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DBSS profit margin not 76 per cent: Ministry

The ministry pointed out errors in the profit margin figures quoted in the BT report. -BT

Sat, Jul 02, 2011
The Business Times

THE Ministry of National Development (MND) has written to The Business Times, highlighting errors contained in a recent report. The following is the text of its letter dated July 1:

The lead article by The Business Times - "Profit margins for DBSS developers 'look high'" (June 30) - on the developer's alleged 76-per-cent profit margin was highly irresponsible as it contained serious errors.

For example, it quoted a land price of $82,222,000 and a maximum GFA of 721,188 square feet for the DBSS project, Centrale 8. Both figures were wrong. The correct figures are respectively $178,128,000 and 682,385 square feet. This was a huge difference of almost $100 million, resulting in a gross overestimation of the developer's profit and gross profit margin. Based on these figures alone, the profit margin would have been 26 per cent, instead of 76 per cent.

But even the reduced estimate was wrong as the article had failed to take into account key cost components such as financing, marketing and administrative costs.

These are significant costs and, when included, would have further lowered the profit margin for all the DBSS projects listed in the article.

We are disappointed that The Business Times had not thought it fit to verify the facts. The general public rely on and expect responsible and accurate reporting from the mainstream media. It is unacceptable that BT had not exercised due diligence and professional journalism, which resulted in an erroneous and highly misleading report. These errors could have been easily prevented if BT had been responsible in checking the facts, most of which were published materials.

Han Kok Juan
Director (Housing)
Ministry of National Development


Comments from National Development Minister Khaw's blog entry

"I was startled when I read the front page article in The Business Times "Profit margins for DBSS developers 'look high'" (Jun 30). It alleged that the DBSS developer's profit margin for Centrale 8 was 76%, even after it had reduced its highest selling price by over $100,000.

"I thought it could not be right and had it checked. Sure enough, the article was fraught with serious errors.

"For example, it quoted a land price of $82,222,000 and a maximum GFA of 721,188 square feet for the project. Both figures were wrong. The correct figures were respectively $178,128,000 and 682,385 square feet. This was a huge difference of almost $100 million. The errors led to a gross over-estimation by BT of the developer’s profit and gross profit margin.

"Based on these figures alone, the profit margin would have been 26%, not 76%.

"But even the reduced figure was wrong, as the article had excluded key cost items such as financing, marketing and administrative costs. These are significant costs and when included, would have further lowered the profit margin for all the DBSS projects listed in the article.

"I have been in MND for 5 weeks, and not sleeping well. I am working my guts out to try to calm the market, for the good of all Singaporeans.

"But I can’t do it alone. I need all to help.

"HDB architects are working round the clock to ramp up BTO supply. Contractors are building up capacity to deliver the flats on time. HDB is setting BTO prices carefully to help guide the market.

"I hope our media can do their part too. There is some panic buying out there, by people worried that prices will continue to rise. Sensationalised articles will merely feed the frenzy.

"If only BT had verified the facts, the misleading article could have been avoided. Please help to circulate this blog to your friends."

Click here http://mndsingapore.wordpress.com/ to access National Development Minister Khaw Boon Wan's blog for previous entries.


Apology

AS pointed out by the Ministry of National Development, The Business Times cited an erroneous land price figure for Centrale 8 in its report "Profit margins for DBSS developers 'look high'" (BT, June 30). This inflated the gross returns for Sim Lian Group on the project to 75.8 per cent, whereas the actual gross returns according to our estimations should have been 26.5 per cent. The error arose because we inadvertently used the land price for another Sim Lian project called The Premier, which is also in Tampines, instead of the land price for Centrale 8.

We are sorry for the error.

This article was first published in The Business Times.

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