What happens when you tried to outsource a high demand product – Property
I can never understand why would the government want to outsource a PUBLIC housing to a PRIVATE company that would later price the public housing to PRIVATE market prices. So instead of a ‘market rate’ for only resale flats, we now have market rate for NEW public housing. What’s the point of offering ‘better fitted furnishings’ when it comes at such a high price?
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Source: http://www.straitstimes.com/BreakingNews/Singapore/Story/STIStory_680819.html
$880,000: Priciest HDB flats launched in Tampines
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.
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Just because you add in a few ‘luxurious fittings’ doesn’t substantial the $880,000 price tag on a PUBLIC housing that is essentially owned by HDB! This is what happen when you naively think that that it’s fine to let a private company handle a public project and let it charge whatever price it deemed necessary to get some ‘reasonable’ return. A 5-room BTO in Yishun doesn’t cost more than $450-500,000. The nearby DBSS in the exact same area as Centrale 8 cost somewhere from $3-550,000 for a new 5-room flat a few years ago. And here you have a DBSS in Tampines costing almost twice of that. If even a PropNex chief executive couldn’t believe his ears and eyes upon knowing the price tag, there MUST be something wrong with such pricing.
Ultimately, the ones who gains are Sim Lian and the government. Those who end up buying the most expensive units in Centrale 8 (what a stupid name anyway, like Tampines Central or Junction 8 or something) end up paying excessive consumer surplus and saddled in more debts. Not for a private property. But for a public flat. While the location is attractive, the ROI is not. You are better off buying some $300-400,000 5-room flat in some other places and sell it at the market rate of $5-600,000 a few years down the road. Saying that, I must reiterate that most people who stay in public housing do not usually speculate on their property for investment and would stay for a long time.
Even Pinnacle at Duxton, the mother of all DBSS and a much better location than Centrale 8, wasn’t priced at that range when it was first built. The danger is with the impending raise in income ceiling for flats, demand will increase. The current supply crunch will also almost guarantee the Centrale 8 would be snapped up regardless of the crazy prices. The real danger, however, is the price point would be increased for future DBSS projects.
Once again, you have the most ridiculous project undergone under the Minister of National Development’s ward.
Scrutinizing the Singapore government 
You are naive. Almost everyone who has owned a property in the last 10 to 20 years have sold and bought another property if not,several.
Take the EC for instance. Those who bought it about 5 to 10th years ago all laughed to the bank.Many cashed out. It was recently reported EC capital gain out shined private by as much as 50% or higher.
There is fundamentally wrong with the way hdb is classed at the moment. The confusion lies in be called “public”. It should not be called public since it can be sold and bought like any private property
so what the government should do is to reclassify these homes to private so there be no confusion, bickering and doubt what these flats are about.
There should just be low,medium and high quality private housing.Those who want “affordable” housing should live far away from popular locality with full amenities.
In a market economy,Yout get get what you pay for.
Yes, that’s precisely what I pointed out in my other post. There is a difference between public and private housing. There should be clear demarcation between the two. The problem is new hdbs are public housing that behaves like private housing once it goes to the resale market. This is this conflicting system that leads to public housing costing near to $1 million today. Can you imagine how much worse it can become in future with this inflationary pressure? People in the past might have benefited. Not so easy in modern times though. Simply speaking, if you are to fork out $880,000 for a 5-room flat in Centrale 8, how long do you think you have to wait to sell it again to gain more moolas? In the meantime, such ridiculous pricing (and I am not the only one saying so), is putting inflationary pressure allowing the nearby Premiere to benefit from it.
By declaring DBSS under HDB, owned by HDB, with a 99-year lease, and more importantly, it is SUBSIDIZED (CPF Grant), it cannot be considered as private housing. Why should private housing be subsidized? Say hypothetically the private developer can sell a unit for an average price of $500,000. Because there is subsidy, and the private developer knows it, it can charge probably $600,000. Yes, this is a bias example. But it’s a possibility. You mentioned that the government should reclassify these homes to private. Yes, i agree. But no, if it is subsidized by tax-payers money. The fact is DBSS is subsidized.
I don’t agree that there should just be low, medium and high quality private housing. Public housing is still required. If everything is private, land price, being extremely scarce in Singapore, will easily drive the private housing prices beyond most people’s reach no matter how ‘low quality’ it might be. Private developers being private companies has to earn profit. Referring to the memoir by former Perm Sec Ngiam Tong Dow, I would assume that land price in Singapore is valued with Raffles Place as a benchmark. Maybe you would like to do a little research on how much land price had increased in the city over the last 10 years. I don’t think it’s appropriate to use Raffles Place as a benchmark. Do we want a Singapore that is only livable for the rich? We have seen worse housing problems in Hong Kong and Beijing. Do we want to end up like Shanghai where an apartment cost 50 times the average annual income? Moreover, I think we are giving the ‘free market forces’ too much credit. We have seen how an uncontrolled policy on housing resulted in a housing crisis in the States. Of course, you are free to disagree, depending if you are a classical or a keynesian.
Oh, and lastly, please don’t call me naive unless you have official figures that runs contrary to my statement about (I am assuming you are referring to this statement) “Saying that, I must reiterate that most people who stay in public housing do not usually speculate on their property for investment and would stay for a long time.” Changing houses once or twice in a lifetime means they have indeed stayed for a long time and would not be considered as speculative activities.