New HDB BTO prices defy gloom

Source : Business Times - 14 Nov 2008

Private home prices may be looking shaky, but the Housing and Development Board (HDB) has launched the 750-unit Punggol Arcadia with five-room flats going for as much as $356,000 to $416,000.
This represents an increase of between 7 and 8 per cent compared to the neighbouring Punggol Sapphire, which HDB launched six months ago.
Both Punggol Arcadia and Punggol Sapphire are being sold under HDB’s Built-to-Order scheme (BTO) and both are about equal distance to the Punggol MRT/LRT station.
In February this year, HDB also launched Punggol Spring, which is twice the distance away from the MRT/LRT station. Launch prices of Punggol Spring were about 20 per cent lower in comparison to Punggol Arcadia.
The prices of new HDB flats do take into account resale HDB prices. But it is not known exactly how this is factored into new flat prices.
In Q3 2008, HDB’s resale price index rose 4.2 per cent, and 12.4 per cent in the first nine months of 2008.
While the location of Punggol Arcadia is ‘attractive’, ERA (Asia Pacific) associate director Eugene Lim notes that the pricing is also close to HDB resale prices nearby.
‘In terms of prices, the current resale prices for four-room flats at Punggol Field blocks 201 and 202, which is diagonally across Punggol Arcadia and a slightly longer walk to the proposed town centre and MRT station, are $300,000 to $330,000. Five-room resale flats in the same locality are selling for $360,000 to $420,000,’ revealed Mr Lim.
Four-room flats at Punggol Arcadia are priced at between $269,000 and $327,000.
Still, Mr Lim expects take-up to be good.
Not as optimistic is PropNex CEO Mohamed Ismail who believes that BTO flats are generally supposed to be the cheapest subsidised HDB flats.
‘In fact, such flats should be priced about 20 per cent cheaper than resale flats in the same area. Otherwise, buyers may as well go for a resale flat where they do not have to wait to move in and can enjoy grants of up to $70,000,’ adds Mr Ismail.
Mr Ismail concedes that the prices for Punggol Arcadia may reflect rising construction costs. Nevertheless, he feels that demand for Punggol Arcadia will be affected.
According the HDB data, only 262 applications were received for the 750-units available on the first day of applications yesterday.
Describing HDB pricing as ‘reactive’, Cushman & Wakefield managing director Donald Han asked: ‘How do you price flats now?’ Mr Han said that if one considered the rising HDB resale price index and the average cash-over-valuation of resale flats, ‘HDB’s adjusted prices could even be considered at the lower end’. According to HDB data, he median cash-over-valuation amount of all resale transactions in Q3 2008 was $19,000.
Mr Han also did not rule out that demand for HDB flats could be sustained by downgraders from the private residential market.
Still, given that HDB resale prices will eventually feel the impact of the global financial crisis, Mr Han believes HDB prices for new flats will be adjusted down accordingly.