Sunday, March 04, 2012

It is possible for a low income earner to buy a HDB flat

Deputy Prime Minister, Finance Minister and Minister for Manpower, Tharman Shanmugaratnam said in Parliament that a person with a monthly income of $1,000 can afford to buy a HDB flat. Many people found this statement to be unbelievable. Two ministers and one Member of Parliament came forward in his defense and explained why it was possible. Their explanations were still not accepted by most people, who gave their views in the Internet.

I agree with the calculation put forward by Minister for National Development, Khaw Boon Wan. A two room HDB flat cost $100,000. After deducting a HDB grant of $60,000, eligible to certain people under certain conditions, the net cost is $40,000. The monthly repayment over a 30 year loan period, at an interest rate of 2% per annum, is $150. This can be covered by the CPF contribution. There should be no dispute over this figure. Even if the interest rate were to increase to 4% at a later date, the monthly payment would still be less than $200.

The argument by the critics focus on another point - how is the family going to survive on $800 a month. This is a separate matter. It shows the importance of raising the earnings of those at the lower income brackets. There is strong argument for a minimum wage to be implemented in Singapore, to follow the example of most other developed countries.

I guess that a minimum wage in Singapore should be around $1,400 a month. Together with CPF contribution, the cost to the employer should be $1,600 a month.

The Government does face a dilemma about implementing a minimum wage. Already, Singaporeans are more costly than foreign workers. Any increase in the cost of employing Singaporeans through a minimum wage must make them even less competitive. And it will increase the burden on small companies that are not able to cope with meeting the high cost of doing business in Singapore.

In the past, the Government tried to address this issue by giving a workfare income supplement to low income workers. Like many convoluted (i.e. extremely complex and difficult to understand) schemes introduced in Singapore, it did not seem to give much help to the people in need, apart from creating a lot of wasteful administrative work.

There are ways of addressing the challenges, but the Government must be prepared to consider other options, rather than stick to the old approach. In the past, it was difficult to find a solution as there were separate ministers in charge of manpower and finance. We now have the unprecedented situation of one minister being in charge of both portfolios, in addition to being the Deputy Prime Minister!. He now have the power to find a more holistic solution - but does he have the time?

If he does not have the time,  he can appoint some people to find the solution. It would be better to get people from outside the old circle that came out with the old approach. Instead, we need fresh ideas. 

5 comments:

ron said...

Yes, based on the calculations the $1000 is sufficient to pay for a 2room HDB flat.

The $800 is the key point, and a wage increase is warranted.

The reasons for not raising wages because it will make us less competitive does not hold anymore.

Dollar for dollar, the cost of workers here in Singapore must be seen with other points:

1. The worker is English educated
2. There is a legal framework that works
3. The country has stability
4. The country has good transport
5. The country has good medical
6. The country is pro business.
7. There is Gov funded training
8. There is tax relief for business
9. There is work safety standards
10.There is liberal immigration

I do agree that our workers need training, but not just technical skills in doing a job. There must be a focus now on communications, inter relationships and attention to process rather than product.

Anyone from China,India,Vietnam can produce things at 1/3 price and even at twice the speed of sound.
But they do not have the skill of looking after the customer... we can do that. Using our natural skill of being a nation that is fully tolerant and aware of racial differences.

We can focus on human resource.. it is our core skill which the others have yet to be competent at.

Lye Khuen Way said...

Agreed that the DPM cum Minister for Manpower & Finance may need "help",
However, thst revelation that S$1K /month salary can afford a 2 room flat had many if's & but's.
1) the S$1K/month refer to a Family, so it must be a married couple, Children ?
2) This family must be appying for the 1st time.
3) If that 2 room at the SUBSIDIED price of S$100K can be sold for S$40K, I dare to speculate that the REAL Cost to HDB is at most S$70K.
4) If our man & wife only have S$1,000 per month before CPF , how in the world are they going to have children ? Even one will be a challenge.

So, by disclosing this magic affordabilty , the old question of over-priced Public Housing is again in the spot light.

( No wonder the PM cannot delegate or give a decisive yes or no to the Hougang SMC By Election decision)

Xianlong said...

Approach of milking people dry through overpriced housing needs to stop.

Sgreans need a higher income due to manipulated housing costs. Sole supplier of land & housing to vast majority lies in the hands of 1 entity-govt.

If housing costs are not that absurb, our cost of living would be lower thus people can manage with a lower income with same standard of living. Economy as a whole would be more competitive.

SD said...

They need to lead by example to silence the critics.

yujuan said...

Why do PAP leaders like to mock the poorer classes in Singapore.
Vivian heaped scorn on the poor to know their place in society, and forget about salivating a meal in a restaurant or even a foodcourt is beyond their means, only entitled to eating only at a hawker's centre.
Now another batch of MPs again mocking the poor, asking them not to ask for a pay higher than $1,000, and even coming out with a ridiculous suggestion they could even buy a 1 room HDB flat with that kind of pay, using $200 as their monthly instalment, leaving balance of $800 for living expenses for the whole family.
Let's make a breakdown based on $800 -
food for 3 persons @ $5X3x30days
=$450
Utilities+services charges=$100
Groceries+miscellaneous =$100
transport for 3 =$150
Total $800

And meaning, no extra money left for medical expenses, and savings, and woe betide the family if the breadwinner is retrenched or can't work because of sudden illnesses.
Also meaning the family has only one child, or one adult member not working.
But in reality, many of the poor have 2, 3 or more children in the family.
Giving a false sense of hope to these people is a form of mockery.
Time to come off the high pedestal and get real.

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