Some comments in the survey
1. HDB Flat used to be financed by one breadwinner with 20 years loan period in the past, but now it is financed by double-income family yet stretched to 30 years, this is a reflection of un-affordability in price.
2. Most young (<30 years old) are willing to spend more on repayment because they think that their salaries will increase and with more income in future, the repayment % will go down> They are not aware that the 23% that goes into the cpf OA when they are fresh out of school will be reduced to 19% when they are 35 and even lesser as they grow older. Even under a 5% yearly salary increment without hitting the 4k cpf cap, the 5% increment cannot cover the drop in 4% to the cpf OA.
3. I hope that HDB does not act like a private company like Capitland. If so, then it should be listed like a REIT in SGX.
4. I think prices should reflect the national income level and should not be subject to speculation or COV. Because HDB monopolises the public housing market, their priority should be to ensure prices remain within the means of the average Singaporean. HDB housing should also only be made available to Singapore citizens and not permanent residents. It is highly unfair for permanent residents to be entitled to buy a HDB flat and later on sell for a profit when there is no 100% guarantee that they intend to live in the country until the day they croak. If the government sincerely believe that Singaporeans are their priority - this is the key area they need to seriously look into or make proper adjustments before it's too late.
In my book on financial planning, I advise that the purchase price of a home should be between 4 to 5 years of the family income (after deducting expenses to employ a maid). It does not matter if the money comes from CPF savings or from cash. They represent your money anyway.
ReplyDeleteThe existing HDB owners are happy with the increasing asset value, the government is proud of highlighting its role in the nation wealth creation from an initial 3 room flat at $6,000 (Yr 1960s) to 3 room flat at $300,000 (Yr 2010). This is a staggering 5000% increase!!! However is this a wealth creation or wealth destroy? Since the new generation has to commit so much their income and life to support their housing, which the government has vowed their best in the basic shelter provision? I discuss this in http://keithyip.com/2010/01/08/housing-policy-wealth-formation-and-the-singapore-economy/. Free to share your ideas too.:)
ReplyDeleteThe first CPF contribution reduction starts when the member hits 50. Second reduction is when the member hits 55.
ReplyDeleteIn 1973,
ReplyDeletea 4 room flat (92 sq m) is $15.5K
a plate of chicken rice is 70 cents.
a fresh poly grad pay is $400 pm.
a minister pay is 3-4k pm, about 40K per year.
In 2009
same flat is $350K. (22 X)
chicken rice $2.50 (3 X)
salary poly grad $1.8 to $2K pm (5 X)
minister pay say $1 m per year (25 X)
So public housing price vs pay jump so much, obviously not healthy for quality of living and retirement for ordinary folks.
Unless got minister pay.(increase >20 X)
If I want to sell my existing flat, of course I would want to sell it as high as possible. If Govt restrict the amount that I can sell, of course I won't be happy about it. You can call me selfish, money minded, but if you are not willingly to pay so high, then don't buy.
ReplyDeleteBtw, if anyone here strongly believe that it is wrong to sell HDB at such high price, please let me know. I would like to buy your unit. I am serious!! I have been hunting for a 3rm unit at Bedok since Jun 09 but the price is terribly high. I don't blame the owner for selling high as I would do it as well. But since there are people who are against the idea of selling at such high price, I am sure I can get my 3rm unit at a reasonable price from you :)
Mike
HDB has lost its mission to provide housing to the general public at a reasonable price like in the old days. Wasn't this the reason why HDB was established in 1960. What is their vision & mission statement. They should focus on their primary role and leave the "hdb condos" to the private sector.
ReplyDeleteMichael Lim
#2 is the most noteworthy point. If age <= 35, 23.115% goes to OA. Any older, and the allocation drops!
ReplyDeleteI believe the salary ceiling is $4,500, not $4,000:
ReplyDelete"Maximum contribution for the private sector is calculated based on a salary ceiling of $4,500 for both the employer and the employee."
Or $6,000 for pensionable employees, though I personally do not know of anyone thus employed.
Pap's mind is always on squeezing more time from sporrans...they don't care the hardships they caused as long as GDP continues to grow to allow their salaries to keep heading north...
ReplyDeleteI think the Govt. should consider seriously to practise market segregation into 2 HDB markets, as I suggested under a previous post. Mr Tan agreed with me, this approach could work.
ReplyDeleteHDB manages one by controlling buy-back and make it affordable for reasonable Singaporeans. Leave the 2nd market to free forces for "stubborn purchasers" or "die-hard" speculators, and see if they will be "shaken up" later on.
Once price is contained in the first and start to dampen and hit the 2nd open market, I wonder if people like Anon. January 13, 2010 11:07 AM (Mike) and others would still think the same in future, if the idea was implemented.
We can see if people still demand "to sell it as high as possible" and get marginalised and stuck in the 2nd market to regret.
If HDB start to implement this, I am sure all those who would want to think whis way would start to shiver.
why bother to keep writing and writing about the cost of HDB? You think they will care or take action? It is too late. The ship has left, there is no turning back. At the end of the day, MBT still says it is affordable.
ReplyDeleteHi C H Yak, your idea is good but i have few questions.
ReplyDelete1) what is the price you would like HDB to buy back your unit? Don't tell me you will be kind enough to sell it at a low price right?
2) If HDB pay a high price for your unit, won't it make sense for them to pass on the high price to the new buyer?
3) MBT still says it is affordable because most people still can get a HDB unit. Seriously not many people are homeless because they cannot afford a unit. Example my cousin who is in her 40s and divorced, rent one room from HDB at monthly rate less than $50. If you cannot afford, just rent from HDB, why insist in getting a unit on your own?
4) The worst hit group is single like me. I cannot buy a new flat which is affordable by a couple (2 persons income compare to 1 person). I cannot get much govt subsidy (only pathetic $11K) even if I buy one unit near my parents. As of now, I can only dream of getting a resale flat unless some kind owner is willing to sell his/her unit to me at a cheap price.
Yak, will you?
mike
Hi Mike,
ReplyDeleteYou wrote:
"If you cannot afford, just rent from HDB, why insist in getting a unit on your own?"
and then ...
"The worst hit group is single like me. I cannot buy a new flat [...] I cannot get much govt subsidy (only pathetic $11K) [...] I can only dream of getting a resale flat unless some kind owner is willing to sell his/her unit to me at a cheap price."
Err, you seem to want the whole cake and eat it too; not only cake but the whole bakery as well, maybe plus entire breadtalk chain.
Does not work this way. TANSTAAFL (google it if you don't understand)
The poison had been planted 25 yrs ago when 2/3 of S'poreans kept on giving mandate to PAP to implement "asset enhancement" policies. All are now digesting this poison. We reap what we sow.
If you are so supportive of current policies, then take the govt's advice. Why so choosy, must be in bedok? Go select ground floor or 2nd floor 3-rm in Boon Lay --- affordable what! Some more you single, can rent a room to foreign workers. Boon Lay area very easy to find FW tenants. Lagi more affordable to pay the mortgage!
Not happy with govt's advice? What to do ... blame karma or forefathers as what Young PAP suggest?
Hi Mike
ReplyDeleteThere is no urgent need for HDB to start buying back from the open market. But it can start immediately with with new launches, BTO or what ever. HDB should release it at reasonable affordable housing price. Forget about pegging it to market re-sale prices and backed by "market subsidy argument". HDB sell at cost plus a resonable mark-up.
How long it takes to build these new BTO. 2~3 years. Say 7 years later the price correction will start.
For 2nd timers, if they choose to sell back to HDB at a reasonable price, they should be allowed to buy from HDB again a second time at reasonable affordable price to be fixed by HDB. This answers your question 1 & 2. If I am able to buy at at reasonable cost from HDB, I don't have to hunt in the open market and pay ridiculous prices; be it to speculators or FT; etc. I can sell cheap and buy cheap from HDB a second time; why must we sell high and buy high again as you suggested. It is the job of HDB to regulate the price; so that you need not speculate to inflate the bubble.
But once you used up this 2nd chance, that is it, you enter the open market at your own risk forever.
HDB should stop from pushing out units at high prices; backed by market subsidy argument in order to sustain current high re-sale prices.
To your Qn 3, "Seriously not many people are homeless because they cannot afford a unit", yes people are not homeless but they are asset rich and cash poor. And all are forced to speculate like you would like to do because of existing policy.
To your Qn 4, policies can be repealed. That is why Ministers are paid their high salaries. If HDB can buy back at cheap prices, they should be able to sell to singles at affordable prices too. But as you said it in QN 3, "If you cannot afford, just rent from HDB, why insist in getting a unit on your own?" You can also rent private apartments if you can afford. No need to buy HDB and / or private properties.
I strongly felt that HDB should not behave like a developer. I also believe that speculators should not be allowed to capitalise on national policies to inflate the "asset bubble" any further and the HDB should be responsible enough to regulate prices. The leeway can be still there for speculators but let them shoulder their own risks and be responsible for their own acts.
Dear Mr Tan, I feel if a couple wants affordable housing, please move to a less convenient township for a start. The town will develop slowly but you still have your own house. My sis and her 2 friends nid new HDB and all got it on first ballot. 1 in Tanglin halt (pays for the sky and stays near town), 2 stays in the west (cheaper to buy and needs a place quickly) and 3. opts to buy BTO in the north (needs to wait and not in hurry. THe price differs about 80% between 1 & 3 but all feel worthwhile as this is their choice. Affordability and convenience needs to be prioritise.
ReplyDeleteNew couples should be almost the last group to whine and complain in this blog cos it waste the good effort TKL is trying to do.
Observe the young couples around you. Wants to holiday, buy car (s), buy a second condo for investment... but delays childbirth and blames high HDB price? Btw, check out high end restaurants for these young couples too! For goodness sake, for those who are really unlucky not to get to ballot, I feel bad, but I have seen many who are soooo choosy, they have the tendacies to look to high and comparing with friends.
And please don't need be so calculative must live near parents and enjoy the grant. Imagine you buy $250k in punggol with no grant and stay near parents in toa payoh or city fringe with grant. Work out the maths.
If i may make another assumption on these whinners, you are the group who have monetary help from parents to get wedding package, honeymoon, banquet...
I don't think affordability is a big issue at the present.
ReplyDeleteYou ask arround, nobody realy complain they cannot pay their HDB.
I think this issue relates to very small percentage of people only.
aiyoyo
ReplyDeletehdb price so high how to afford?
economy strong?
many unemployed.
just thinking next generation how to survive?
cant see the logic in hdb prices
aiyoyo
Mike is precisely trying to say that everyone is trying to have their cake and eat it.
ReplyDeleteI totally agree with mike with the idea of renting. House ownership was never meant to be affordable for everyone. If you think it's a bubble, rent. You'll have the last laugh.
Market segmentation or controlling prices do more harm than good as it puts private contruction of landed property or condominiums out of business as housing prices for new units are kept artificially low. To any extent, demand for private is decreased and shifted to new HDB. In the end, forcing the price of resales even higher when the people who are supposed to be rich enough to be living in private housing now spend their dollars in the HDB resale market.
High housing prices is the case for all developed countries. Owning a house in Singapore is different from owning a house in our neighbours to the north or south. The difference is too obvious to need any mention. Hence, can't own, rent. Save money, and less risk. And you can't complain about the gahment trying to use your house to tie you down to Singapore or some conspiracy theory like that...
It's funny when people blame high prices when they are the very people who sets it.
Please don't counter with new HDB being priced by gahment cos gahment price at a fraction of resale HDBs anyway.
Elite system generates ppl who worship capitalism because they also benefit from it. Low income ppl are the most poor thing. But again, there are choices in life as suggested by some of you. One thing is many ppl when they are young, they think they are "superman" and too optimistic about their finance down the road. Many ppl also are not aware of the 120% cap that you are allow to use CPF to pay for a house, thereafter it's cash.... CASH...which means you will have lesser disposable income. Do we want to end up like HK sooner or later where ppl throw in 50% of their income just to own a house ?
ReplyDeleteLook, those of you who think HDB prices are expensive ? Don't buy but rent ? Do the math......look at at the monthly rental for 3 or 4 or 5 room or whatever...imagine monthly rental X 12 x 99 ......still think its cheaper to rent ?
ReplyDeleteHi wjsim
ReplyDeleteYour argument that a segmentation in HDB new and resale markets will dampen the prices of private properties (say condo) and increase demand (hence prices) for HDB resale flats is flawed.
In fact, the converse will happen if there is true and real purchasing power. This is because their prices will also drop when the asset bubble is not supported, and actually generate demand if people can really afford to go private.
The problem will only happen when people speculate in the HDB re-sale market for a windfall to jump onto speculation in private properties. But if there is segmentation as I suggested, price will correct in both markets. People are less likely to speculate.
This is why existing policy must be changed. HDB now also has a conflict of interest because it builds EC and BTO premium flats. And you can see BTO are not cheap but catching up with private property prices. HDB wants to profit from this market too.
In a way, property agents also aggravate the speculative HDB re-sale market by capitalising on HDB policies.
Should national policy on housing the common people support and facilitate speculation; plus to help private developers to sell condos?
If HDB price for both new and re-sale flats must be kept high and less affordable for majority of Singaporeans just to prop up and sustain equally high private property prices, your argument will not hold water. If you were the Minister and dare to say this, you will be the next laughing stock.
You said "It's funny when people blame high prices when they are the very people who sets it." In a way true, in you are talking about rental vs purchasing, but certainly this is Singapore, the rules and regulations count more, and the Govt supports home ownership and not rentals. Yes, HDB flats are priced at a fraction of re-sale price; but do you know the real costs, and why the need to talk about "market subsidy" behind new HDB flats, which would otherwise be built by private developers. Do you know what was the historical price of land and actual compensation paid when the Govt acquired under the Compulsory Acquisition Acts to have the current land bank?
And going back to your argument that segmentation will cause price of private property price to fall, are you contradicting yourself if HDB flats are indeed that cheap and affordable, because only a big gap between HDB flats and private condos will force such a correction of the total property market, if indeed demand in the HDB and private condo markets are linked. There is still a certain degree of distinction between the two markets generally.
Someone mentioned GDP above. No, LHL is going to change it to GNP soon I think, after hearing interview on TV last week. Our domestic econmy has shrinking real fast because manufacturing has being moving out since 10 years ago. Not much high value-add manufacturing investment came in to replace the lost despite EDB effort. My personal observation only because I'm from the manufacturing industry.
ReplyDeleteAnd our gahment has been busy expanding the external wing. So GNP number will be much much bigger than GDP when it's introduce. Then, everyone feels happy and the gahment feels incredible, because got good gahment ma..Then election will come. Then pay rise using GNP number and growth. Last round PM was $500K if remembered correctly, next round how much? Make a guess. Above is my guess only, I hope will not come true.
The worse are the singles. They are not eligible to buy from HDB, and have to pay resale prices. It is not their choice for them to remain single, yet the government is punishing them for it.
ReplyDeleteI can't buy a flat even I have sufficient CPF in the account. For the market now, if I want to buy a flat, COV 20k + bank Loan 5% + agent com + Basic Reno can easily come to 40k. I am not sure how we can afford this kind of housing. The 5% bank loan should be allowed to be paid by CPF. I am renting a room now and wife is pregnant and stuck. Approached HDB for help they simply give me a loan for bigger flat(EA) with COV more than 20k. Agents are saying PR and those just converted are flooding the market with the COV. I am not sure whether they will take over our homes in the near future. I have no confidence in the housing policies and government. BTO flats allow first timers for application. I can't go for that and I believe a lot will face the same problems. If the flats are not enough, why do we keep flooding the market with foreign people to take away our homes? I do not see the housing policies as a way to encourage Singapore to have more babies as well. Maybe government should look into that. It much more than giving a few thousand dollars for having a baby. The environment is conducive for foreign talents but not for us. Even the kids are competing with them in school. Our salaries are not rising with the rising prices.
ReplyDeleteThe middle class people are neglected definitely as government only take care of low income and first time flat applicants. As for the rest, I think we have to swim in the open sea.
ReplyDelete