YOU think our new HDB flats are too expensive?
No problem, we’ll slash the price by $102,000.
That was what developer Sim Lian Group did with its latest Design, Build and Sell Scheme (DBSS) project, Centrale 8, at Tampines Central.
It came under heavy fire for unveiling the costliest new HDB five-room flats at $880,000 last Thursday.
On Tuesday, it decided to cut the price to $778,000, citing that the earlier prices were “indicative” and would be firmed up closer to the actual booking date next month.
But the move raised almost as many eyebrows as the original pricing of $880,000.
If the developer can lower the price by as much as $102,000 for the top-end units, was it trying to profiteer from this public housing project, asked some outraged home-buyers.
After all, it will still make a profit selling the units at $778,000 or it would not have slashed 11.6 per cent from the indicative price.
The 178 five-room units in this development are now priced from $685,000 to $778,000 after Sim Lian released what it called the “confirmed price range” of its Centrale 8 units.
Sim Lian is to date the first developer to cite “indicative prices” for a DBSS launch, only to lower them by so much within a week.
When asked about the accusations of profiteering, its spokesman told The New Paper yesterday: “We want to maintain our point that they were (the previous prices) merely indicative.
“We didn’t confirm that we’ll be selling at those prices. It’s not that we had already set the price. It was a range given but it’s not the set price.”
When asked why there was a huge discrepancy between the indicative and confirmed prices, the spokesman declined to comment.
Property watchers contacted by TNP said that unlike public housing provider HDB, property developers like Sim Lian are not obliged to sell its flats cheaply. But it should also be reasonable with its prices.
SLP International head of research Nicholas Mak said: “If they are accused of trying to make super normal profits, they will not be the first nor the last developer to do this.”
He compared Sim Lian to developers of high-end projects and luxury brands Gucci and Prada.
He said: “A Gucci bag, in the end, is just a bag. But Sim Lian is selling a product that is a HDB flat, not a luxury product. This may not sit well with some people.”
Mr Colin Tan, a research and consultancy director at real estate firm Chesterton Suntec International, said that it has been long time since such a major boo-boo happened in the property scene.
He said: “It’s made worse because this is public housing. You don’t want a stigma that your flats are too expensive. People won’t want to buy for fear of being branded a fool.
“Even for those who are genuinely keen, they would think twice. The demand is there, it’s a question of pricing. Everyone admitted that it’s a good site.”
Under the DBSS scheme, developers are free to set prices for the finished flats which come with features such as better flooring, built-in wardrobes and air-conditioning.
But these flats are subject to HDB regulations.
ERA Realty key executive officer Eugene Lim said that Sim Lian, as a listed company, has to be accountable to its shareholders.
“They got the land through an open tender process where the highest bidder gets the land. It was a good buy for them,” he said.
“But there’s no moral obligation for them to price the houses low. To them, every project has to make money.
“Even if a developer gets the land cheap, they don’t have to sell (the units) cheap.”
Residential projects typically yield a profit margin of about 20 per cent, he said.
In this case, even if the developer lowers the price of its top-tier units, it will still make money, albeit less.
Mr Lim pointed out that land in Tampines Central is limited, so it was probably an opportunity for Sim Lian to push the price a bit higher.
“Unfortunately, $880,000 is fixed in people’s mind. People will remember this, even though it’s just an estimate,” he said.
Sim Lian said yesterday that it received some 1,431 applications for the project.
This is twice the number of flats available – 708 units of three-, four- and five-room flats.
Its spokesman told TNP that the application numbers were within its expectations as HDB had launched some Build-to-Order (BTO) projects last month that may have affected the demand.
“We’re happy with the results and the numbers. The backlash from the public also had some effect and affected some buyers’ perceptions,”he said.
In comparison, its first DBSS project, The Premiere@Tampines, was nine times oversubscribed in 2006.
The developer said the overwhelming response to The Premiere was because it was the first DBSS project in Singapore.
It drew nearly 6,000 applications for 616 flats with indicative prices ranging from $138,000 to $450,000 .
Sim Lian said the confirmed prices were subsequently lower than the indicative prices but it was unable to give exact figures.
Prices of other DBSS flats such as Natura Loft at Bishan and The Peak@ Toa Payoh rose by up to 3 per cent or $20,000 in comparison to their launch prices, reported The Straits Times in 2009.
Mr Colin Tan said the application numbers for Centrale 8 are decent, given that it’s for a benchmark pricing.
He said: “Given the outcry, it’s pretty decent. Some of these applicants are obviously not deterred by the pricing.
“But it looks like there’ll be some unsold units given the two-to-one ratio. But having said that, few developers can sell all their units so quickly.”
Researcher K Ang, 38, who checked out the Centrale 8 showflat last week, thinks the adjusted prices are still too high.
He lives in Sengkang with his family of three in a five-room flat and was hoping to upgrade. But he decided against applying because of the prices.
“I still think the developer priced it too high. It’s still not that affordable. It’s like two times the price of a BTO flat but with better furnishing,”he said.
– This article was first published in The New Paper.