Affordability

[kazukirai]

My thoughts are that the report (using their scale) shows that housing affordability in SG is "severely unaffordable" but that scale is a construct which may not necessarily be useful in a predictive sense.

If you look at the table(s), in a relative sense, we seem to be much better than the other major (and even some not-so-major) cities. New York's (6.2), Toronto (6.2), London (6.4-7.3), Melbourne (8.4) and HK (14.9). Even favourite cities for S'poreans who move to Aust like Adelaide (6.3) and Perth (6.0) rank worse than SG's (5.1).

Off-hand, I remember reading somewhere (I think it was from former NTUC income chief Tan Kin Lian) that a nice rule of thumb for housing affordability is no more than 5x one's annual income. So if our median home price to median income multiple is 5.1x, that seems to fit in right.

Any financial planners here can confirm this or have any insights?

[jaykay]

Pardon me if I was slow, I just learnt that for DSR includes credit card debt which is in my view absurd as some people uses e credit card for consumption and make full payments regularly. Even some have to use their credit cards for business travel before getting a expense claim from the company. But if those are taken into account for DSR, those who uses credit card as consumption can almost not buy any property.

Only if you roll over the outstanding balance on regular basis.

[brattzz]

Have we forgotten that debt is the main reason why property/cars is overpriced?

CPF causes HDB to be overprice...
Bank Loans causes COE/Pte Properties to be overprice...
Credit card cause rolexes price to go up...

We have to try to look/appreciate at the true value of things, not just the "market-value"... unless ur a trader...
If the environment allows for it, (like now, low interest rates..etc) at least we must recognized that short term environment and what's the impact/damage for the long term...

[greengiraffe]

Frankly in any land scarce politically stable cities, affordability ratios have been blinking RED for many years. Broadly speaking that is the cumulative effects of Central Bankers sweeping economic problems of yesterday years under the carpet by pursuing repeated expansionary monetary policies.

The resulting effects is the ever widening income gap and rampant asset inflation that the rich have benefited. The reasons of many folks stubbornly pursuing their real estate investment dreams (on top of a privately own residence) is the result of seeing too many people making easy money off property investments in the past 50 years.

Hence affordability will always be a problem in land scarce and politically stable global cities.

GG

My thoughts are that the report (using their scale) shows that housing affordability in SG is "severely unaffordable" but that scale is a construct which may not necessarily be useful in a predictive sense.

If you look at the table(s), in a relative sense, we seem to be much better than the other major (and even some not-so-major) cities. New York's (6.2), Toronto (6.2), London (6.4-7.3), Melbourne (8.4) and HK (14.9). Even favourite cities for S'poreans who move to Aust like Adelaide (6.3) and Perth (6.0) rank worse than SG's (5.1).

Off-hand, I remember reading somewhere (I think it was from former NTUC income chief Tan Kin Lian) that a nice rule of thumb for housing affordability is no more than 5x one's annual income. So if our median home price to median income multiple is 5.1x, that seems to fit in right.

Any financial planners here can confirm this or have any insights?

[pianist]

The only way to explain the ultra high ownership in Singapore is the success of HDB public housing scheme when public housing in any other country is deemed a "dirty" word.
I hope HDB continues on its intended mission and not on a "corporate" mission.

unlikely, for the past 20 years ++ so many hdb home owners have bought at market price, if suddenly unwind, some may not able to take it. maybe public pricing for hdb will happen at the outskirts?

[corydorus]

The only way to explain the ultra high ownership in Singapore is the success of HDB public housing scheme when public housing in any other country is deemed a "dirty" word.
I hope HDB continues on its intended mission and not on a "corporate" mission.

unlikely, for the past 20 years ++ so many hdb home owners have bought at market price, if suddenly unwind, some may not able to take it. maybe public pricing for hdb will happen at the outskirts?

I doubt unwind be more than 30%. Is just on paper since they typically stay in the HDB flat. Not sure why they can't take it. They may not be happy that's all. Prices are relative. So if they sell and buy another, it will be lower too.

[corydorus]

Affordability also need to look at disposable saving remains to buy housing. No point to have high median salary but not much saving to achieve similar quality of lifestyle as other cities. This i feel the report is lacking in their coverage.

We also need to take old age medical cost into consideration as it is at the tail end of our life and hardest to estimate. Gov can push the problem far behind before it really surfaces. In other country their high tax is to provide certain level of medical subsidy. Ed. In Taiwan (relatively high income taxes), pregnant woman with complications will opt for Caesarean delivery free. Cancer patients are heavily subsidies by the state. Good or bad is another topic.

[specuvestor]

The only way to explain the ultra high ownership in Singapore is the success of HDB public housing scheme when public housing in any other country is deemed a "dirty" word.
I hope HDB continues on its intended mission and not on a "corporate" mission.

unlikely, for the past 20 years ++ so many hdb home owners have bought at market price, if suddenly unwind, some may not able to take it. maybe public pricing for hdb will happen at the outskirts?

I doubt unwind be more than 30%. Is just on paper since they typically stay in the HDB flat. Not sure why they can't take it. They may not be happy that's all. Prices are relative. So if they sell and buy another, it will be lower too.

Agree with Cory, that's where the ideology is important. We 're going on the right path under Khaw. The corporatisation of HDB was during Goh era under the Singapore Inc ideology. Not focusing on PnL does not mean the prices will collapse because HDB is the largest landlord.

What needs to unwind is:

1) restore the original mission. In the past HDB flats were NEVER auctioned even if owner don't pay up, they then privatise this liability under the pretext of commercial banking loans. It is a sign of the mission changing. Stop focusing on HDB as an asset but restore the idea that it is a roof over our head so that our basic needs is taken care of.

2) Continue to claw back CPF amount to be used for housing. Another landmark of Goh era which led to the asset rich cash poor syndrome.

Off-hand, I remember reading somewhere (I think it was from former NTUC income chief Tan Kin Lian) that a nice rule of thumb for housing affordability is no more than 5x one's annual income. So if our median home price to median income multiple is 5.1x, that seems to fit in right.

Any financial planners here can confirm this or have any insights?

IIRC Buffett only agrees to borrowing specifically for property as a matter of pragmatism. His rule of thumb is 7 years

[liphuang]

Hi liphuang,

I think you are mistaken, if you read the article properly, you will realize they are not comparing against countries but against metro cities.

I think the report is a bit mis-leading. Singapore is a country as well as a city, but it is being compare with other countries. Singapore should be compared with Landon instead of UK, New York instead of US.The same problem is with Hong Kong also.

It is naturally as a major economic center, the housing price is higher compare with less important cities within the country. If you look at the chart at page 22 with a list of cities. Other than Tokyo and Osaka (not sure how it happened), those city with "more affortable" housing are mainly ties 2 cities in the country.

The only way to explain the ultra high house ownership in Singapore is that the house in Singapore is more affortable than most of other major cities.

I know it covers only metro area instead of the whole country. But even metro areas have different prices. Landon and Leeds are completely different in housing market. One is a national economic center and the other one is a center of surrounding area only. Singapore needs to compare with Landon not Leeds.

[corydorus]

Hi liphuang,

I think you are mistaken, if you read the article properly, you will realize they are not comparing against countries but against metro cities.

I think the report is a bit mis-leading. Singapore is a country as well as a city, but it is being compare with other countries. Singapore should be compared with Landon instead of UK, New York instead of US.The same problem is with Hong Kong also.

It is naturally as a major economic center, the housing price is higher compare with less important cities within the country. If you look at the chart at page 22 with a list of cities. Other than Tokyo and Osaka (not sure how it happened), those city with "more affortable" housing are mainly ties 2 cities in the country.

The only way to explain the ultra high house ownership in Singapore is that the house in Singapore is more affortable than most of other major cities.

I know it covers only metro area instead of the whole country. But even metro areas have different prices. Landon and Leeds are completely different in housing market. One is a national economic center and the other one is a center of surrounding area only. Singapore needs to compare with Landon not Leeds.

Price between Bishan / Punggol differ significantly even in a small island. Not sure is pale in comparison between London / Leeds.