One-third of applicants unsuccessful in BTO exercise

On Thursday, MDA-licensed — and therefore we can trust to be factual and not misleading — The Straits Times reported  on the latest HDB Build-To-Order (BTO) exercise that closed on 5 June.

The report “One applicant for each BTO flat” declares:

There was one eligible buyer for every flat offered in the latest Build-To-Order (BTO) exercise as of 5pm yesterday, one of the lowest subscription rates since the system was introduced in 2001. This meant it was likely that most of the applicants would get to select a flat, analysts said.

It is happy days in Singaparadise as almost every one who applied can get to choose a flat. Years of demand backlog has finally been cleared. Or so we are led to believe.

Is that really the case when the report itself went on to talk about the uneven distribution of demand between Hougang and Sembawang?

But not all the 4,900 BTO units in the five non-mature estates enjoyed equal popularity. The 314 three- and four-room flats in Hougang attracted more than 1,200 applicants, while the 1,462 similar sized units in Sembawang attracted just 560 bids. This equates to an application rate, or number of applicants per flat, of 3.8 and 0.4 respectively.

To suggest that “it was likely that most of the applicants would get to select a flat” is to ignore this mismatch in demand and supply. Who exactly are these unnamed ‘analysts’ The Straits Times is quoting? None of the names in the rest of the report said such a thing specifically.

The data available on the HDB website give us a clue on the approximate success rate. In the table below, all numbers are from HDB except the columns in blue that I have added with some basic calculations.

BTO May 2013 Statistics

Source: HDB (except columns in blue added)

We can see that Straits Times used the final ratio of 1.1 in the bottom right corner to conclude that there is “one applicant for each BTO flat”. But if we aggregate by considering each project and flat type individually, the actual percentage of unsuccessful applicants is 31%. So a more correct headline should be “One-third of applicants unsuccessful in BTO exercise”. Also, 27% of the flats remains unsold even as applicants face rejection. Doesn’t sound so rosy now, does it?

Of course, it is not HDB’s fault if applicants are choosy on location or willing to take a chance on locations that were over-subscribed. After all, it can’t keep building in more popular areas just to meet such demand, for where do you find the space? But we must be wary of the authorities or the press trying to paint a better picture than what flat-hunters are experiencing.

All along, the government has been urging applicants to opt for less popular estates, yet not many people are biting. Perhaps the carrot should be bigger than simply reminding them there are higher chances of success? If there continues to be low demand for less developed areas, should the price not better reflect this economic? In this BTO exercise, a 4-room unit in Hougang is in the price range of $268,000 – $335,000, while a similar unit in Sembawang costs $225,000 – $304,000. This difference of $30,000 – $40,000 may not be a significant factor for most in deciding which location to go for, certainly not enough for them to forsake ready amenities and infrastructure it seems.

Last thing to note, as was reported in the media as well, is that 2-room flats continue to be under-subscribed. I have written about these unwanted 2-room flats before. Despite the low demand, HDB continues to roll them out . It must be glad that rules will be relaxed next month for singles to purchase such flats.