Why Is Brother's Flat Cheaper?

Source : The Electric New Paper, February 21, 2008

HDB says prices of new flats pegged to current resale prices, flats in outer areas cheaper

# Brother buys flat last year. Now, he wants to buy one

# Same block, same floor, same size, so...

HIS brother had bought a new four-room HDB flat for $280,000 under the Balloting Exercise last February.

Earlier this month, he applied to buy a similar unit there, only to find out that the price had gone up to $364,000 - an increase of about 30 per cent.


















The unit was the same size and was even on the same floor and block in Bukit Merah.

The buyer, a manager who wanted to be known only as Andy, felt that the price increase did not make sense.

'I was shocked when I saw the price online. Even my brother couldn't believe it. If there's no change in construction cost since the block is already built, why did the price go up?

'In general, the prices of flats in that area have increased, but not by such a huge jump.

'What's the explanation for the hike?' he asked.

HDB said that it is not appropriate to compare the twoprices as there is a one-year difference between the two sales launches.

In the pricing of new flats, HDB said it takes into account the market values of equivalent resale flats in the area.

The HDB resale market did exceptionally well last year, and prices increased by 17.5 per cent compared to year 2006.

Andy, who is in his 40s, decided to apply for a four-room flat in Bukit Merah despite having to pay more than his brother.

Blocks of HDB flats at Bukit Merah, one of the most popular HDB estates in Singapore.

He is currently living in a HDB flat in the central part of Singapore.

'I've little choice. I want to live near my mum, who is living with my brother,' he said.

But another home-owner we spoke to in that estate is more than happy with the increased value of her new flat, even though she will not be able to sell it for five years.

Housewife Joyce Soh, 37, saw her flat's value go up by more than 20 per cent in a year.

She had bought the five-room flat last year and moved in three months ago.

She paid $408,000 for a 1,184sqft unit on the 24th floor.

Today, a similar-sized unit in the same block is going for about $502,800 in the latest Balloting Exercise, although it is on a lower floor, according to information from HDB's website.

POPULAR AREA

Ms Soh, who relocated from Taman Ho Swee, said she is not surprised by the increase in price.

'This location is very central and it's near the city,' she said.

'Prices of other HDB flats in this area are also some of the highest, too,' she said.

Bukit Merah is one of the most sought-after HDB estates due its proximity to town.

Record prices have become the norm in this estate and in nearby Queenstown.

Last June, a five-room flat in Bukit Merah was sold for $720,000.

In January, an executive flat in nearby Queenstown was sold for a whopping $890,000 - one of the most expensive Housing Board flats in the country.

PropNex CEO Mohamed Ismail said it is unusual for prices of newflats to increase by such a huge percentage within a year.

He said it could be because flatprices for the Balloting Exercise (BE) last February were decided before the HDB market started to pick up during that quarter.

Mr Ismail also said that the HDBresale price increased by only 2 per cent for the whole of2006.

Last year, HDB resale prices rose by 1.3 per cent in the firstquarter and soared to 6.6 per cent in the third quarter.

Mr Eric Cheng, executive director of HSR Property group, said that market valuation for resale flats has gone up at least 30per cent compared to last year.

Mr Cheng said: 'If resale prices increase, logically, new flat prices will increase too.

'And prices in Bukit Merah are also higher because of location and amenities.'