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Thread: Flats near city cost up to 50% more

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    Default Flats near city cost up to 50% more

    Sep 24, 2008 Wednesday

    Flats near city cost up to 50% more

    Central, Bukit Merah and Queenstown among popular HDB estates

    By Jessica Cheam

    IF YOU want to live in an HDB flat close to the city, be prepared to pay as much as 50 per cent more than if you choose to stay out in the sticks.

    Prices for resale flats in estates near the city such as Central, Bukit Merah and Queenstown have left the rest of the country behind in recent years, according to new HDB data obtained by The Straits Times.

    And what is particularly striking is how fast that price differential has widened.

    PropNex chief executive Mohamed Ismail pointed out that in 1996, the difference between inner city flats and the national average was only around 11 per cent. Now it is around 50 per cent.

    Take a four-room flat in Bukit Batok. In 1996, it sold for an average of $252 per sq ft (psf), while a similar one in Queenstown was sold for $280 psf.

    The HDB's latest second-quarter data shows that the Bukit Batok flat would now sell for about $303 psf while the Queenstown flat commands $458 psf.

    The price gulf will only widen, say analysts, given the shortage of prized flats, and factors like increasing transport costs that make people more inclined to live closer to their place of work.

    In the long run, 'unless there's a successful decentralisation strategy, the gap is unlikely to narrow', said Mr Colin Tan, head of research and consultancy at Chesterton International.

    About 52,000 HDB flats, or 6 per cent of total supply, are in inner city areas.

    The new HDB data puts in stark terms how prices can differ.

    January to July figures showed that resale prices of four- and five-room flats in estates near the Central Business District were about 48 to 52 per cent higher than the national average.

    Popular locations include Smith Street, Tanjong Pagar Plaza, Cantonment Close, Jalan Membina and Stirling Road.

    While a four-room flat commands an average price of $295 psf islandwide, this shoots up to $437 psf in city areas - a 48 per cent jump.

    Similarly for a five-roomer, the average price of $303 psf spikes 52 per cent to $461 psf nearer the city.

    The resale market is the obvious way in but homebuyers also have a chance via the HDB's balloting exercises.

    These are wildly popular, as offered units are in highly coveted central locations surrounded by amenities - and are priced with the HDB's market subsidy.

    In January, in the HDB's latest ballot, 278 flats in Bedok, Clementi, Queenstown and Jurong West received a staggering 9,901 applications.

    The price range for four-room flats was $141,000 to $398,000, the five- room units cost $218,000 to $532,000 and the executive flats $333,000 to $470,000. Prices depended on location and features of the units.

    Some homebuyers, however, have baulked at the high cost of new flats.

    Auditor Ho Koon Woei, 31, said he noted the new flat prices increasing at least $100,000 on average in mature towns in the last two years.

    'Such a hike in prices in a short timeframe makes it more unaffordable for first-timers,' he said.

    The HDB has not held a ballot since January, but analysts expect prices of any upcoming new flats in central areas to match the market prices.

    While private home prices lost steam and inched up just 0.17 per cent in the last quarter, HDB resale prices rose 4.5 per cent.

    Some, such as Mr Tan, feel that the HDB 'should be mindful that it does not add to the escalating price trend' in the resale market.

    The HDB's new flat prices would effectively set a price floor - a level at which resale flats will not be sold below.

    And if resale flats are priced above new flats, and new flats are pegged to market rates, there is a danger of a price spiral, he added.

    'In the pricing of its flats, it should err more towards affordability rather than market pricing,' said Mr Tan.

    However, this does not mean that the HDB should offer such low prices that it affects market prices, say analysts.

    'If prices are excessively cheap, that will affect the existing prices of city properties,' said Mr Ismail.

    Ultimately, he feels demand for city properties will price flats accordingly.

    On a psf basis, HDB flats at premium prices are still far cheaper than private homes in the city, which are priced from $1,000psf upwards, he pointed out.

    'I wouldn't be surprised if in the next 15 years, the premium of a city HDB flat achieves 100 per cent more than a flat in suburban areas.'

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