Spotlight on 'lottery effect' of flats slated for Keppel Club site

The land will accommodate about 9,000 apartments after the land lease for the 115-year-old country club expires on Dec 31, 2021.

Aug 23, 2019

Tan Ee Lyn


The prospect of public and private apartments being built on the prime land now hosting the Keppel Club and its 18-hole golf course is prompting questions of how to mitigate the "lottery effect" of what are likely to be prized assets.

The land will accommodate about 9,000 apartments after the land lease for the 115-year-old country club expires on Dec 31, 2021. Prime Minister Lee Hsien Loong confirmed at the National Day Rally that the Keppel strip of the 30km Greater Southern Waterfront will be used for Housing Board flats.

While the public and private split for the planned 9,000 units is not clear, property experts expect the HDB flats to be oversubscribed - just like the wildly popular Pinnacle @ Duxton in Tanjong Pagar.

And that has raised the question of whether buyers should be allowed to reap handsome profits for taxpayer-subsidised homes.

When Pinnacle @ Duxton was launched in 2004, there were nearly 5,000 applications for 1,848 units, which were eventually allocated by ballot. Getting a unit was like winning the lottery. And some have indeed hit the jackpot.

A five-room Pinnacle unit on a high floor that would have sold for between $345,100 and $439,400 at the launch went for $1.12 million in 2016. There were 18 Pinnacle flats that sold for more than $1 million last year.

ANOTHER LOTTERY IN THE OFFING?

The high market value of city units like those in the Pinnacle @ Duxton had sparked questions about equity, as the flats are heavily subsidised and securing a unit is largely down to chance.

Property experts interviewed by The Straits Times agreed that the HDB flats in Keppel would be priced higher than flats in most other areas, given its green and seafront environment and proximity to the city.

Dr Lee Nai Jia, head of research at consultancy Knight Frank, said a new five-room flat on the Keppel plot would probably start at around $800,000, assuming existing conditions apply and the market stays as it is.

He based his estimate on median resale prices of five-room HDB flats in Queenstown, which are now around $800,000.

Real estate analyst Vijay Natarajan of RHB Securities Singapore said: "The new five-room (Keppel) HDB could be priced anywhere between $700,000 and $950,000 depending on its location, views and (the) floor it is on."

In 2016, National Development Minister Lawrence Wong had said the Government was looking at selling future public housing within the city under a different model to address the lottery effect in a "fair and equitable" way.

Referring to the Pinnacle @ Duxton, Mr Wong said then: "I think to do more (public) housing in the city under the same regime would not be plausible, and we shouldn't do it... I have to sell it potentially with different parameters."

Possible measures could include a longer minimum occupation period (MOP), a shorter lease or higher resale levy, he had said.

Such measures could kick in for the new Keppel development, said property experts.

"The objective is to create diversity and encourage vibrancy in the area," said Dr Lee of Knight Frank. "To create community and identity of the area, young owners need to stay there long enough. A natural extension will be to raise the minimum occupation period to 10 years."

Owners of HDB flats can sell their units only after living there for at least five years.

Mr Natarajan recommended that the MOP for such prime HDB sites be raised to between eight and 10 years. "This would encourage more participation from genuine long-term home owners and limit investor/speculator demand."

A longer MOP will also help curb profits from renting out Keppel units.

Marketing director Anna Yeo of property agency SLP said: "Now, an HDB owner can rent out a unit after an MOP of five years. The MOP should be lengthened to 71/2 years or even more."

While there have been suggestions for HDB to reduce its standard 99-year lease to as low as 30 years for such prime units to deter profiteering and speculation, Ms Yeo did not think such a measure would work.

"The Government wants everyone to have a home and not to use it for speculation. So, lengthening the MOP is a better measure than shortening the lease," she noted.

Another suggestion, said Dr Lee, is to make the owners reimburse part of the subsidies they enjoyed when they eventually sell their flats.

WHY BEGRUDGE THE WINNERS?

Still, others questioned why society should begrudge a person lucky enough to win such a "lottery".

"I think the system is fair," said Dr Harvey Neo, senior fellow and programme head of the Lee Kuan Yew Centre for Innovative Cities at the Singapore University of Technology and Design.

"The luck of the draw is the only way to go because there is no other better way to allocate such scarce resources. Besides, you never know about property; you may end up not making as much money as you hoped," he added.

But he laid down one condition: "The Government needs to ensure it is truly the luck of the draw for all applicants and there cannot be any reason for any applicant to have priority over others."

For the Pinnacle, priority went to former Duxton Plain tenants, children of Tanjong Pagar resi-dents, grassroots leaders of Tan-jong Pagar GRC and first-time housing applicants.

Under the Grassroots Organisation (GRO) Scheme, grassroots leaders with three years of continuous and active service in their GROs can apply for HDB Build-To-Order flats and executive condominiums in constituencies within the town council boundaries which they serve.

In 2016, People's Association deputy chairman Chan Chun Sing told Parliament that an average of 28 grassroots leaders, or less than 0.1 per cent of the total number, utilise the scheme annually.

Dr Neo reckons the Keppel flats would not do as well as those at Pinnacle in terms of resale value because of what is likely to be a larger supply.

"The proposed Keppel site is slated for 9,000 units, compared with less than 2,000 units for the Pinnacle (which makes the latter more limited in supply)," he said.

"While we do not know the proportion of private versus public housing in these 9,000 units, it is safe to assume that the number of public housing units available will likely be more than the number of units in the Pinnacle."