New flats affordable for most buyers, says Mah

I see the word "affordable" being abused again. Little or no cash down is an illusion because young couples are indebted probably 25-30 years of their lives.

And, HDB actually does "rent" the apartments to Singaporeans! It's on a 99-year lease and you never actually "own" the flat even after paying off the mortgage (which is getting harder and harder these days). Can he please come up with a much better argument?

Apr 25, 2011
GE 2011
New flats affordable for most buyers, says Mah
By Fiona Chan, ASSISTANT MONEY EDITOR & Robin Chan

MOST buyers of new flats need to fork out little or no cash to pay for their homes.

This is the result of the Government's efforts to keep housing affordable for young couples, National Development Minister Mah Bow Tan said yesterday.

In his latest rebuttal to the Workers' Party's (WP) proposals on lowering new flat prices, Mr Mah argued that the Government has kept housing costs within the means of most first-time buyers.

Eight in 10 couples who bought new flats last year used only a quarter or less of their salaries to service their home loans, which means their Central Provident Fund (CPF) contributions can cover almost all their monthly mortgage payments, Mr Mah said.

Speaking at a press conference at Tampines East Community Club, he illustrated how a young couple can buy a new flat with almost no cash required.

A couple below the age of 30 needs to pay only a 5 per cent down payment for a new flat. This can come out of their CPF savings.

So a couple earning a combined $4,000 a month can work for half a year and buy a new four-room HDB flat with no cash upfront, said Mr Mah.

If they are eligible for housing grants, they can also use those for the deposit.

As for the monthly mortgage payments, these would require less than $50 in cash, he added.

'With all this in place, you would get a flat with zero deposit. Now how many housing ministers in the world can say what I've just said?'

On top of that, a new HDB flat is not 'any ordinary, low-quality flat', but 'a good-quality flat, a flat in a good environment', added Mr Mah.

'Can the WP point out any other major city in the world where home ownership is so readily within reach for the majority of its young people?'

Mr Mah, representing the People's Action Party, has crossed swords with the WP at least three times since the latter unveiled its manifesto on April 9.

Among other things, the WP called for new flat prices to be lowered by reducing the price of land and rethinking the asset enhancement policies of the last 20 years.

But owning a home and seeing it grow in value as an asset is a key pillar of the public housing system, Mr Mah countered yesterday.

'My answer to them is, if homes are not an asset, why don't we just rent homes to people?' he said. 'If that's the proposal, then say so.'

Mr Mah also dismissed another suggestion, surfaced by the National Solidarity Party, that permanent residents (PRs) should have a longer minimum occupation period for HDB flats than the five-year norm for Singaporeans.

'The deck is pretty much stacked in favour of Singaporeans when it comes to buying flats,' he said.

PRs are not eligible for HDB grants or loans, cannot buy new flats direct from the HDB, and make up only a small proportion of resale flat buyers, he said.

'I think targeting the PRs isn't going to make that much difference as far as making flats affordable to first-timers,' Mr Mah added.

He also reiterated that the WP's plans to reduce the prices of new flats are 'ill-conceived and even dangerous', and run the risk of crashing the property market.

Mr Mah disagreed with WP chief Low Thia Khiang's assessment that lower new flat prices would have little impact on resale flat values. Mr Low had made this argument last week, saying that because new flats are relatively few in number and cannot be resold immediately, they will not affect the broader resale market.

But the different market segments are interlinked, Mr Mah argued, and any action in one segment will have implications for the other. This is especially so as half of the current buyers of resale flats qualify to buy new flats, he said.

In addition, Mr Mah called Mr Low 'mischievous' for alleging last week that the Government itself has been raiding the reserves by, for instance, giving out money under the Grow and Share package during this year's Budget.

'The 2011 Budget, including the Grow and Share package, was completely funded from current reserves,' Mr Mah said.

He added that the Government has never drawn on past reserves for its budget spending, except in the 2009 economic downturn, when it withdrew $4 billion to save jobs and revive the economy. The Government repaid the funds this year.

Still, despite the back-and-forth with the WP over the affordability of new HDB flats, Mr Mah believes housing will not be a make-or-break issue in the May 7 General Election.

'There are so many other issues,' he told reporters. 'I think the most important issue really is... who can form the government that can look after Singapore and secure Singapore's future.'

A bit similar to car sales pitch. Very easy to own a car because they made the initial downpayment low, but buyer will need to stretch the loan to the maximum 10 years.

I also don't really agree with MBT that HDB flat is an asset. It is only an asset to those who can afford to sell and upgrade. With prices of new houses going up at the rate we are seeing for the past few years, majority of the people will have to live in the same house as they could not afford to change. If one cannot sell and realised the profit, how then can we call it an asset?

MBT last point on who can form the government that can look after Singapore and secure Singapore's future seems to miss the main point that WP (and I believe many Singaporean) is advocating. It is almost a given that PAP will form the next government. What many want to see is a strong and credible opposition presence in parliament to act as the check and balance to government. I think this is really necessary. I give full credit to the 1st and 2nd generation PAP's leaders, but the 3rd generation leaders I am not sure.

Would anyone want to buy the shares of a company that does not have even one ID?

(25-04-2011, 10:00 AM)Ben Wrote: I also don't really agree with MBT that HDB flat is an asset. It is only an asset to those who can afford to sell and upgrade.

Actually, there are some ways to monetize the flat. As d.o.g.-san has pointed out in another thread, there is always the 'sell and rent' option. There's also the sell and downgrade option. To get rich, one must take some steps that aren't with the majority.

I believe the reasoning is right but those options usually aren't palatable to most people. No offense meant to anyone but that's also probably why most people remain 'most people'.

' Wrote:Would anyone want to buy the shares of a company that does not have even one ID?

This is so true! I started trying to think of how to think rationally about voting and I think comparing Politics to a Corporate setting works best for me.

As Shareholders (Voters), we want to see competent Executive Management (Ministers and MPs) that can steer the company (Country) on a long-term sustainable path. This means that the Executive Management (Ministers and MPs) should not be overly focussed on the bottom line (GDP) while sacrificing the long term viability and direction of the company (country).

Executive Management (Ministers and MPs) should be adequately compensated but not grossly overpaid or have perverse incentives like bonuses pegged to a single year's profits (GDP). After all, Executive management's salaries are a cost.

Boards should be well represented with I.Ds (Opposition) so that there are proper checks and balances. Indepedent Audits should be carried out on the Financial Statements (Results of policies).

So, at the coming AGM (polling day), please exercise your vote as a shareholder (citizen) and make a wise and rational choice.

(25-04-2011, 10:59 AM)]
Would anyone want to buy the shares of a company that does not have even one ID?
[/quote]

[quote=kazukirai Wrote: This is so true! I started trying to think of how to think rationally about voting and I think comparing Politics to a Corporate setting works best for me.

As Shareholders (Voters), we want to see competent Executive Management (Ministers and MPs) that can steer the company (Country) on a long-term sustainable path. This means that the Executive Management (Ministers and MPs) should not be overly focussed on the bottom line (GDP) while sacrificing the long term viability and direction of the company (country).

Executive Management (Ministers and MPs) should be adequately compensated but not grossly overpaid or have perverse incentives like bonuses pegged to a single year's profits (GDP). After all, Executive management's salaries are a cost.

Boards should be well represented with I.Ds (Opposition) so that there are proper checks and balances. Indepedent Audits should be carried out on the Financial Statements (Results of policies).

So, at the coming AGM (polling day), please exercise your vote as a shareholder (citizen) and make a wise and rational choice.

Sorry guys but I beg to differ on your points without going into the politics of it. In my qualitative screens before going into the quantitative there are 3 things that i look for:

1. honest and trustworthy management that shares the fruits with shareholder...dividends etc. Base on their actions and not words/rhetoric.

2. vision. mgt must have the correct/sensible vision and not pie in the sky. over aggressive is also not good and you have to question whether it is deliverable.

3.execution of the vision. ..track records of past performance

Look at all those companies that went bust (s-chips and some local ones), they all have IDs but are they held accountable. They still get their fees. Remember IDs and managment all drink from the same well. At the end of the day you need to be convinced that mgt has the above 3 qualities and the IDs is good to have but not the reason to invest. IDs to me is secondary.

Finally yes I would invest in a company without IDs if they can satisfy all 3 of the above and the quantitive analysis is ok...private equity, business venture etc.

(25-04-2011, 12:27 PM)Jacmar Wrote: 1. honest and trustworthy management that shares the fruits with shareholder...dividends etc. Base on their actions and not words/rhetoric.

there is no way you can tell whether or not management is honest and trustworthy. i am keen to know how you qualify 'honest and trustworthy' management.

if there are no external auditors, how can you be certain of the company's financial health, and if there has been any misconduct? how would you know the books are not cooked? and how do you ensure full disclosure of information that is of interest to stakeholders?

(25-04-2011, 10:59 AM)kazukirai Wrote:

(25-04-2011, 10:00 AM)Ben Wrote: I also don't really agree with MBT that HDB flat is an asset. It is only an asset to those who can afford to sell and upgrade.

Actually, there are some ways to monetize the flat. As d.o.g.-san has pointed out in another thread, there is always the 'sell and rent' option. There's also the sell and downgrade option. To get rich, one must take some steps that aren't with the majority.

I believe the reasoning is right but those options usually aren't palatable to most people. No offense meant to anyone but that's also probably why most people remain 'most people'.

If we look deeper of the problem, Majority People wishes is to own a Home. There will always be "smarter" people out there and the richer.

But our Vote or Solution should not just be caring for oneself.


Cory

http://www.todayonline.com/TalkBack/Sing...ah-Bow-Tan

No idea what's the big deal, housing isn't even an important enough issue! :p

(25-04-2011, 07:59 AM)Musicwhiz Wrote: So a couple earning a combined $4,000 a month can work for half a year and buy a new four-room HDB flat with no cash upfront, said Mr Mah.

If they are eligible for housing grants, they can also use those for the deposit.

As for the monthly mortgage payments, these would require less than $50 in cash, he added.

I didn't realise the big mistake (I am assuming it is a mistake unless MBT is able to prove it otherwise) in this example given by MBT until I read the Today online talkback forum (link posted by piggo above) where many pointed out the error in calculation. MBT need to come out and educate us on his calculation. If he gets this wrong, it will be a big blow to his already badly damaged reputation.

(25-04-2011, 12:27 PM)Jacmar Wrote: Sorry guys but I beg to differ on your points without going into the politics of it. In my qualitative screens before going into the quantitative there are 3 things that i look for:

1. honest and trustworthy management that shares the fruits with shareholder...dividends etc. Base on their actions and not words/rhetoric.

2. vision. mgt must have the correct/sensible vision and not pie in the sky. over aggressive is also not good and you have to question whether it is deliverable.

3.execution of the vision. ..track records of past performance

Look at all those companies that went bust (s-chips and some local ones), they all have IDs but are they held accountable. They still get their fees. Remember IDs and managment all drink from the same well. At the end of the day you need to be convinced that mgt has the above 3 qualities and the IDs is good to have but not the reason to invest. IDs to me is secondary.

Finally yes I would invest in a company without IDs if they can satisfy all 3 of the above and the quantitive analysis is ok...private equity, business venture etc.

Hi Jac,

My point wasn't about I.Ds actually. I was picking up from Ben's political-corporate analogy.

As you have said, there are a lot more factors to consider that should rank above whether a board has an I.D or not. However, if the I.D is truly not independent then that I.D should not be re-appointed and as a shareholder, one should vote as such.

Assuming a $300000 4 room flat.

Downpayment 10% = $30000.
Additional CPF grant = -$15000

BUT....

If you are eligible for and taking a housing loan from HDB, you will pay the 10% downpayment as follows:

* 5% at the time of signing of the Agreement for Lease
* balance 5% at the time of keys collection. (that is at least 2 years later...)

So, Ah Mah is not wrong lah...

As for monthly payment, I think also correct...