HOUSING AND DEVELOPMENT BOARD (Valuation reports)

Mr Chiam See Tong asked the Minister for National Development (a) whether the HDB valuation reports nowadays give a premium for equivalent flats in higher floors and (b) whether purchasers, who paid the same price for flats in the lower levels as those who purchased flats in the higher floors, will lose out, since now the HDB is telling the public that flats in the upper floors have a premium.

The Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, the valuation of HDB flats is carried out according to market practice. The valuation takes into consideration various factors. These include the condition of the flat, good view, orientation, storey height and location like proximity to MRT/LRT stations, etc. All factors being equal, higher floor flats generally command higher value.

The valuation of a flat reflects the prevailing market price and represents what potential buyers are willing to pay. The premium for flats in the higher floors reflects the market preference today that buyers are willing to pay more for flats in the upper floors of an HDB block. This was not always the case. In the past, owners preferred lower floors. But preferences change over the years. As the lifts become more reliable and owners prefer the view and privacy of higher storey flats, so such flats command a premium.

The fixed pricing mechanism in HDB was discontinued in 1987. In the early days, HDB flats were built to fairly standard designs and it was simpler to price flats in a standard manner. Residents were allocated flats by balloting and could not choose their units. Over the years, HDB has a wider range of flat designs and refined its pricing system accordingly. From 1988, HDB has progressively used premium and discount factors in the pricing of new flats for sale under the "Differential Pricing Policy" to account for the individual attributes of each flat, including the storey height.

It is incorrect to say that purchasers in the early years who were allocated flats by ballots on lower floors have lost out. All owners of HDB flats who purchased them in the early years have not only enjoyed proper housing, but have also benefited greatly from the substantial capital appreciation of their flats. This appreciation in the value of HDB flats is a result of good Government, strong economic growth, the Government's investment in major infrastructure and the Estates Renewal Programmes.

Mr Chiam See Tong: Sir, would the Minister be willing to compensate those owners who have purchased flats in the lower floors and yet paid the same price by giving them a discount when they buy a newer flat in the upper floors?

Mr Lim Hng Kiang: Mr Speaker, Sir, the Government is not responsible for changes in the market or for any other trends which may affect the price of the flats. For example, in 1984, somebody who bought a 3-room flat in Potong Pasir would pay $41,500. He could have bought a flat in Bishan for the same price. Today, when that same person in Potong Pasir sells his flat, he would be able to sell it for $187,000. In Bishan, that same flat could be sold for $217,000, a difference of $30,000.

An hon. Member: Why?

Mr Lim Hng Kiang: Many housing agents explained to me that the difference is because of Mr Chiam. So Mr Chiam compensates!

Mr Chiam See Tong: I think it is in bad taste. In fact, the prices of flats at Potong Pasir can match almost any other housing estates. They still fetch a premium.

My point is that the purchasers from the same block pay the same price for their flats, whether they are at the lower or upper levels. When these people sell their flats, those at the lower levels will get less than the earlier purchasers of flats at the upper levels. In the early days, the HDB did not take into consideration all the factors mentioned by the Minister. Would the Minister not think that it is only right that these people who were willing to take the lower floors be compensated in some way?

Mr Lim Hng Kiang: One could argue that those living in the upper floors paid a lower price than those living in the lower floors and therefore, by Mr Chiam's argument, he is suggesting to HDB that when the people in the upper floors buy their second flat they should pay a higher levy.

Mr Heng Chiang Meng (Cheng San): Sir, if the Minister ever considers the question of compensation, I would also like to add one more. If I had purchased a Singapore Big Sweep ticket and I did not win any prizes through the lucky draw, I would also like to be compensated, as compared to those who had won the first prize, I would be worse off.

Mr Speaker: Mr Heng, what is your question?

Mr Heng Chiang Meng: I am coming to it, Sir. I would like to ask the Minister whether the valuation is done by the HDB or the Government valuers or private valuers.

Mr Lim Hng Kiang: On Mr Heng Chiang Meng's first non-question, he can refer to the Minister for Finance who is in charge of the Big Sweep.

On his second question, the valuation is done by private sector valuers and if the owner is not happy with the valuation, he can request for a second valuation.