Leong Sze Hian
I refer to the article “Length of loan is not the issue: Mah Bow Tan” (Today, May 1).
It states that “It is not the length of the loan but the percentage of monthly income repayable to the housing loan that matters. But if people are not happy with the 30-year loan for whatever reason, they can always take a smaller loan.”
The reason why most flat buyers take a 30-year loan, may be because their cash-flows are unable to support a shorter loan, given the sky-rocketing HDB prices.
Even the lowest range of new BTO four-room flats has an average price of about $255,000.
After the minimum down payment of five per cent, the monthly repayment on a 30 year loan is $970.
How many can afford shorter loans?
How many households can afford to pay more than $970, since a shorter loan as the Minister
suggests, would mean $1,099, $1,296 and $1,627, for a 25, 20, and 15 year loan, respectively.
Available Housing Withdrawal Limit
Other than a new flat with a HDB Concessionary Loan, all other HDB flat transactions are subject to the Available Housing Withdrawal Limit (AHWL).
Once the AHWL is reached, CPF can no longer be used to pay for the mortgage.
The AHWL is calculated as the CPF Ordinary (OA) and Special Accounts (SA) must have 50 per cent of the prevailing Minimum Sum (MS), once the total CPF used exceeds the Valuation Limit (original price or valuation, whichever is the lower).
For example, at the current MS of $123,000, once the CPF utilised exceeds $255,000, if the OA and SA is less than $61,500, no further CPF can be used.
So, for a 15 year loan, the AHWL may be hit after just 12 years and 5 months.
For a 20 year loan, it’s after 15 years and 7 months.
Therefore, opting for a shorter loan for new flats on HDB loans, or resale flats on HDB or bank loans, may be a risky move, since most people may not have enough cash to pay when CPF cannot be used.
Highest prices in the world?
These issues may be exacerbated by what are arguably the highest prices as well as the fastest growing public housing prices in the world.
The HDB Resale Price Index (RPI) grew by 11.1, 5.1 and 8.4 per cent per annum, over the last 5, 10, and 20 years, respectively.
This was higher than the Private Property Index (PPI), which grew 10.5, 3.9 and 6.4 per cent over the same periods.
Using the assumption that new flats’ prices were pegged to resale prices under the Market Subsidy Pricing policy, one could discount the four-room average price on a year-to-year basis to derive an estimate of historical prices.
On this basis, a $255,000 four-room average price in 2011, may be around $150,000, $158,000, $133,000 and $50,000, about 5, 10, 15 and 20 years ago.
Are there any countries in the world that have public housing prices that increase faster than private property?
After all, isn’t the primary objective of public housing to provide affordable housing to ordinary and particularly lower-income Singaporeans?
As an indicator of affordability, how much did median households income increase during these periods?
For example, median household income only increased by – 1 and 5 per cent for 2009 and 2010, against a 8 and 14 per cent increase in HDB prices, respectively.
Prices = Profits = Ministers’ pay?
Since in a sense, the HDB controls the supply and pricing of HDB flats, how much profits have been made over the years, under its Market Subsidy Pricing policy?
Also, to what extent has this contributed to GDP growth, and correspondingly Ministers’ remuneration which have a GDP growth component, and maybe a performance bonus too?
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think you are obviously a current house owner, wanting to hold on to your investment. That’s OK, it’s only natural to feel that way.
The best solution would be for HDB to buy back all flats, erase all mortgages, and then start all over again.
This time, we must FIX the HDB prices at affordable and fair prices.
3rm = $100K, 4rm = $150K, and so on. We must match the house prices to the current income levels.
What say you?
Can the opposition or PAP consider this plan?
BRO TOO MUCH WORK FOR THAT,LETS MAKE IT IT SIMPLE…..
YOUNG COUPLE WHO INTENT TO BUY FLAT WILL BE GIVING A CASH INCENTIVE IN CASH TO BUY FOR RESALE,OR RENOVATE THE HSE OR BUY FUNITURE.
EXCITING HOME OWNER CAN HV THE SAME CASH INSENTIVE TO PAY OFF PERSONAL LOAN,OR REDURE HOUSING LOAN.(NOT FOR THOSE WHO OWN 2 HSE OR FULLY PAY HDB).
MARKET GO UP,MORE ON INSENTIVE TO REDURE BURDEN FROM YOUNG COUPLE.
MAEKET GO DOWN,REDURE INENTIVE CUS HOUSING IS ALREADY EFFORDABLE.
MOREOVER ALL THOSE MONEY ARE FROM OUR HARD EARN MONEY AND PREIOUS HDB ALREADY MAKE SO MUCH HUGE PROFIT FROM US ALL THOSE YEARS.
WIN WIN SITUATION.
There are too many home owners and home owners-to-be in Singapore. The govt has gone overboard in promoting home ownership. Please note that the richer northern Europeans have a lower percentage of home ownership than the poorer southern Europeans. And now it is the southern European economies that are struggling. Home ownership is not for all. Apart from those already renting, there will be a class of 10 – 20 % who have already join the ranks of home owners but struggle because all their cash is tied up in the asset. Government should realise that this 10 – 20% of the population will be better off renting and not default on their mortgage loans or close to default. This same figure seems to correspond to the figure of people who rent in northern European countries. One shoe does not fit all so there is no point trying to push everyone to purchase a flat. All ads for property sales including those pushed into mail boxes should come with an investment warning that property prices may go up or down (just like share investment warnings).
Are there enough rental flats in the public & private sector now? No. So obviously something has to be done, especially to encourage people to rent out unoccupied properties or unoccupied rooms within properties. HDB should also go back to building more rental flats in choice locations and look into shorter leasehold periods e.g. 15, 30, 45, 60 & 75 years for non-seniors. Private sector should also be encouraged to offer such shorter leasehold periods.
Meanwhile there seems to be all the rage to build condos with a lot of facilities but these facilities seem to be underutilised. I would suggest restrictions on too many condos and encourge simple apartments with minimum facilities like security rather than full condos. The idea would be to bring down the costs of private housing for those who cannot afford condos but are ineligible for HDB.
The property of schools and other educational institutions are underutilised during evenings and weekends. If apartments could be built for teaching and admin staff and their families on school and institutional property, then (a) there would be better use of the property, (b) there’s an added incentive to draw people into teaching and (c) it frees up housing for others. Something similar could be said for sports facilities – think of the views over sports grounds and swimming pools if apartments could be built to sports complexes and public pools.
As for FT, I would favour floating serviced apartments for some of them so that they do not hog HDB flats. Some of the younger FT may be keen on this idea, and if one day there is a downturn and the FT have to leave, the floating serviced apartments can sail away to somewhere doing better. This will not happen with govt incentives to private operators if the govt’s own GLCs don’t take up this idea. Encouraging FT to commute from Johor is another idea.
DUD because land is NOT part of the contractual bargain in HDB contract – the HDB and HDB exclusively owns the land, the buyer (leasor) does NOT own any part of the land, so why must the buyer pays for something which is NOT in the contract’s offer and acceptance? HDB SHOULD NOT PRICED IN ANY LAND COSTS.
DUD also because your argument is inherently self-contradictory. You priced in ILLEGALLY another $125,000 for land and give the leasor, by your proposal, “a very handsome subsidy” of say $250,000, where is the value of opportunity costs of that land? If the so-called handsome subsidy is only $150,000, the HDB would profiteer $100,000 illegally and the opportunity costs “sacrificed” would still be the amount of subsidy i.e. $150,000! So how do you then define the opportunity costs of land OTHER THAN AN ARTIFICIALITY OF CONSTRUCT of fiction economics? For opportunity costs of anything, there has got to be benchmark to willing seller-willing buyer market value comparison. Within HDB estates, what is the alternative use other than retail which you can’t have one retail block sitting next to one HDB residential block throughout the estate, right? Your conceptualisation of opportunity costs is fake of truth.
And land value also fluctuate, right? so how do you price the “fluctuating” land value in each batch of HDB sales each time?
Why NOT either admit that HDB made phenomenal profit from public housing instead of pussyfooting around the edge of abysmal lies of subsidy WHEN THE TRUTH IS THAT THE CONSUMER (leasor) IS SUBSIDIZING HDB FOR THE LAST 46 YEARS PERHAPS?
In any case, the true economic is really measured and valued by global economic parameters – not some kind of artificiality of bureaucrats in HDB or MND. Look at HDB prices, how far they fall to since the Asian Currency Crisis till 2003 from 1997. Almost 35% from peak to bottom in the last cycle.
Inflating HDB pricing to first time buyer DOES NOT ADD VALUE to private housing or public housing. It is the GLOBAL ECONOMIC PARAMETERS WHICH OVER-RIDES. You must know that.
But inflating property prices has very damaging spillover effects on all other sectors of the economy because of escalated capital values, and rent increase to justify the risks of investing in all property based asset. Higher rental means higher costs of living and costs of production screwing up our global competitivessness. And when the bubble burst – it could come sooner than later this round starting from China – everyone is trapped in debt beyond financial rescue. It is just sub-prime stupidity of economics which nobody wants and needs in this country except greedy speculators.
If you want to speculate, you take your chance just like any gamblers in the casino or stock market BUT DON’T EXPECT THE STATE OR THE ECONOMY TO PROVIDE YOU WITH THE SUPPORT FROM UNDERNEATH TO UNDERWRITE YOUR GAMBLING HABIT AND SCREW UP THIS WHOLE COUNTRY.
why not gov give a us some space.every thing want tax,want money,dont be so greedy can,even hse u also want make profit for it.
30yrs loan.
propert tax.
insecurance.
mantaintace.
stamp fee.
lawyer fee.
pub bill.
telephone bill.
internet bill.
renovation.
funiture ,personal loan,and so much more to pay and pay and pay.we need to eat,children need to eat,study,need to take care parent,dont mention car,gst,imcome tax and so many many tax…i almost lost count…pls lah…..we dont earn million like u.i beg u gov.
just a root for us to relax after
our hard work,cant ready see us gd izzit…..pls lah….
it is not the length of loan, it is the calculation of afforability that is disturbing.
whenever people calculate the household income, they based on median income which usually means two working adults. besides the lack of time for babies, there is a real possibility that one of them may be out of job for a while or when they closte to 50. so i would suggest that it is based on 1.5 working adults so as to reduce the burden and encourage more time and money for babies.
there is no way they can solve it,just refund back some cash insenstive and at the same time redure new hdb pricing,they had earn “tone” of money thur the land and hdb for the past 10yrs, refund back is the only way that can help both exiting home owner who brought the hse btw 2008-2011 and new owner.steping down or change minster will not solve the problem,even u change some of the policy,u cant help those exiting owner.(excluded those who own 2 hse cus they can manage by renting out one unit that they can gain alot of profit thur 2nd house.they just need to rent it out for 10yrs,and the hse is free.that why this stupid polciy is for those who rich and become richer.poor become more poorer.
THEY CAN GET MILLION DOLLAR PAY,BOUNES,PENSION.
AND WE SINGAPOREANS HV TO BE SLAVES FOR OUR LOAN AND PAY THEM TAX.
WE PAY THEM TO CREATED SO MANY PROBLEM FOR US,AGAIN WE NOW HV TO BARE OURSELF AGAIN.WHAT THE HELL IS THIS WORLD.
HDB should target that 10 – 20% that I wrote about and offer to buy back their HDB properties at a fair price, and work out rental arrangements with the sellers on indefinite term basis or long rental periods.
In time, the pool of rental flats can grow. Demand to own properties in time will then soften and HDB home prices.
INTERESTING THREAD ABOUT HOUSING….
http://www.blogger.com/comment.g?blogID=16821129&postID=6418292710326676144
Actually the way housing has been managed only reflected on loss of direction by the government.
Anyone will be able to know that a government is elected by people to serve them in areas of “clothing, food, housing and transportation” as well recognized in the common Chinese saying “Yi, zhi, ju, zhin”
Laws of parliament were originally passed in the early 1960s emphasizing among others on “housing” with the iconic slogan “Low cost housing for the people”
PAP was returned to power so many times partly because of this policy.
When it came to MBT’s time, probably because ministers’ salaries are pushed up a few multiples with wrongful benchmarking, resulting in need of minister to prove their money getting worth, we then saw ministers behaving with all kinds of “no free lunch” policies to make monies from citizens. The original government duty-bound “low cost housing” changed to “no free lunch” disguised as “Asset Enhancement Housing”
The solution to our present problem is easy. But it has been made complicated by all sorts of disguises and packaging and lately fear tactics. Do not get confused over technicalities. Return to the basic “low cost housing for the people”
It is not true that selling to first-timers HDB flats at cost-plus prices will cause property prices to drop. In fact selling them at market prices will reduce their disposable income, postpone marriages and undermine our economic competitiveness. Singapore has been known to be the last to come out of economic recessions because of self-created inflated high costs of living and doing business which government up to now refused to acknowledge due to MBT’s type of policy (sucking monies from people)
It is a fact that ordinary citizens cannot benefit from any so-called asset enhancement policy unlesss they are in the category of the rich owning a second property. So don’t let all the so-called trick about asset enhancement distract us from government’s original commitment to provide a roof over the head for people under “zhu cher yu chee wu” low cost public housing.
Also do not believe in the scare tactics as stated by LKY during election that if we elect the opposition, the property market will collapse.
Recessions as we have learned from past experience will make any market collapse not just property.
If ministers truly want to prevent the economy from going into the same deep recessions as in the past, do not go for asset enhancement. The system of taxing and witholding spending for creating reserves with profiteering on all lands including housing land is the root cause of our many past deep recessions. But have our ministers the talent to understand this real cause? Even IR is only a temporary stop-gap policy. It is by increasing the disposable incomes of our people which will enhance our properties in a sustainable manner. Who is our true talent who can manage such pro-people pro-growth and pro-disposable incomes to enhance people’s wealth.
Lands acquired under the Land Acquisition Act in the 1970s cost the governmen only S$0.70 per sq ft (See original acquired costs for Clementi Lands as posted in another thread)
Do not over-charge land costs for HDB flats for the first-timer. By all means make all the profits from land but from commercial development not for public use and housing under Homeownership for the people scheme.
Let the HDB prices for the first-timers be set according to Lim Kim San’s formula:
HDB selling price : Cost of land + development of roads, sewerage and utilities + construction cost + administrative costs in selling.
Morally and legally there is no reason to acquire lands for public housing or public use but turn them into money shaking tree and profiteering scheme.
Follow this basic priciples – lands acquired for public use and essential medical and transportation services should not be turned into money-shaking tree.
Go by the basic principles and avoid getting trapped by any technicality over the detailed consideration how to charge for this or that and give benefits to whom. Such details will come out nicely once the basics are set right. Talk about how many cherries, how to provide loan, means testing etc etc separately.
If minister says he want to bring back the iconic “Zhu Cher Yu Chee Wu” (homeownership for the people) again Singaporeans are proud of, he should fulfill such basics with technicalities or confusions about asset enhancement due to the wrong turns taken by MBT.