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Crazy pricing, just absolute madness! Sim Lian must think we're all millionaires!

Jun 17, 2011
$880,000: Priciest HDB flats launched in Tampines
By Daryl Chin

THE priciest-ever new HDB flats went up for sale yesterday under a Design, Build and Sell Scheme (DBSS) development launched in Tampines.

The most expensive five-room flats at Centrale 8 by developer Sim Lian will set buyers back a cool $880,000.

That works out to a whopping $750 per square foot - a price tag more often seen on suburban condominiums.

PropNex chief executive Mohamed Ismail said he did a double take when he first heard about the prices.

'No doubt it's in Tampines, which is a mature estate with many good things going for it, but it is still extremely high for a public housing flat,' he said.

DBSS flats are public housing units designed and built by private-sector developers and they typically come with more luxurious fittings.

Still, the 178 five-room units at the development, which measure between 1,163 and 1,173 sq ft each, will cost almost twice as much as more standard flats sold in the recent Tampines Build-To-Order (BTO) project, where a 1,216 sq ft unit cost up to $444,000.

Smaller-sized units at the project, which is on Tampines Central 8, also do not come cheap.

For instance, a three-room flat measuring up to 667 sq ft will cost up to $510,000, while a four-room unit taking up 904 sq ft is priced up to $683,000.

Prior to this, the priciest HDB flats had belonged to other DBSS projects such as The Peak@Toa Payoh and City View@Boon Keng, where five-room flats were sold at around $720,000.

Market watchers noted that despite the hefty price tag, Sim Lian did not pay a record-busting price for the land. It paid $261 psf per plot ratio (ppr) for the 21,132 sq ft site.

Earlier this month, a Pasir Ris Central site was awarded for $281 psf ppr, while a Clementi Avenue 4 plot was awarded for $271 psf ppr in March.

Said Mr Ismail: 'Other developers will have a keen eye on this, as setting a record price does not necessarily mean a good take-up rate. Even more so with the recent government assurances of more BTO flats in mature estates.'

SLP International's head of research Nicholas Mak said while the location is good, it did not justify the high price tag. 'Another side effect,' he said, 'is that it might encourage resale flat sellers in the area to increase their prices, as buyers would not need to wait for their units to be built.'

When asked the rationale for the high pricing, a Sim Lian spokesman said: 'The premium is due to its locale in Tampines Regional Centre with mature amenities such as banks, three shopping malls and the upcoming Integrated Lifestyle Hub.

'It is also within walking distance to the existing Tampines MRT Station and the future downtown line 3 MRT interchange.'

House-hunter James Goh, 34, said he has been eyeing a place in the east for a while, but a five-roomer at the development might be too costly for him.

But the architect added that given the choice location of the flats, he might consider downsizing.

The 708 units are expected to be built by 2014.

Jun 22, 2011
Prices slashed after DBSS flats uproar
Five-room units drop from $880,000 to $778,000 now
By Cheryl Ong

DEVELOPER Sim Lian Group has slashed the prices of its Design, Build and Sell Scheme (DBSS) flats at Centrale 8 in Tampines by up to $102,000.

The move follows the public outcry at the record prices of the designer Housing Board (HDB) units launched last Thursday, when the developer asked $880,000 for the biggest five-room flats.

Outraged buyers complained to the Ministry of National Development (MND) and minister Khaw Boon Wan, who on Saturday wrote in his blog that consumers who thought the prices too high should give the flats a miss.

Others accused Sim Lian of profiteering, pointing out that while it did not pay a record sum for the land for Centrale 8, it priced the project at record prices of up to $750 per sq ft (psf).

They wanted MND to tell the developer to lower the prices, something the ministry said it could not do because under the DBSS, developers are free to set prices for the finished flats.

Sim Lian's announcement last night that it would cut Centrale 8 prices came hours after the ministry said in a letter to The Straits Times Forum Page that it would be reviewing the DBSS as part of its overall review of housing policies.

Last night, Sim Lian released what it called the 'confirmed price range' of its Centrale 8 units.

Three-room units now cost up to $445,000, down from $510,000. Four-room ones now cost a maximum of $592,000, down from $683,000. And five-room units will now cost up to $778,000, or $663 psf.

The price cuts still keep its five-room units at a record high for DBSS launches, but much closer to the maximum of around $720,000 for five-room flats at previous DBSS launches like The Peak@Toa Payoh and City View@Boon Keng, and $739,000 at Bishan's Natura Loft.

Sim Lian said it arrived at the new prices by taking into account resale prices of HDB flats in the area, the prevailing economic conditions and proximity to the transport network, good public facilities and other amenities.

It also commented on the backlash from the public since it released the initial prices of its units.

'It is regrettable that during the application period, the media and members of the public did not take note of our repeated public emphasis that the price range which we had announced was only an indicative price range, and would not be the final sale prices for the respective types of flat units,' said the statement.

It is the first developer to date to cite 'indicative prices' for a DBSS launch, only to lower them by so much within a week.

Sim Lian Group was the first private company to work with the HDB in 2005 on the pilot DBSS project, The Premiere, also in Tampines.

The Singapore Exchange-listed company's core businesses are construction and property, and its construction arm has been doing contracts for HDB flats for more than 30 years.

The hefty discounts took industry watchers by surprise. Some asked how Sim Lian could have arrived at its original indicative price range, if confirmed prices eventually turned out so much lower.

Said SLP International head of research Nicholas Mak: 'It is a sign that they are bowing to public pressure. It is a lesson to the other developers when it comes to pricing their own products.'

Said PropNex chief executive officer Mohamed Ismail: 'Definitely, I think that Sim Lian's reduction of the price is demonstrative of the fact that people are not prepared to pay such high prices for the flats, whether they are the intended sale prices or not.'

Indeed, MND warned in its letter to the Forum Page that DBSS developers which overprice their flats risk getting a poor response from buyers.

DBSS flats were first introduced in 2005 to offer more choices and variety to meet the demands of higher-income flat buyers.

Since then, 5,500 DBSS flats have been built and sold, or 916 units a year.

In comparison, HDB has launched more than 60,000 Build-to-Order (BTO) flats since the BTO scheme was introduced in 2001, which works out to about 6,300 units launched every year.

ongyiern@sph.com.sg

Don't understand, a nearby HDB resale

Blk 391 Floor 01 to 05 Floor Area 123.00 Price $485,000.00 Date Jun 2011

The pricing is nearly half of what they're asking for...

There is nothing to understand here. Its simple clear profit minded developers. As I was saying in another thread, leave it to the free market and this is what would happen. If you expect the free market to have "competition" to reduce the prices , this is an example of what would happen.

The theory of free market is great, but in reality it does not work without regulation of some sort, this has been shown time and time again over many years, the greatest example of it is in USA, which led to the last financial crisis .

Finally we can put some figures to the term "market subsidy". If free market is charging this amount and you can buy at a lower amount fom HDB, the difference is so called "market subsidy".

I recall reading somewhere that a DBSS equivalent of a resale generally costs around 150k to 200k more. In this case it appears to cost 300 - 400k extra? Isn't that blatantly overcharging for public housing? And if people are willing to pay that amount, how much more are they willing to fork our for private estates?

Homebuyers should vote with their wallets. If they try to rip you off, don't buy.

Sim Land won the land in Aug 2010 at S$261 per sq foot of potential gross floor area.

Back of envelope calculations (using assumptions like 60% LTV and S$250 construction cost), breakeven is probably around S$580 psf.

Before the uproar, the rumored launch price was S$750 psf. Hence, profit margin of Sim Land could be around 28%. Its return of equity could be in 90% range.

After the public uproar, the official launch price is S$663 psf, suggesting profit margin could be around 14%.

Reasonable?

I tend to agree with DY. We vote with our wallets.

Non-aircon hawker centres - prices range from 2.50 to 4.00

Aircon foodcourt - prices range from 3.00 to 5.00

Super high end foodcourt - prices range from 6.00 to 10.00

For the same hawker food, if someone wants to pay more for the "ambience and aircon", then so be it. But if non-aircon hawker centres (normal HDB flats) food rise to 5.00.... I too will complain like no tomorrow. But short of bringing my own food to work, what else can I do?

I'm a little surprised that some people actually believe this is a free market problem.

Given that 80+ % of Singaporeans live in public housing, is it a wonder that private property prices (being restricted to top income earners and foreigners on expat pay) are a lot higher? Also, given that the supply of land for DBSS projects originate from a single source- the government, can we say that competitive free market forces are at work and are to blame for high property prices?

It seems to me that the housing market in SG is quite far from what a free market is. I'm not saying that free markets are perfect but I think the blame being directed at free market forces in this case is a little misdirected.