Slower sales for HDB's condo-style projects

Renewed interest in property more focused on private, HDB resale sectors

The numbers show it: Singapore has been gripped by a buying frenzy that seems to have pervaded every segment of the property market.

Sales volume for HDB resale flats has surged 58 per cent in the second quarter, and private home sales have even spread from the mass market to the upper-mid-tier segment.

But while sales have been brisk at condos, the pace has been somewhat slower in the HDB hybrid condo-style flat sector, also called Design, Build and Sell Scheme (DBSS) projects.

These condo-style HDB flats have better finishes and facilities, and are built by private developers.
A survey by The Sunday Times shows that sales at three centrally located DBSS projects - The Peak@Toa Payoh, Park Central at Ang Mo Kio and Natura Loft at Bishan - do not seem to have moved as briskly compared to the pace seen in the HDB resale market and for private mass market homes, where projects such as 8@Woodleigh in Potong Pasir were fully sold out in a short timeframe.

Sales are hovering at the 70 per cent to 75 per cent level, despite the fact that buyers no longer have to ballot and can buy a flat via walk-in selection.

Analysts note that 70 per cent is a decent level of sales but point to a number of reasons these DBSS flats have not performed as well as their peers - the exception being Parc Lumiere at Simei, which has sold 93 per cent of its 360 flats since its April launch.

Firstly, the target audience - HDB home buyers - are highly price-sensitive. Prices for bigger flats - hitting the upper range of $600,000 and just over $700,000 each - are out of reach for many buyers, say analysts.

This is why Parc Lumiere was a sell-out, said PropNex chief executive Mohamed Ismail, although its location is less central. 'Most of the flats were priced below the $500,000 psychological barrier.'
Also, the only flat types left are five-roomers, which may be too big for young couples buying their first property.

Secondly, new private projects have been attractively priced by developers during recent launches, narrowing the price gap between DBSS flats and private condos.

'Home buyers will prefer to buy private property, especially if compared to the higher-range DBSS flats which cost up to $730,000,' said Mr Ismail.

Furthermore, DBSS flats are subject to HDB rules such as the $8,000 household income ceiling, ethnic quota and a five-year minimum occupation period.

With this income ceiling, apartments priced above $700,000 will be a stretch for first-timers, said property veteran Nicholas Mak, former head of research at Knight Frank.

Amid the recession, such buyers are also more conservative and are unlikely to commit to pricey homes, he said.

Such DBSS projects, however, will start to see renewed interest if and when private property prices start to creep up, say market watchers.

'When this happens, there will be a distinct price jump between DBSS properties and private condos,' said ERA Asia Pacific associate director Eugene Lim.

Then, such HDB condo-style flats will appeal to those who cannot afford private property but find the main supply of HDB flats too basic, added Mr Ismail.

This is already starting to happen, according to DBSS developers.

A spokesman for United Engineers, which is developing Park Central, said that with the recent property market warming up, 'there has been an increase in sales queries and appointments at our

sales office, especially in the months of June and July'.

All DBSS developers have so far held on to their prices despite the recession.

Meanwhile, other developers such as QingJian Realty, which built Natura Loft, are pulling in buyers in innovative ways such as holding lucky draws in which home buyers stand to win cars.

As to whether DBSS buyers can make a profit from resale demand in the future - after the five-year occupation period - this will depend on how high prices are in the private mass market at that time, added ERA's Mr Lim.

Source: Sunday Times, 26 July 2009