Condo-Style HDB Flats Losing Allure

Source : The Strait Times, Dec 12, 2008

Falling prices in private home market chipping away at demand for DBSS flats

PRICEY condo-style HDB flats have not been spared in the property downturn, going by what has been left for sale at Park Central @ AMK.

While over 70 per cent of the project's 578 units have been sold, the larger five-room units costing $600,000 to $670,000 each are still available.

These levels put the flats in the same price bracket as older condominiums, which might prompt some potential HDB buyers to turn to the private home market, where prices are falling.

Developer United Engineers announced the figures yesterday, and also said foundation works had begun at the Ang Mo Kio estate, which is being developed under the HDB's design, build and sell scheme (DBSS). Under the scheme, public flats are designed, built and sold by private developers.

Sales at Park Central have been favourable in view of the challenging economic climate, said Mr David Liew, the managing director of the group's integrated facility management and property development business.

Buyers include young couples, retirees and those with proceeds from collective sales, the group said.

The DBSS concept has been quite popular, but some experts fear the fall in private condo prices could leave buyers spoilt for choice.

Price is the key factor in DBSS projects as they are targeted at HDB buyers whose household income must not exceed $8,000 a month.

'It's a price-sensitive sector. These buyers can choose between HDB flats and lower-end condos,' said Associate Professor Sing Tien Foo, the deputy head of the National University of Singapore's real estate department.

'During a downturn, the price gap between these segments will narrow, so demand (at DBSS projects) may be affected,' he noted.

Most DBSS flats are priced at $500,000 to $700,000 each, roughly the level for executive condos, said ERA Asia Pacific associate director Eugene Lim. 'There is already an overlap.'

For a $600,000 unit, the monthly instalment on a 30-year, 80 per cent loan is about $2,000, assuming an interest rate of 2.6 per cent.

When the property market was rising in 2006, DBSS products met the needs of buyers who could not afford private homes.

The first such project, Premiere @ Tampines, was an instant hit, drawing 5,700 applications for 616 homes in late 2006. Although it sold only 500 flats initially, long queues formed when the remaining units were released for sale.

City View @ Boon Keng received 3,500 applications for 714 flats early this year, but only 460 were sold. Nearly 90 per cent of the flats have since been taken up, including all the three-roomers.

Park Central, Singapore's third DBSS project, garnered more than 2,300 applications. Prices average $490 to $500 per sq ft, putting the four-roomers at between $400,000 and $500,000 each.

The fourth DBSS project - Natura Loft in Bishan - saw about 680 applications for 480 flats last month. Its four-room units go for $465,000 to $586,000 each, while its five-roomers cost $600,000 to $739,000.

Once prices go above $600,000, the flats will be competing with old leasehold condos, executive condos and bigger executive flats, said Knight Frank's director of research and consultancy, Mr Nicholas Mak.

Unlike exec condos, which are initially subject to sale restrictions similar to those on public housing units, but become fully private after 10 years, a DBSS unit is just a value-added HDB flat, he said.

Indeed, demand for DBSS flats might be more severely affected than that for other segments as potential buyers have more choices, said Dr Sing.

Nevertheless, Mr Mak feels the DBSS concept is sustainable if the Government accepts lower land prices.

The problem is that most developers of DBSS sites bought them in good times.

There are two DBSS projects slated for launch in the first half of next year: one in Simei and a huge project of nearly 1,200 units in Toa Payoh.