Tuesday, July 19, 2011

Wrong to say prices for new flats are falling: Khaw

IT IS wrong to compare the prices of the latest Build-to-Order (BTO) flats - offered last week - and those launched in May and conclude that the Housing Board's prices for new flats are coming down.

National Development Minister Khaw Boon Wan said this yesterday and added that there is no reason for a sharp decline in prices unless market sentiments dip.

Speaking to reporters after his first official visit to the HDB Hub, he noted that 'pricing a flat is quite tricky as there are many factors at play', citing variables like the floor the unit is on, location and proximity to amenities like MRT stations.

The prices of HDB's new flats are typically pegged to prevailing resale prices but are discounted.

Referring to previous media reports, Mr Khaw noted that in each BTO launch, there is a range of products 'so you cannot just look at the July BTO, the lowest is so much, and then the May one, and say there is a 18 per cent drop'.

In last week's launch of 3,600 BTO flats in seven locations in Sengkang, Tampines, Jurong West, Bukit Panjang and Yishun, the indicative starting prices for three-, four- and five-room flats were $137,000, $217,000 and $274,000.

In May, the starting prices for 4,000 BTO flats in Pasir Ris, Punggol, Tampines and Woodlands were $166,000, $264,000 and $335,000 respectively.

Calling broad-based comparisons akin to comparing apples with oranges, Mr Khaw added: 'What I'm trying to achieve at this stage is to try to stabilise the pricing. So you can largely see that prices are not increasing but it is also not dropping sharply because there's no reason to... unless the market begins to drop.'

Market watchers have said the BTO rollouts in May and last week, after Mr Khaw assumed the National Development portfolio, demonstrated his commitment to ramp up supply aggressively to alleviate demand while being cost-effective.

According to official estimates, resale flat prices have climbed a further 2.9 per cent in the second quarter, following a 1.6 per cent increase in the previous quarter and a 14.1 per cent hike last year.

Data from real estate agencies also indicated that cash premiums, paid on top of a flat's valuation, have been rising as much as 50 per cent to $32,000.

This is likely to affect price-sensitive first-timers most.

In new flat launches, 95 per cent of the supply is set aside for first-timers.

Mr Khaw also referred to his recent blog post on Sunday, which said that almost all applicants who ballot for a unit that is twice oversubscribed would get a chance to select one because many applicants back out. Calling such data crucial to him as a policymaker, he said that 'I need to know this - that a subscription of two practically means a 100 per cent chance'.

Applying this principle to May's BTO, which was about four times oversubscribed, he added: 'I can be assured now that I think quite a big number will have a chance to say 'yes'.'

On the topic of larger, combined launches which he advocated for last month to reduce the frequency of repeated disappointment, he said: 'The key is that you must push out more, and (with a) wider range. So previously, when HDB releases small launches, in fact, it's worse.

'Each time you release a few hundred units, everybody rushes for these hundred units and many will get disappointed for sure.'

So far, 15,500 new flats have been launched this year. HDB has said it is on track to offer 25,000 in all by year-end.

Asked if more flats would be released next month, Mr Khaw said while he could release them in small batches, he saw 'value in having sufficient critical mass', and that he would be combining the next two months' launches into one.

A review of the income ceiling for first- timers to buy BTO flats, as well as the Design, Build and Sell Scheme (DBSS), is still under way, he said.

Right now, the monthly household income qualifying criteria is up to $8,000.

Mr Khaw also explained why prices for new flats and surplus ones under the Sale of Balance Flats (SBF) exercise are different.

'Because they (SBF) are almost available, so pricing them would have to be different. Because if the product is available next month, versus three years' time, obviously you have to price it differently, otherwise it would not be fair to those buying BTO flats today,' he added.

To supplement the main flat supply this year, Mr Khaw also promised 2,000 surplus flats, none of which has been launched to-date.

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