What is "affordable housing"? The minister for national development said in Parliament that new HDB flats are still affordable and has produced studies to prove his point. Critics have brought up arguments from the other side to show that HDB flats are expensive for the working people. I shall be writing to give my views of this point within the next few days.
In the meantime, I invite you to share your comments.
Maybe we can make use/adapt USA's Housing Affordability Index to gauge our own citizen's affordabilty.
ReplyDeleteMaybe an analogy of what is affordable may help.
ReplyDeleteYou know, sometimes people (eg low income) cannot afford certain very expensive luxurious things when they have to pay cash upfront. So they go for hire purchase (HP) scheme where they pay it in installments over a period. But it will be more costly in total than if you were to pay all by cash at one go. Those on HP schemes may also have little left for other essentials for living and little savings for contingencies.
Hence we may have a poor opinion of such "HP" people on how they manage their money, although the luxurious things have become "affordable" to them with the HP scheme.
Now back to HDB housing. It is not a luxurious thing, it is a necessity. But it has become very expensive but still "affordable" in the "HP" sense, which is what the minister is saying.
So is this a good thing for the individual and family? Of course it is very good for the store with the HP scheme (customer base become very large) and in the case of HDB flats it is also very good for u-no-hu.
MBT's arguments to show that HDB flats are affordable to existing buyers are flawed by "survivorship bias", where you are trying to show that things are better than in actual fact. This technique is used by active fund mgrs to try and show they can beat passive investing.
ReplyDeleteMBT's arguments to show that HDB flats are affordable to new buyers are flawed by cherry-picking assumed salaries and not based on actual median or percentile salaries. And even then, the examples he used are often maxed out their CPF-OA contributions to pay the mortgage. He also likes to use 30-yr mortgages which will decimate a person's CPF account and ignores the opportunity cost of not enjoying the relatively higher CPF interest rates. MBT also ignores the fact that CPF-OA contribution factors will decrease with age, forcing people to top-up mortgage payments with cash.
Frankly in this current property cycle, for average couples, the only "affordable" flats are new 3-rm or 2-rm HDB flats. But they have income ceiling restrictions.
Prior to his budget speech, Mr Mah has been releasing a whole series of statistics. Unfortunately, many of these have been exposed as being "funny numbers" by netizens.
ReplyDeleteThe first of these releases in the HDB Sample Household Survey 2008. Goh Meng Seng did 2 articles to explain what was wrong with the numbers.
http://singaporealternatives.blogspot.com/2010/02/call-for-clarity-from-mah-bow-tan-and.html
http://singaporealternatives.blogspot.com/2010/02/no-clarity-yet-but-more-questions-on.html
Independently, Leong Sze Hian did an analysis and came to a similar conclusion.
http://theonlinecitizen.com/2010/02/hdb-95-per-cent-happy-with-their-flats-%e2%80%93-really-or-just-half-the-story/
After being exposed for the first time, Mr Mah then instructed 2 "independent" professors to contribute an article to the ST to show HDB flats are affordable. These professors used an apple=orange=pear methodolody to try and show that HDB flats are affordable by comparing Singapore to the most expensive cities in the world. It got exposed by Dr Ng in Temasek Review (TR).
http://www.temasekreview.com/2010/03/02/no-empirical-evidence-that-housing-in-singapore-is-affordable-by-any-standard/
Later in a stunning revelation, it was found that the two "independent" professors were not so "independent" after all. One of the professors was in fact on the board of HDB. He is also a grassroots leader in one of the CCs.
http://www.temasekreview.com/2010/03/03/st-fails-to-mention-that-author-of-its-article-on-hdb-flats-being-affordable-sits-on-hdb-board/
Leong Sze Hian has also done the following article to point out what is wrong with statistics presented during Budget 2010.
http://theonlinecitizen.com/2010/03/budget-debate-statistics-uniquely-singapore/
Moreover, MBT have not considered the consequence on a wide range of other social issues that are associated with having to repay this huge debt. Some of these issues include
ReplyDelete: (fertility decrease )desire or ability to have children are delayed or totally compromised
:innovation and entrepreneurship might be decreased as people are less likely to take risk when faced with the uncertainty of paying the huge debt
: the huge COV are taken from cash upfront. Savings for long term retirement are affected and less cash for investment(for good or bad)
: family life is extremely stretched as both parents have to be fully employed throughout their 30yrs of mortgage and time for children are compromised. Less possibility for the mother to stop working or even working part time during the child's formative years from 1-6 yrs old. This is especially damaging for the lower and lower middle class as they might not be able to afford maids to take care of the children.
In summary, the issue of affordable housing should not be only based on just the direct economical reasons without due considerations of the other wide ranging social issues.
The PAP's version of certain issues does not square off with the usual and common people's definition.
ReplyDeleteFor example, there have been endless debates on the issue of 'subsidies for HDB flats' between the Government and the Opposition. There have been equally diverse views on the question of 'affordability of HDB flats' between the Government and netizens.
Now we have a new issue hotly debated in cyberspace, the definition of 'productivity'.
What does all this show? That there is a wide gulf between the Government's perception of issues and the people's take on those issues.
The perceptive divide is just going to grow wider and will be slowly felt in elections to come.
Do you realise that with such a massive increase in 'public' housing prices, a massive transfer of wealth has taken place in the last decade?
ReplyDeleteOn top of that your CPF monies (originally intended for retirement) is steadily being eyed for multiple purposes such as housing, medical care, education, etc.
And at the end of the day, some person at the top is going to repeat the lament "Singaporeans are not saving enough for retirement".
Someone should calculate how much HDB is earning from people who apply but fail to get any queue number which allows them to choose a flat. Foe eg, if 10,000 applicants apply for 500 available flats, HDB will earn $100,000 each time. If the balloting is done 12 times a year, HDB will earn $1.2m a year, pure profits as these applications are done on-line, albeit physical applications are allowed. Where is the incentive to build more flats if they can make such easy money?
ReplyDeleteNot only are more money channeled into HDB housing, the portion available for that purpose has also been reduced over the years with the CPF cuts.
ReplyDeleteOlder Singaporeans, like me, were fortunate that HDB flats were much cheaper in the 70s and early 80s. Apart from that, our total CPF contribution rates were higher, as high as 50%, and interest rates were as high as 6.5% for many, many years.
So, you can see the difference and the difficulty faced by my children and your children, in years to come.
This will be a difficult knot to untie for the Government, and letting HDB prices go too much either way will be disastrous for a lot of people. I would aptly compare this issue to something like 'riding a tiger but not knowing how to dismount'.
I do not like the word "affordable" as its meaning is very relative, subjective and not absolute.
ReplyDeleteHere is an example comparing sg to Aus. In sg, salaries are mostly low and car prices are very high. So, a car can be considered unaffordable to most. But the situation is the opposite in Aus. Cars are so affordable such that McDonald cashiers and garbage collectors drive to work in their own cars.
Another angle on affordability is this. Say an item costs $12k. If one has to pay for it upfront, it may seem unaffordable (ie expensive). But if one pays $100 per month for 10 yrs (excluding interest considerations), it suddenly appears affordable (ie cheap) on a month-to-month basis. This is the logic HDB is using to paint a pix that HDB flats are affordable, eventhough they are expensive. The same strategy is being used by many retailers to con ppl into buying high-priced items using "affordable" monthly instalments.
There needs to be a universal definition of "affordability". One online dictionary defines it as:-
"that which can be afforded; believed to be within one's financial means"
I find this definition inadequate.
rex comments as follows,
ReplyDeleteif i remember correctly, all of Mah Bow Tan's replies reported in straits times, skipped (deliberately or otherwise) the issue of "30 year" mortgage. I saw a lot of statistics that compared the average payments of mortgages relatve to salaries, between Singapore, tokyo, hongkong. But it is not an apple for apple comparison, as the people in other countries may not be taking 30 year loans.
The 30 year loan issue is a very big factor which cannot be ignored. Jamesneo above gave a very good expose of the accompanying problems, NONE of which were highlighted by Mah Bow Tan. I do not understand why Low and Chiam didn't even think of saying some of these things. Do they have brains? I feel betrayed by these two opposition dummies. They have absolutely no skill in the art of debate.
rex
In my opinion the PAP govt is putting up a very embarrassing and most pathetic show in parliament trying to convince S'poreans things are still okey dokey. The endless fallacies, half-truths and false arguments are simply out of this world. I really think the PAP leadership is now at its last leg.
ReplyDeleteThe high HDB prices only benefit PRs, I know of Malaysian PRs who come to work in the last 10 years and sold off their HDB at good profit and returned home in the last year. Singaporeans will continue to be the suckers, nowhere to move to.
ReplyDeleteDuring the last few years, the prices of HDB flats have increased exponentially while workers salaries have not catched up. It is the proportional increase between prices of HDB flats and the workers' salary increase that is what affortability is all about. MBT expects the workers to sweat his whole life just to have a roof over his head and that is his measure of affortability.
ReplyDelete"They have absolutely no skill in the art of debate."
ReplyDeleteNow you know why the PAP is so good.
Keep the dummies and kick out the good ones e.g. Francis Seow etc.
To put it simply, MBT is thinking of his own 3 million dollar salary when considering the affordability factor. He is not thinking of you and me since he does not know us. He knows all the million dollars ministers so naturally with his limited mental faculty he uses the easiest assumption. Time to vote out such useless minister. If I recall, he was never voted in in the first place but conveniently put there by some wise old forecaster, just like Ong Ah Heng.
ReplyDeleteNotihing is cheap in Singapore. Go to Tampines Mall and the Prata Kosong is $1.20per piece and aheinhing too.
ReplyDeleteIn the 70's Prata Kosong used to be 30cents per pcs. So comparing HDB price..........the increase is what I call "RUN AWAY" Price and cannot compare to the Prata Kosong price, which is gradual but diaappointing in terms of sgrinkage
Low Income Apartments is a term used to describe dwelling units whose total housing costs are deemed "affordable" to those that have a median income. Although the term is often applied to rental housing that is within the financial means of those in the lower income ranges of a geographical area, the concept is applicable to both renters and purchasers in all income ranges. This article focuses on the affordability of owner-occupied and private rental housing as social housing is a specialised tenure.
ReplyDelete