PAP's manifesto is "Securing Our Future Together".

Reference #01
Abstracted From :-
CNA 20 April 2011


Finally, Mr Mah explained that the Worker's Party's proposal to lower flat prices by paying less for the land is an illegal raid on the reserves.

Under the Constitution, after every general election, the new government is required to manage its expenditure based on its current revenue during its term in office. It cannot use assets which have been accumulated under previous governments, unless the Elected President agrees.

Mr Mah said: "These assets are reserves protected by the EP for future generations of Singaporeans. This system was put in to prevent a profligate government spending money which it had not accumulated. State land forms part of the reserves protected by EP.

"When the government takes state land from the reserves to use, for example for public housing, it has to pay the full value of the land back into the reserves, to replace the land which it has used. This land value is determined by the Chief Valuer, according to objective market conditions and established valuation principles.

"In this case, it is valued for public housing, which is already lower than for private housing. The govern­ment cannot arbitrarily price state land higher or lower as it pleases. Nor can it appoint a Chief Valuer to do its bidding, because the Chief Valuer's appointment is protected, and subject to the approval of the EP."

And paying less for land to build flats was not a casual matter of "left pocket to right pocket" but of raiding the reserves meant for future generations.

Reference #02
Imperial units - Land Area

Reference #03

Optimisation of land use through innovative legislation in Singapore

Reference #04
YPAP March 15, 2010
MND COS Debate on Affordability of HDB flats


  1. rex comments as follows,
    This is the first time i read the Army boy's speech. I am not impressed at all.
    The speech appears to be a collection of motherhood statements and devoid of substance and intellectural thought, creativity and political acumen. I do not understand why this Army boy is being touted by LHL as one with Ministerial potential.
    On the speech itself, I think it would have been a good one in the context of SAF Day, an army recruitment campaign advert, Join The Army kind of message.
    Generally, generals should not take over Singapore politics. Singapore generals are just paper generals, never made life-and-death decisions, never fougth a war, never made contact with business world, finance world, real world. In short they will end up as yes-men in the political hierachy if they are further bolstered up, just another Tin Pei Ling, nothing else.
    This election day, is a no-brainer for me, it is so simple to decide.


  2. Wah the Chief Valuer's appointment is protected, but I wonder who is protecting him ? Our govt, PAP or LKY ?

    So does it mean that if he decides to give a better valuation to his close friends' assets being compulsorily acquired, nobody can really question his subjective judgement as long as he comes up with some valid reasons ?

    Instead of clarifying matters, it seems our Minister is making things more worse and complicated by inviting more questions and further issues to be raised ?

    Is Mah admitting now that our HDB is actually being runned more like a private developer than a public housing board tasked with providing affordable housing for Singaporeans ?

  3. Yes ! All Opposition Parties can use this and many other write-up on this topic in their rallies/ verbal replies to PAP anytime & everytime.
    Thank you Mr Yak for the trouble in compiling.

  4. Great analysis! I liked the way you broke it down to components and backed up your arguments with calculations, documentary evidence, and references to changes to the law. I'm still waiting for the PAP to answer as convincingly without rhetoric.

  5. What an idiot of the highest order , contributing less to the reserves is in no way a raid on the reserves. A raid is when. GIc and Temasek lose billions of our reserves and still get money from the reserves

  6. Why are you guys asking all the sensitive questions? You wanna be a refugee in an other country or face detention? BUT I'm now encouraged
    to join the ranks of you Brave Hearts and ASK!! Hopefully Opposition party members will make note of our grievances and frustration with Govt lies and deceits. Know where to tick on the Ballot Slip!

  7. I bought a resale 3-rm flat immediately after my wedding while waiting for my turn to ballot for a new HDB flat under the balloting system. I selected a flat at CCK, the first & last of the 2 (the other one at Sembawang)D&B flat by HDB architect in 95/96 direct from HDB under the balloting system. The price was at $425k , waited 3 years for it to be built and got my keys only towards end 99. I could not select a flat at a cheaper located as they are ready before 3 years. I need to wait 3 years in order to avoid the penalty of selling a resale, the policy then. I sold my 3 room flat (opp mrt) for a loss in 1999 to take possession of the new flat. I have been staying in this flat for 10 years. Many of my neighbours who had bought the flat direct from HDB then had already cut their loss and sold theirs. The valuation by HDB approved valuers until the last 2 years had been around $325K! I fail to understand why! Considering the money I have spent on renovation and the interest I have paid to service the loan (the interest in the early years was >5% (when CPF interest was >4%), my HDB flat is a negative asset! My other half and I have emptied our CPF to service the flat. We have not much left for old age. Our only consolation is that our flat is spacious. But that also means that we get the least of those govt handouts due to our flat size. There is only feeder service servicing this part of cck. We feel trapped.

  8. @Lye Khuen Way
    "All Opposition Parties can use this and many other write-up on this topic in their rallies/ verbal replies to PAP anytime & everytime."

    i think something along the lines of "If this goes on, your children will not afford HDB"

    it is directed at the older folks, but the younger ones are also indirectly mentioned. so kill 2 birds with 1 stone