According to this
article, an affordable housing represents 3 years of average earnings. I have recommended that the price should be not more than 4 to 5 years, so I am already stretching on the high side. Many people are buying properties representing 7 years or more of their earnings. I consider it to be far too high.
3 years? The buyer has to be a very high income earner. How many salaried persons have this kind of income? People who can pay up the loan for a house probably do not need any loan at all. They can even pay for the property in cash.
ReplyDeleteMedian wage for a person in SG is $2600/mth. So for average couple 3 years of gross income is $187,200.
ReplyDeleteCan't even smell a new 4-rm HDB with that amount. Even for new 3-rm, must be in unpopular suburban area.
If prices of HDB flats fall to the above figure, all those who bought property (both private & HDB) in the 5 years will start rioting.
Readers will like to know that in the 70's when a fresh graduate got about $1,000 pm, the five room HDB was about $34,000 which is lower than the 3 years income of a fresh graduate.
ReplyDeleteIn those days HDB pricing was standard throughout Singapore. So there was a queeing and balloting system. HDB ownership was also very restrictive. Private property owners were not allowed to buy HDB. U r allowed to sell into the secondary market after 5 years. Prior to that u have to sell back to the HDB who will allocate a buyer from their waiting list for u.
A comfortable 5 rm or exec HDB flat or smaller entry level condo is at least $500K.
ReplyDeleteIf this represents 3 years income, then annual income is around 166K or $14K per month.
Wow this is quite high income for an individual. For a couple say each earn $7k, is also quite high.
How many individuals earn at least $7K per month?
Considering that 60% of working adults ($20K and below annual income) don't even have to pay income tax!
Definitely property prices have reached intolerable levels!
Japan is a high cost country and yet even the average Japanese have greater purchasing power than a Singaporean according to some recent research data.
Amazing comments...
ReplyDeleteJust shows that after paying an eye for housing in Singapore, it becomes difficult to read.
3 year income yes, but since you should only spend 25% of your income to service the loan, in effect it would mean roughly a 15 to 20 year loan (the lower the income the lower you can keep for loan servicing)
The HDBs are for sure not "affordable".
Govt needs to close the CPF loophole before collapse.
Remember the biggest land lord will have something to counter this theory. This time the biggest land lord coordinated very well with the developer after late 1990's experience. Higer benefit the biggest land load and help in GDP which tie to performance. The regulator can't even spell low interest environment encourage speculation. What a joke
ReplyDeleteHousing prices around the world have gone up to a level that the benchmark of 3 years is no longer suitable. This is why I am using 4 to 5 years as the benchmark. Many people have actually exceeded this level and have paid prices based on 7 years or more.
ReplyDeletePartly, the low interest rate is to be blamed. If interest rate goes up, many home owners will find their property, even at 5 years, to be a burden. But, if interest rate remains modestly low, it should be okay.
The max income imposed by HDB is $8K per month. 36 months of income is $288K -- HDB should not sell any flats higher than $288K!
ReplyDeleteIs either prices of houses are too high or that general Singaporean pay is too low. The ministers pay can buy a condo without taking a loan while average Singaporean pay for a unit throughout his whole life. I think the real problem is actually not with the prices of the houses, but the income gap between the rich and the poor.
ReplyDeleteAll these point to the fact that our housing price is too high ! It starts from HDB then private properties. We were middle income earner and took a loan to buy resale HDB 9 years ago. The price of the flat was $400K + and about 4years of our annual income then. We took a 20 years loan. However, after making a big lump sum payment 2 years ago through saving for a few years, we're finally going to be debt free by end of this year. It can be done; eliminate all unnecessary expenses and expensive holidays, don;t buy a car if one cannot afford, do one thing at a time. One needs to be very prudent and plan for the worst, e.g. in 2001 when global stock market crash, we were worried about our job so we skip private properties although we could afford it in ideal situation and we also do not qualify for new HDB then. It's always a balancing act and being realistc : if your head is not so big, don't wear such a big hat or you risk falling down because the big hat will cover your eyes. Don't envy others because it may lead you to make foolish decision. I know of people who got into trouble when interest rates hit 6%.
ReplyDeleteMy wife and I are of median-low wage earners and have managed to get a 3-room flat at approximately 2.2 years of our average combined income. Taking only my salary into account, it would come up to 3.6 years. However... this was only possible as a result of some luck in timing combined with a little loophole in the system and our conservative attitude. If our purchase was not timed correctly, we would have been RESTRICTED to getting a unit at roughly 7 years of average income (a larger flat)... much like everyone else in my generation. I.e. Many people today are "forced" into getting a flat that stretches their finances simply because of the income ceilings.
ReplyDeleteHello, Kin Lan, I think your formula is outdated and article's content is outdated too. Nobody can buy any housing - be it new or resale using such formula.
ReplyDeleteDon't forget, the retirement age is not 55, it's 65 and going to 70 and people are living to age 85 and longer.
The correct formula for affordable housing is 6 times of the average earnings. Example: $8,000 x 12 x 6 = $576,000. This is more realistic and updated.
Kin Lian,
ReplyDeleteHDB 101 : What the PAP don't want you to know
http://www.sammyboy.com/showthread.php?t=50943
Came across the above thread. Perhaps you want to publicise in your blog to educate many clueles readers (i used to be 1 of them).
I'm shocked after reading. Very educating. I fear for young & future generations who are transformed into slaves for the state controlled by handful of elites.
http://www.singstat.gov.sg/news/news/op19022010.pdf
ReplyDeleteAmong employed households, median household income from work was $1,090 for those in HDB 1- & 2-room flats, $3,190 for HDB 3-room flats, $5,560 for HDB 4-room or larger flats, and $12,500 for private flats, condominiums and private houses in 2009.
Note median household income is about 40% higher relative to year 2000. This does not mean salary has gone up 40%, it just means we have more dual-income family (probably more graduates too).
The current new BTO Punggol 4-room pricing is $247,000 - $301,000, close to 5X median household income.
I know somebody who quit his $4K/mth sales job in order to qualify for new HDB flat. Otherwise the combined salaries would exceed the $8K/mth limit. HDB only check during application for flat; after that you earn minister pay they also don't care.
ReplyDeleteThis was during the better economic times in 2006, so he could find another job relatively quickly. Wife is in civil service, so he reasoned that it's better for him to make the "sacrifice". After all, sales line also not stable, and in worse case the wife's salary able to cover the mortgage. Anyway, I think he's also about to finish paying off the mortgage liao.