Many factors considered before price of HDB flat is set

A flat's price is not directly proportional to the length of its lease, as the lease's value is front-loaded to the initial years of the lease. Market conditions, floor level, size and location also affect how a flat is priced.
A flat's price is not directly proportional to the length of its lease, as the lease's value is front-loaded to the initial years of the lease. Market conditions, floor level, size and location also affect how a flat is priced.ST PHOTO: KUA CHEE SIONG

We thank Mr Chua Bean Chong for his letter (HDB pricing does not reflect flat lease period; April 18).

In pricing new flats for sale, the HDB takes into consideration several factors, including the prevailing market conditions, the flat's attributes (for example, its remaining lease, the floor level, size and orientation) and its location.

A generous discount is applied to every flat before the final subsidised price for Singaporeans is arrived at.

We adopt the same pricing principles for flats sold under the Sale of Balance Flats exercises.

The length of the remaining lease of the flat is just one of the factors used to determine its price.

The two four-room flats cited by Mr Chua were offered in the November 2016 Sale of Balance Flats exercise.

The unit in Ang Mo Kio Avenue 5, priced at $357,200, is a repurchased flat with a lease of 62 years left, not 52 years as indicated by Mr Chua.

This seventh-floor unit is close to amenities such as the Ang Mo Kio MRT station and bus interchange, Ang Mo Kio Hub and Town Centre.

As for the $404,000 unit in Ang Mo Kio Street 21, although it is a new flat with a 99-year lease, the unit is on the second floor and located on the western fringe of the town.

Given the widely differing attributes of the two flats, it would not be appropriate to make a direct comparison of their prices.

Furthermore, the price of a property is not directly proportional to the length of its lease.

Based on valuation principles widely used by professional valuers in Singapore, a lease's value is front-loaded in the initial years of the lease to take into account the time-value of money.

Ignatius Lourdesamy
Director (Marketing & Development)
Housing and Development Board

A version of this article appeared in the print edition of The Straits Times on April 27, 2017, with the headline 'Many factors considered before price of HDB flat is set'. Print Edition | Subscribe