Bumper profits for early BTO flats

According to the Straits Times news report “Bumper profits for early BTO flats” (Jul 7) – “Of these, the highest number of transactions were of Sengkang four-roomers with the leases starting in 2009. They cost up to $205,000 when they were first launched around 2005.

Price up 2.8 times

Their average resale price over the past three years was $566,880 – about 2.8 times the highest price home owners paid to HDB.

Analysts noted that the overall market over the past 10 years has improved, with the resale price index rising by about 90 per cent.”

Let’s look at a different 10-year period in history to try to have a different perspective.

Bumper losses for earlier new HDB flats?

If you bought a new HDB flat in the fourth quarter of 1996 (HDB Resale Price Index99.0) at say an average discount of 30 per cent from the then resale price plus a 10 per cent for renovation costs (which the subject news report has ignored) – 10 years later in the fourth quarter of 2006 (Price index 74.9) – you may have lost about 5 per cent of the flat’s original costs after 10 years!

Let’s illustrate an explanation of the above with an example.

1996 new flat price $70,000 (30% discount on resale price $100,000) + $10,000 renovation = $80,000

2006 sold for $76,000 ($100,000 times 0.76 – Price Index dropped 24% from 1996 to 2006)

Loss = 5% ($76,000 divided by $80,000)

Resale flats lost 24% after 10 years?

If you had bought a resale flat instead of a new flat in 1996 – you may have lost about 24 per cent after 10 years!

Resale flats didn’t make money after 12 years?

Also, it took almost 12 years for the Price Index to recover to 99.4 in the third quarter of 2008 from the 99.0 in the fourth quarter of 1996.

40,000 in arrears?

At its peak during this 10 year period from 1996 to 2006 – I understand that about 40,000 HDB households were in arrears over 3 months. So, how many HDB households lost their homes because they couldn’t pay?

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