Tuesday, July 19, 2011

The Trick In Pricing A Flat

You know PM Lee has a tough problem ahead integrating Tamil speaking and Hindi speaking Indians when Singaporeans can't even understand Khaw Boon Wan's lingo. "You cannot just look at July BTO, and the May one, and say there is a 18 percent drop," he wrote in his blog. For the benefit of sanity, let's assume he was typing while standing on his head.

Perhaps Mah Bow Tan is threatening to file a police report about the raid on the reserves. Perhaps the guy who developed the Nissan Nassim Jade condo is crying foul - you actually thought the family discounts were charitable write-offs? Whoever is wearing the brass knuckles must be powerful enough to convince the Minister to declare, "Wrong to say prices for new flats are falling." In Orwellian doublespeak, of course.

The term "Application Rate" in above table has to be another challenge for comprehension. Application rate of 2 is supposed to mean 2 applicants for one flat. But does that mean in March 2011, there were as many as 8 families scrambling for one housing unit? It turns out that the number refers to subscription rate, as in: "almost all applicants would get a chance to select a flat if the subscription rate worked out to be two applicants per flat." In plain English, a BTO launch is just another IPO.

The Minister maintains, prices of HDB's new flats are typically pegged to prevailing resale prices but are discounted. That was the Mah folly, and it looks like Khaw is continuing the saga. So much for separating the essential good from the speculative luxury. Those queuing in the HDB office will be no different from those in the TOTO lines, playing a game of chance to flip the property for quick bucks. "Pricing a flat is quite tricky as there are many factors at play," Khaw told reporters. Please, spare us the trickery, what the people want is honest to goodness transparent accounting. Those who prefer sleight of hand have already been burnt at the casinos.


  1. Why tie marriage to a flat?
    Why must couples wait three years to start a family?
    What about singles?

    Scrap BTO.
    Scrap DBSS.

    What's so difficult in forecasting demand when population growth is within the government's control?

    Just built it!

  2. Pricing a flat is NOT tricky. Don't believe? Just open the books and HDB financial accounts for all Sinkies to see. I'm sure there will be at least 100 PhDs in finance, economics and real estate who will be able to calculate for you what a reasonable price with a 10% profit margin will be for HDB flats.

    And land cost doesn't count. Becoz HDB doesn't sell the land to you, only the flat itself (on 99-yr lease term). You don't get any Title Deed. You only get Lease Agreement.

    If you buy 99-yr leasehold condo or EC, then you are buying both the land AND the flat (both on 99-yr lease term). You get a Title Deed and are master of your domain. 20-30 years down the road, you can choose to go for enbloc and earn millions more.

  3. Its Nassim Jade and not Nissan Jade :)

  4. This reminds me of the MWD *mass weapon destruction of the recent mortgage derivatives that caused the collapse of housing market in US.
    If they (the creator) cannot explain it in simple clear terms to the lay people and give them the breakdown, then their purpose and intent is to cover up and confuse them, as they can't convince them. So they made it look like some kind of complex mathematical problems that only the math professor or scholars can understand or solve it. BS!!
    If they can sell it, they can explain it. Question is , do they want to come clean about it!
    All that fudging to & fro with complexity etc are testing the people's patience and insulting their intelligence.
    Lay out the figures and books and let the people SEE and DECIDE, with their eyes open with the information they have. The govt is NOT the private entity. They have no rights to deny the people's its transparency when they are using taxpayers money to build these project to begin with.

  5. Of course, pricing a flat is very tricky here because of a government without total accountability and transparency to its people. There must be something that cannot disclose to the public since the pricing is persistently opaque to its people. Perhaps only when real change comes then there could be retro-review on its secret.

  6. I'm no millionaire Minister-Scholar-Elite.

    My dumb idea of making HDB affordable and pricing simple is as follows:

    1. Cost to build an HDB flat:
    Keep this as low as possible.

    2. Add a profit margin to the cost:
    If PAP must insist on making money from non-elite Singaporeans.

    3. Price of HDB flat = Cost + profit margin

    And I blogged this in just 5 minutes.

    Is it this simple or am I missing something?

  7. to anon 1:28pm
    the problem is the profit margin.
    to peasants 10% is more than enough but to the MIW, never enough.
    the humongous salary they give themselves which the majority never agree to, says it all.

  8. The problem with citing "complexity" and the whole saga-drama about HDB boils down to 1 thing only. THAT is HDB runs by the Govt will NOT and will NEVER want to make a loss. They cannot be at the receiving end of the loss , ONLY Profits. Stamp fees, transfer fees, gain tax after resale etc .. The same mentality goes to every of the key essential enterprises they make - transport, healthcare etc .

    Altruism has been losing out to Profits/Cash. Where do the heart and desire to serve its people come from one might ask?

  9. IF you can't explain it simply, you don't understand it well enough.
    - Albert Einstein

  10. The Hard Truth is that HDB can sell new 5-rm HDB flat for $170K and STILL EARN 20% PROFITS. But like that, PAP ministers salaries will be $300K, no more $3 Millions. Also no more 12-month GDP bonus liao. That's the TRICKY PART.

    Frankly if I'm PAP elite, I will also act blur and feed bullshit to the people. You die your business right? My business is to look after Number 1. As long as I and my family can enjoy 1st class retirement in Switzerland can already.

  11. Maybe someone can ask the Minister to answer this question honestly : if it is meant to be 'BTO' or build to order, why is it that there is always this oversubscription of flats during each registration exercise ?

    Why can't HDB just bring forward the construction of the flats so that there should be an adequate supply of flats to meet the demand at any point of time such that there is really no reason for any new HDB applicant to reject any unit at their 2nd or 3rd attempt at balloting.

    The cunning trick must be to make sure the supply is always well below the demand at any point of time to create this illusion that the flats are always in hot demand and therefore must be very affordable, isn't it Minister ?

  12. ask warren buffet if he will buy a hdb, if the answer is no, you know it is over priced ;)

  13. Buyers drive up the price, not gov or private developers lah. The gov only blame is to make SIN prosperous and stable, and hence a good place to put your money in. You want to bring down home prices? Turn this into a communist country or let corruption sets in.

  14. To: Anonymous@July 19, 2011 6:01 PM,

    According to the 2010 Mercer Human Resource Consulting cost-of-living survey, Luanda, Angola has the highest property prices in the world.

    Luanda, Angola is no communist country, and it is safe to say Singapore can't be more corrupt than Angola.

    Also, are property prices dirt cheap in Beijing and Shanghai, the last time I checked, both of these cities belongs to communist China.

    It is fine if you choose to be a PAPAYA whore, just be a smarter one!!!

  15. CORRECTION: Also, are property prices dirt cheap in Beijing and Shanghai, the last time I checked, both of these cities belong to communist China.

  16. I wonder how the The Workers Party will perform in Parliament? Will they REALLY get the party in power to open the books?



    RH: That the LIEgime built only 3,183 flats in 2008 is totally incomprehensible. That this 3,183 is only a tiny fraction of what is needed can be predicted as early as 1986 -- when 38,379 babies were born. They would now be ~24 years old, coupling into ~19,000 couples so needing ~19,000 flats [actual 2008 marriages = 24,596, close to what could have been predicted from the 1980s. Not that 1986 was special -- other than my son's birth -- the ~40,000 babies is a longtime constant so doesnt take a Great Forecaster to see]. Add in the insane 90,000 new PRs in 2008 and another 20,000 new citizens and you have the STUPIDEST GOVT OF ALL TIME!!! Note: I have not factored in deaths because deaths do not add much to the supply of flats every year. Nor have I factored in private housing since they are so expensive 85% are forced to live in tiny HDB flats built by the govt monopoly.