Hefty gains for DBSS sellers

By Lin Zhiqin & Esther Hoon

February 19, 2016 4:00 PM SGT

Based on HDB data, there have been three resale transactions at City View @ Boon Keng — a Design, Build and Sell Scheme (DBSS) development that recently fulfilled its Minimum Occupation Period (MOP). The profit margin for these resale units is estimated to range from 35% to 59%. Judging from the 73 units at City View @ Boon Keng listed for sale on TheEdgeProperty.com, many owners are looking to cash in on this boon.

A three-room flat on the fourth to sixth storeys of City View @ Boon Keng was sold at $590,000 this month. Separately, a four-room unit located on the 37thto 39thfloors changed hands for $880,000 this month, while a five-room unit on the 22nd to 24th floors was sold for $855,000 in January.

City View @ Boon Keng was launched in 2008 at prices ranging from $349,000 to $394,000 for three-room flats; $523,000 to $597,000 for four-room flats; and $536,000 to $727,000 for five-room flats. Using the mid-point of the price ranges as reference, the resold three-room flat fetched a $218,500 profit, representing a profit margin of 59%. The four-room flat fetched $320,000, or 57% in profits, while the five-room unit yielded profits of $223,500, or 35% (see Table 1).

Higher profit margin for DBSS flats

	City View @ Boon Keng DBSS	Resale HDB within 500m
Flat type	2008 launch price ($)	2016 resale price ($)	Estimated profit ($)	Estimated profit margin (%)	Average 2008 resale price ($)	Average 2015/16 resale price ($)	Average profit ($)	Average profit margin (%)
Three-room	349,000 to 394,000	590,000	218,500	59%	284,244	395,795	112,150	39%
Four-room	523,000 to 597,000	880,000	320,000	57%	454,923	567,471	116,139	25%
Five-room	536,000 to 727,000	855,000	223,500	35%	594,071	780,450	186,379	31%

Notes: Profit for City View @ Boon Keng estimated based on the midpoint of the launch price range. Computation of profit does not account for any housing grants. Source: HDB, The Edge Property

These resale prices also represent a $194,000, or 49%, premium over the average resale price of a three-room flat within 500m of City View @ Boon Keng in 2015 and so far this year. The premium is $313,000, or 55%, over an average four-room resale flat; and $74,550, or 10%, over an average five-room resale flat in the vicinity. The price premium notwithstanding, buyers seemed eager to snap up the DBSS units as soon as they fulfilled their MOP of five years last month. According to a recent news report, 10 units were sold before their MOP ended, under special approval by HDB.

The DBSS was first introduced by then Minister for National Development Mah Bow Tan in 2005 to involve developers in the building of public housing and to offer buyers with higher disposable incomes a wider variety of housing.

Because of their better design and finishes, DBSS projects usually command a higher premium than built-to-order and resale HDB flats. The sale of DBSS sites has been discontinued since 2011, following a public outcry over the hefty price tags of newer projects. Thirteen DBSS projects have been launched so far, of which only

The Premiere @ Tampines and City View @ Boon Keng have fulfilled their five-year MOP. In 2008, the average resale price of a three-room flat located within 500m of City View @ Boon Keng was $284,000. Resale prices averaged $455,000 for four-room flats and $594,000 for five-room flats. In 2015 and so far this year, resale prices averaged $396,000 for three-room flats, $567,000 for four-room flats and $780,000 for five-room flats.

Buyers who bought in 2008 and resold in 2015 or this year could have made profits of $112,000, or 39%, for three-room flats; $116,000, or 25%, for four-room flats; and $186,000, or 31%, for five-room flats. Against City View @ Boon Keng, these non-DBSS flats have a lower profit margin of 20 percentage points for three-room flats, 32pps for four-room flats and 4pps for five-room flats. The larger difference in profit margin for four-room flat types is likely owing to the large height premium for the flat on the 37th to 39th floors at City View @ Boon Keng.

The DBSS units are able to command a premium as well as higher profit margins over resale HDB units probably because they are newer. Still, to enjoy a higher profit margin, a buyer looking to sell upon fulfilment of MOP would have been better off buying a unit at City View @ Boon Keng in 2008 instead of a nearby HDB flat on the resale market.

City View @ Boon Keng is located a stone’s throw away from the Boon Keng MRT station, but there are two HDB clusters located directly across the road from the station. The rental yield for Bendemeer Ville, the cluster located on Bendemeer Road, ranges from 5.9% to 6.5%. Rental yield ranges between 4.8% and 6.2% for the HDB cluster located on Towner Road. In general, the rental yield for non-DBSS developments located within 500m of City View @ Boon Keng ranges between 4.7% and 6.8%. There has been only one rental contract at City View @ Boon Keng (8 Boon Keng Road), reflecting a rental yield of 4.9%, which is at the lower end of the rental yield range for HDB flats in the vicinity (see Table 2).

Table 2: Lacklustre rental yield at City View @ Boon Keng versus properties within a 500m radius

Project name	Completed	Average price ($ psm)	Sales volume	Average monthly rent ($ psm)	Rental volume	Rental yield (%)
8 Boon Keng Road*	2011	7,847	1	32.10	1	4.9
5 Boon Keng Road	1996	6,146	2	24.00	4	4.7
22 Boon Keng Road	1974	5,710	2	28.40	4	6
26 Bendemeer Road	1972	5,656	2	30.80	4	6.5
28 Bendemeer Road	1972	5,996	2	29.70	4	5.9
34 Whampoa West	1972	5,500	3	30.90	12	6.8
107 Towner Road	1983	5,335	3	27.50	4	6.2
108C McNair Road	2005	7,599	1	30.10	4	4.8
103 Towner Road	1983	5,780	2	23.00	1	4.8
105 Towner Road	1984	5,834	1	30.20	6	6.2

Notes: Based on resale and rental contracts within past six months; excludes projects without resale and rental contracts *City View @ Boon Keng
Source: HDB, The Edge Property

Rental yield for City View @ Boon Keng andsurrounding HDB developments was generated using the “Location Scan” tool on TheEdgeProperty.com. The tool allows users to obtain prices, rents and yield of properties within a 100m-to-3km radius of a selected location or landmark.

Despite the more affordable prices and higher rental yield of non-DBSS flats, many DBSS projects still possess favourable attributes such as good locations, better designs and finishes, and a younger age. Their popularity with buyers is evidenced by the 107 transactions at The Premiere @ Tampines so far.

Owners of DBSS flats appear eager to capitalise on these factors, with 28 units at The Premiere @ Tampines and 73 units at City View @ Boon Keng listed for sale on TheEdgeProperty.com. In comparison, the next highest number of units listed for sale at other HDB developments stands at just 16 in the vicinity of The Premiere @ Tampines and three around City View @ Boon Keng.

The rental yield for the HDB cluster on Towner Road is 4.8% to 6.2%. Click here for HDB listings near City View @ Boon Keng.