Are HDB Flats Affordable?

[la papillion]

It's NOT AFFORDABLE!!

I was trying to look for a 5 rm flat around bedok, tampines area...guess what, they are asking for 600 to 700k, including COV! One thing I did notice after the whole series of measures is that the supply seems to be diminished, meaning that less pple are indeed selling their flats. That's at least what I think from the amt of property put out in the various websites.

Though it's expensive, well, I asked for it I could have settled for a low level, 'ulu' area, no amenities and wait for 4-5 yrs for a new flat, but I'm too picky and choosy. I blame it entirely on myself of course

[Stocker]

Who is the biggest property owner here ? Do U think they want property price to crash ? Do properties provide good revenues to them ?

[yeokiwi]

That's a million dollar question, and those drawing million dollar salary should answer that. But if you want my humble view, I feel that the cost for building a flat in Pinnacle Duxton and building one in Punggol is the same, if both flats are of the same size and design. Perhaps the only difference is the land cost as obviously Duxton land is much more valuable than Punggol. However, the same flat will be able to sell at a much higher price in Duxton than Punggol not just because of the land value, but also because of the location. A private developer will therefore add a fat markup to the cost and people will still buy. HDB is taking the market value of a flat in that area, which of course is inclusive of the fat markup, and gives a "discount" as subsidy. My guess is that the selling price of a HDB flat will be more than enough to cover the cost of construction + cost of buying that piece of land. So that is why the term "subsidy" is really subjective, depending on which angle you look at it.

Anyway, going by the sell out response when Pinnacle was launched, obviously many Singaporean are able to afford it. The question of taking a 30 years loan or 3 years loan does not seem to matter.

You actually did not answer the question. Anyway,personal view is personal view. It doesn't have to be backed up with a million dollar salary.
If a view has to back up with a high salary, I think I better keep my mouth shut in front of my boss.

The path of having a resale HDB flat market has already be chosen many years ago. With a resale HDB flat market, it will become a lottery system to HDB flat applicants if the price of a flat in Pinnacle Duxton and a flat in Punggol are selling at the same price.
Given a choice of a flat in Pinnacle Duxton or Punggol at the same price, would you choose to stay in Punggol?

Besides that, it does not do justice to the rest of the Singaporeans if the HDB decides to sell the flat at Pinnacle Duxton at cost price without taking account of the land valuation. If HDB does that,it instantly creates a class of lucky owners that get to buy a $1 million flat with $200k purchase price.

There are many factors that result in current high HDB price but not all of them are controllable by HDB:
1) Lower interest rate environment. S'pore is at the mercy of global bond market. It makes no sense to keep the money in the bank and at the same time, it also lowers the monthly repayment for properties and that will encourage ppl to bid higher for their dream flats.
2) High saving rate. Due to the mandatory contribution of salary to CPF, it makes no sense to most people to keep the money in CPF without using the money to buy a property.
3) High influx of foreign workers into Singapore.
4) High HDB rental yield
5) Low flat supply in the last few years.
6) Relax of the requirements to rent out the entire HDB flat.

There may be other factors but as we can see, HDB can only deal with 4-6 and if you had read cif5000 attached link, the low number of flats being built by HDB in recent years is probably the main cause of a high HDB price.
Since it is not easy to get a new flat, it basically forces all those who want a flat to flood the resale flat market.
The immigrant policy in the last few years also results in a substantial increase in Singapore population and put pressure on the housing needs. Apparently, some ministries simply do not communicate with each other.

Lastly, the lowering of the requirements to rent out entire flat has also attracted many rich people to buy a HDB flat to rent out. Well, a 5% rental return is truely an awesome investment with a good possiblilty of flat value appreciation.

In conclusion, what can the gov do? With 8 out 10 Singaporean families having a HDB flat and many of them got their flats via resale market, it is impossible to do away with the resale market.

So, how to reduce housing price?

There were some suggestions by forummers in one of the threads in afralug:
1) 70 years lease. By reducing the lease, the land cost component will be reduced.
2) HDB 3-room 4-room, 5-room rental flats. If the peasants can't afford to buy a flat, a rental flat is still better but I doubt the government will go this path.
3) A new class of HDB flats that cannot be sold in resale market. The flat must be sold back to HDB.
4) Increase housing subsidy for lower income families.

Actually, any national policies for affordable flats must be selective. It cannot be applied to all citizens. There are many rich citizens in Singapore that are more than capable to live a decent life.
Giving them subsidies is depriving the rest of the lower income families.

[Ben]

You actually did not answer the question. Anyway,personal view is personal view. It doesn't have to be backed up with a million dollar salary.
If a view has to back up with a high salary, I think I better keep my mouth shut in front of my boss.

You and I can air our personal view freely, regardless if we earn million or not. However, those earning million should not just have personal opinion on these matters. They should also have concrete plans supported by facts as their decision will affect millions of people. That is why I say those earning million should answer your questions.

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Besides that, it does not do justice to the rest of the Singaporeans if the HDB decides to sell the flat at Pinnacle Duxton at cost price without taking account of the land valuation. If HDB does that,it instantly creates a class of lucky owners that get to buy a $1 million flat with $200k purchase price.

Yes, agreed with you. In fact, I have stated in my earlier post that Pinnacle Duxton should be value higher than Punggol because of the higher land value.

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Bro yeokiwi, I agreed mostly with what you said. I also pointed out that the govt has done a good job in meeting the housing needs of Singaporean, well, at least up till now. The only thing I don't quite able to accept is the so call "subsidy", which is using market value as the basis for calculation. It is more like a discount to me than a subsidy.

Also, I am of the opinion than our govt did not anticipate this surge in demand. They thus need to improve on the planning, or the communication between ministries. I remember that at one point of time, people can walk into a HDB showrooms, decide on the spot to buy and pick up the key on the same (or within short notice) day. That is probably the time when they decided to significantly slow down on new build and causes this shortfall s that we now see.

[yeokiwi]

Hi Ben Bro,

On hindsight, Lim Hng Kiang was probably doing the right thing by overbuilding the flats. haha.
For the ten years period, the HDB price stayed almost constant with a slight down trend. The ten year period gave the chance for the salary of the Singaporeans to catch up with the flat prices.
During the period, I heard some Singaporeans were complaining that their flats' valuations were below their purchase price but most newly wed couples could easily afford a good size apartment.

Of course, when Mah Bow Tan took over, the no. of flats being built was reduced drastically. Too drastic I would say.
If HDB has that kind of surplus flats now, I doubt the price of HDB flats will go up so much.

[flinger]

The question on my mind is :

We have moved to market based pricing for HDB, but is our salary going at the same speed?

Prices of HDB for 3 - 5 rooms range from 300,000 - 800,000 ++ now. ( Resale flats)
BTO Flats go for ( 250,000 - 600,000)

Would our salary keep up with the fast moving prices of property? ( HDB Flats only).

I think we already struggling to pay off these properties, in the near future, would flats actually cost million dollars? ( Resale & BTO).

Would the acceptable range for debt be moved from 30 - 40 and then 50 % of your income? The range has been moving , previously it was 20 and then 25 and now its 30% and for some real estate agents 40% is a good sum ..

Do they not realize the world has changed??? People do not have secure jobs that they can stay for 20 - 25 years, its a very fast moving economy, you can be cut from the company as long as there a business reason to do so, you can be a top sales person or worker, but if they need a number to cut and you are in there, you are done.

There is no job security in the new world order, so taking a 30 - 40 % loan on a new home , isn't that kind of risky ?

The common reply is , buy within your means... if that's the case, no one would be able to afford a house, esp with the kind of prices that housing is going at.

hmmm...... Am I the only one thinking this way??

[kazukirai]

We have moved to market based pricing for HDB, but is our salary going at the same speed?

Would our salary keep up with the fast moving prices of property? ( HDB Flats only).

Would the acceptable range for debt be moved from 30 - 40 and then 50 % of your income? The range has been moving , previously it was 20 and then 25 and now its 30% and for some real estate agents 40% is a good sum ..

Hey Flinger,

Just a look at the comments section of websites like New Temasek Review and The Online Citizen will tell you that you aren't alone.

Anyhow, I believe MBT had another response which is to not be choosy and accept any gd 'ol location. When I was applying for the BTO in Sengkang earlier this month, there was another project launched in Bukit Panjang. After application closed, the Bukit Panjang project showed that there were far fewer applicants. We know what happened in Bkt Panjang recently so perhaps there is some wisdom in the crowd.

I'm not sure if I have any insight to share regarding your question because since HDB has moved to market based pricing for BTO i.e. pegged to current resale prices, there has to be people buying in order for the BTO prices to be moving up.

And if indeed, as you say, that most people have been buying based on shifting of goalposts to what the acceptable level is, then I think we are in for some trouble later on.

However, I think the most important point many Singaporeans miss out is "Why depend on others and not on ourselves?"

Most of us will start with low salaries (as all fresh grads do) then work our way up the corporate ladder. Along the way, we be prudent in our spending and learn to get satisfactory returns on our savings or develop alternate streams of income, then we won't have to be at the mercy of our bosses or the charity of our politicians.

Isn't that what we're all here at Value Buddies for?

[Blackjack]

Whilst the discussion on HDB affordability & pricing is evergreen, I don't think this issue can be easily untwined and resolved, especially since this is a result of policy legacy. Some other things to consider?

1) Will pricing HDB flats to cost immediately lead to negative equity for existing home owners? Do we want that?
2) Similarly will pricing to cost encourage more home owners to "take the profit" off the table, whoever they are selling to, or encourage such mentality?
3) Most fresh grads should have no issues paying off their loans in time, even if debt level may have increased or salary may not have caught up. But to me this also partly illustrates Singapore's attractiveness globally as a place to stay in. If nobody's keen to come to Singapore to stay then probably it would be fair to expect salary to catch up with cost of owning a home, or even exceed it. (imagine a land of high-income earners who are expats in other countries)
4) Not everyone are fresh grads even though we may be ourselves or the company we are in to give us that impression. Those who are not and are working in blue-collared jobs would really feel the pain when it comes to housing. Try imagining living off $1k net salary (using $1.3k gross) with a family of kids to feed. Spend more on food, transport, insurance, or? (I tried doing some "financial planning" for someone I know with this scenario and realised it is difficult to sustain on a long term basis.)
5) Generally I think our govt has acknowledged this issue though I think the level at which it is done still leaves much to be desired. (think inconsistency in statements) But at least, if we recognise a problem then we can allow ourselves to get somewhere further

[arthur]

However, I think the most important point many Singaporeans miss out is "Why depend on others and not on ourselves?"

Most of us will start with low salaries (as all fresh grads do) then work our way up the corporate ladder. Along the way, we be prudent in our spending and learn to get satisfactory returns on our savings or develop alternate streams of income, then we won't have to be at the mercy of our bosses or the charity of our politicians.

Isn't that what we're all here at Value Buddies for?

Bro.

The one single prob about the save and invest wisely part is with current housing price, you can bet the returns will be far smaller and the opportunity cost of doing other things with that "market subsidy" value you paid would be far greater.

Somehow I think its a govt ploy to lock a couple down with such exhorbitant pricing.
Sure the older generations are laffing all the way to the banks, but their profits will come from their children and grandchildren.

Talk about karma.

Cheers.

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Also, I am of the opinion than our govt did not anticipate this surge in demand. They thus need to improve on the planning, or the communication between ministries.

Ben

I have to seriously disagree with you on this point.

How can the head of national population board (or some whatever govt body) not talking to head of HDB (you knw who).

This is a very black or white question. Either both are ignorant of each other intentions (which is real bad!) or both are fully aware and unwilling to think of a way to look ahead and plan ahead. (which is worse!)

[Musicwhiz]

It's pretty common in the Govt not to "anticipate" stuff. Some examples:-

1) It was not anticipated that there would be a super surge in foreigners wanting to buy houses to live in, even though the policy has been to admit foreigners without much hassle for the past 5 years. So demand outstrips supply.

2) It was not anticipated that car populations would grow to such alarming levels, even though policies for car ownership have been lax for far too long (0% downpayment, 10-year loan tenure). Hence, we have too many cars on the roads.

3) It was not anticipated that Orchard Road would flood, because it was a once in 50 years event.

4) It was not anticipated that there would be gang fights, because Bukit Panjang area has been safe for the last 14 years (and therefore is assumed to continue to be so).

So, as you can see, the Govt is truly not good at anticipating......