Build-to-Order put on hold – to just build

Published 28 May 2011
The Business Times
By Uma Shankari

HDB goes into overdrive and will build in anticipation of demand; record new supply coming up, but industry players warn about dangers of overbuilding

WITH a new minister calling the shots, the Housing & Development Board (HDB) rolled up its sleeves yesterday and announced a huge new supply of flats as well as its intention to build even before demand is determined.

HDB goes into overdrive and will build in anticipation of demand; record new supply coming up, but industry players warn about dangers of overbuildingHDB said that it would roll out 4,000 new flats in six projects – the largest supply of new flats ever released in a single launch – and also ramped up the supply for the whole of 2011 from 22,000 units to 25,000 units.

HDB will also start to build flats in anticipation of demand – marking a significant shift away from its current Build-to-Order (BTO) system, where a project is built only after confirmed orders are garnered for 70 per cent of the flats.

National Development Minister Khaw Boon Wan announced the policy changes in his Housing Matters blog yesterday.

‘Given robust demand, I told them (HDB) to proceed to build, knowing that the orders will definitely come,’ said Mr Khaw. ‘In other words, build ahead of demand, during this period of demand backlog. We can return to normal BTO approach after we have stabilised the situation.’

Currently, a tender to build HDB flats is called only after 70 per cent of orders have been confirmed; hence ‘build to order’. With the change, HDB will call a tender as soon as architectural drawings and tender documents are ready.

HDB will also bring forward the projects planned for the first quarter of 2012 by a couple of months, which will allow it to raise the number of new units from 22,000 to 25,000 this year.

The new pace of building will be sustained next year, Mr Khaw said: ‘As we intend to ease the $8,000 income ceiling on HDB flats, we can expect additional demand and we have to prepare for that.’

He also hopes to allow more young couples to buy their homes directly from HDB. Currently, 70 per cent of new couples get their first homes through HDB’s BTO system. The rest get theirs in the resale market. ‘This is not bad, but I think there is scope to do more,’ said Mr Khaw. ‘I think we should strive to have the vast majority of new couples start off their first set of homes in HDB, preferably via the BTO route.’

He added: ‘One priority is to help young couples own their own homes as soon as possible, so that they can start their family and have babies. This is a national priority – promoting marriages and births – and the Ministry of National Development must facilitate it to its best ability.’

The announcements drew mixed reactions from analysts and industry players. In particular, there are concerns that HDB’s move to build ahead of orders could lead to oversupply problems down the road.

‘The question that some people will ask is: are they overbuilding?’ said ERA Realty’s key executive officer Eugene Lim. ‘There are some concerns in the market. But I think HDB will definitely watch the take-up very closely.’

Another industry player noted the plans to roll out around 25,000 new flats in both 2011 and 2012 assumes that there is a large backlog of demand from first-timer households.

‘Currently, there are about 15,000 first marriages among Singaporeans a year. But HDB is rolling out 25,000 flats a year. At least 95 per cent of the flat supply is supposed to be set aside for first-time buyers. So if there isn’t enough demand from them, there is going to be a problem,’ the industry player said.

But the ramped-up supply will meet demand from first-time buyers who are asking for more BTO flats in a greater variety of areas, analysts said.

PropNex spokesman Adam Tan said that some first-timers are still put off from buying resale flats because of the high cash-over-valuation (COV) amounts demanded by sellers.

‘COV prices are bottoming out at around $21,000, and many first-time buyers will still be priced out of the resale market for this reason. Hence, they will definitely find great relief in this bumper crop of BTO flats,’ Mr Tan said.

International Property Advisor chief executive Ku Swee Yong said that as more new flats are built, a proportion of them could be allocated as replacement flats for selective en-bloc redevelopment schemes (Sers) so that renewal programmes can also be sped up.

The 4,000 new flats rolled out yesterday are in six different projects spread out over four estates: Punggol, Pasir Ris, Tampines and Woodlands. This gives first-time buyers ‘plenty of choices in relatively popular neighbourhoods’, HDB said.

Including the latest batch of flats, HDB will be releasing around 12,000 new BTO flats in the first five months of 2011.

The BTO supply will also be supplemented by more upmarket public housing units offered under the Design, Build and Sell Scheme (DBSS) and the executive condominium (EC) housing scheme. For 2011, land sites for 4,000 DBSS flats and 4,000 EC units are scheduled for sale.

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