By Leong Sze Hian
I refer to the article “HDB resale prices: Don’t just find a scapegoat – It is not an issue of us-versus-them, but one of a rise in demand” (ST, Feb 11).
It states: “But actually, what exactly is the issue? Are rising HDB resale prices an issue?”
Well, the issue is that the HDB’s Market Subsidy Pricing policy pegs the prices of new flats to that of the resale market. This makes new flats increasingly an affordability issue for Singaporeans.
As for the statement “Surely not to the majority of 880,000 or so households who already own an HDB flat, to whom rising flat prices means rising asset values”, what good is a higher priced HDB flat if you need to downgrade to a smaller flat in order to have enough money to retire?
Under current rules, downgraders can only purchase a resale flat. As the price differential between a larger and smaller resale flat may not be very substantial, the alternative of downgrading to a new smaller flat may mean a wait of 5.5 years (2.5 years waiting period plus 3-year Build-to-order (BTO) construction period).
This problem may be further compounded by the change in policy last year that after age 55, any shortfall in the CPF Minimum Sum (MS) must be topped-up from property sale proceeds (CPF monies utilised plus accrued interest), before the balance can be used for housing again.
With the MS at $117,000 now and projected to increase to $161,000 and $271,000, in 2013 and 2023 respectively, anyone selling to monetise their flat may not have much left after meeting this Minumum Sum rule and the price of a smaller resale flat.
The article also stated: “What of the charge that some people are buying HDB flats for rental income? Actually, this is patently the case – and rightly so. HDB’s 2008/09 annual report states there were 22,754 flats that were sublet. No one knows how many more flats are being sublet illegally. A number of HDB flat owners will also be renting out some bedrooms for income”.
Actually, the 22,754 flats that were sublet as stated in HDB’s annual report had their applications approved in just one year.
So, how many flats in total are being sub-let entirely?
How many applications were not approved?
How many are sub-letting their flats because of financial difficulties?
For those in financial difficulty, is it possible to apply for a waiver of the 5-year and 3-year rule before flats purchased with or without a housing subsidy can be entirely sub-let?
For those with genuine financial difficulties, this option may be better than compulsory acquisition of their flats at 90 per cent of valuation.
I agree with the statement that “(people have) to acknowledge that the market is moving faster than one’s income and savings can keep up with”.
In this context, the problem may be that some of the HDB’s policies are out-dated and do not reflect the reality of a changing environment, such as the 2.5 year waiting period, because in the past the HDB built to sell, as opposed to today’s BTO approach. This may effectively mean waiting for another threee years for a flat on top of the usual 2.5 years.
The income ceiling of $2,000 and $3,000 for eligibility for 2-room and 3-room new flats have also not been changed for many years, despite rising new flat prices and the higher cost of living.
I also refer to the “Special report : Homeless wanderers – Number of homeless people doubles” (Sunday Times, Jan 31).
It states that “About 60 flats are voluntarily surrendered to the HDB every month”.
Many of the occupants became homeless because they could not afford to pay for HDB flats.
In this connection, I refer to the articles “New flats to stay affordable” (ST, Jan 27) and “HDB flat supply will meet demand : Mah” (ST, Jan 14).
The latter states that “a family with a monthly income of $3,000 can buy a flat worth up to $250,000 and spend only 30 per cent of their income every month on the mortgage …. This means they can comfortably buy any of the flats (three-room and some four-room) offered in the latest BTO projects this month”.
A typical financially prudent household of four persons (couple with two children) may find it hard to make ends meet with a disposable monthly income of $2,100 ($3,000 less 30 per cent for the HDB mortgage).
A breakdown of a typical household’s expenses is as follows:-
food ($40 x 30 days) $1,200
education ($200 x 2 children) 400
transport 300
utilities 150
insurance (various) 100
telephone/internet 70
service & conservancy charges (S & CC) 40
property tax 20
television license 10
medical 10
_________
Total: $2,300
The household may be left with no savings or any money for leisure activities.
If the household has more than four people, like those staying with their parent(s) or have more children, it may be quite difficult for them to survive.
As there are hundreds of thousands of people with a disability or chronic illness, a household surviving on a $3000 per month income with such a family member may also find themselves stretched financially.
Affordability depends on individual circumstances, and it may not be quite appropriate to generalise that a $3,000 household can afford a HDB flat.
According to the Department of Statistics’ Household Expenditure Survey report, there are about 106,000 households with less than a $1,000 monthly income, and about another 116,000 households with less than a $2,000 monthly income.
I therefore estimate that there are about 300,000 households earning less than $3,000 a month.
So, does it mean that about three in 10 households may find these new BTO three-room flats beyond their means?
The issue of affordability may be further compounded by the HDB’s Income Ceiling policy, whereby a household earning over $3,000 a month is not eligible for a new three-room flat, and has to purchase a new four-room or bigger flat.
As the HDB celebrates its 50^th anniversary this year, instead of just the HDB determining affordability, I would like to suggest that an independent third party be engaged to study the affordability of HDB flats.
Related posts:
- HDB flats – “affordability will always be there”, says Mah
- Year In Review: HDB flats – subsidy, affordability, prices.
- A final farewell to Ms Lo Hwei Yen
- The final farewell to JBJ
- How to spend your final $30,500
Mah Bow Tan says HDB flats are affordable, so it must be true. Why can’t you whining ingrates just trust your PAP elites? Mr Mah has been a minister for such a long time, surely he is good at his job.
Stop being babies and support the PAP. Give your moral support/votes to Mah Bow Tan. We Singaporeans are blessed to have him, the God of Fortune incarnate, bestow upon us the golden showers of prosperity in a time of economic uncertainty.
//PAP Douchebag
Why don’t you ask him to start the election immediately?
We have a surprise for him.
For the declining birth rate, I hope that the system be changed to better cater for the young couples longing to have a nest in order to support the birth rate of Singapore. First, where to look for a big sum of cash to pay for ever increasing cov to for those lucky generations who had secured their flats so cheap few decades back and now wanting to sell to the poor young couples who needed to pay for many things eg. wedding, renovation for house and many things, to facilitate setting up a family. So where do we still have the extra cash for the housing. In the end, it’s the second time buyer or so called investors who have the means to secure the resale flats. So, this is a major factor that caused the plans of setting up family in Singapore to be pushed back many years. It is a pity that the govt did not solve this issue that affects the birth rate of Singapore. We do need good policies to improve the life in Singapore, but we as Singaporeans need a much capable government who can look into rising issues fast and create and implement changing policies in this fast changing world. The government should be resilient to analyze issues deeply and change their policies with the changing needs. One of them is to provide solutions to rising cov. I mean real solution; not, giving subsidies interms cpf grant; not, taxing people when flats are sold within 1 year; not, reducing the loan amount to 80%; not, hdb property tax; not, increasing BTO flats only when people beg for it; not, giving priority to first timers but giving assured flats to people who are really in need to set up a family and give the nation a boost on its declining population! And for the BTO, it does not work as the system requires couples to delay starting a family. Since we have the ethnic quota, what about a resale quota on sellers selling to second timers or PRs so that the flats are more reachable by the first timers who want to set up their family fast? What about allowing hdb grant to pay for cov? What about giving incentives to sellers who sell their flats to first timers? There are many solutions to tackle these issues, it really depend on the capability of a good government.
Baby bonus policy… PAP failed, utterly.
The problem can only be solved by farmers, not scholars.
wah! yesterday just check ntuc bargains.. 2 can of baby milk powder as designated by the birth ministry hit $106++..wah lau..would the birth ministry cared to share how many can of milk powder 1 baby consumed in 1 month? the last ime when my nephew was born his S26 milk powder cost $26/can nia…
[i]PAP Douchebag
Mr Mah has been a minister for such a long time, surely he is good at his job.[/i]
your father has been a good father to you for such a long long time..sureLEE he is good in his duties to manage his savin whether present or retired..how come the prime minister and his laulee father must kaypoed and enforced the law that YOUR father cannot control his owned retirement funds/savins?
why? your father frequent bataam often? than again you might NOT have a father to start with……….
so the family has no CPF contributions? How do u calculate the monthly installments?
reduce the HDB lease from 99 years to 50 years for peasants.. then more peasants can own pigeon holes to live in
It seems funny to me that this feedback loop of: rising cost of living = decreasing birth rate is not recognised for what it is. People do act rationally in this instance. People will not start families if they feel any of the following:
1. Economic instability (includes potential to lose their jobs, general economic climate, recession)
2. Increased cost of living which has outpaced their real wages (this includes the big ticket purchases like housing, transportation)
3. Increased competition for resources (this includes public infrastructure like education, transport, employment, medical, housing)
4. Lack of representation at the popular and political realm (political participation and media)
It seems really clear to me that these reasons contribute on a macro scale as to why people don’t set up families as early, or have as many children as needed. We have to take this in a global perspective as well. With few exceptions, most “developed societies” have decreasing child fertility rates. It’s a reflection of the larger trends and issues associated with living in urban, relatively crowded and affluent conditions. The countries which buck the trend are those countries which augment their population growth through immigration. And the USA and Australia are 2 prime examples of that.
I am not convinced that these models are reproduce-able in Singapore as the fundamentals of our city state are different. We already have one of the world’s highest population densities. We have no more space for expansion. We have no natural resources, and no hinterland.
I find it interesting that this decision to increase the population to 6 million was taken by the government without consultation with the people. We should seek that the government address this. We need dialogue on this policy. The government alleges that we would not be able to increase or maintain our growth rates without an increase in population. That needs to be challenged.
With the corresponding rise in cost of living, the median for the middle class has actually shifted downwards (UBS study shows that real wages has decreased in recent years). The government wants “higher productivity” and for citizens to compete with FTs who are willing to work for “less”. It contributes to decrease the standard of living for citizens. If people are working harder, or longer… why would they be optimistic about their futures and their families?
“You want me to pay more for everything, work harder, work more, work for longer, and have less job security, compete with more people for less of everything, stay in a smaller, more expensive flat that is further away, and have more children? And you can’t understand why I don’t want to have more children?”
When i think about it, it’s funny isn’t it? a little like a tragi-comedy.
ray
Excellent observation, Ray.
I fully agree with you.
This government needs to wake up from its slumber or be removed, pronto.
Singapore I believe model itself to early Greek and Chinese ruling ELITES. Some leaders had made it known their strong inclination towards these early Civilization. PLATO&CONFUCIOS come to mind immediately.
Just remember those were the days the ELITES live in splendor with courtyard houses filled with maids in attendance and slaves who are eternally grateful for the privilege to slave for these ELITES.
DOES IT SOUND FAMILIAR????????
Ray, you have spoken out clear and loud what I think about this whole singapore policies bullshit thing. My fiance and I are planning to get married but were unable to get the TWO BTOs that were launched in our neighbourhood – and we cannot afford a resale flat.
So, we are left with the only option – wait. My Fiance is already in his mid-thirties and from the speed this whole thing is going, by the time we got a flat, i don’t think we would even want a kid because we will be worried if we can raise the child given the age and financial situation we are in – we need to plan for retirement too. Can’t tell you guys more how frustrated i feel now.
mon, you are right. Ask them to start the election, i too have a surprise for them.