The final nail in the “HDB affordability” coffin?
By Leong Sze Hian - the online citizen
I refer to the article “HDB resale prices: Don’t just find a
scapegoat – It is not an issue of us-versus-them, but one of a rise
in demand” (ST, Feb 11).
It states: “But actually, what exactly is the issue? Are rising
HDB resale prices an issue?”
Well, the issue is that the HDB’s Market Subsidy Pricing policy
pegs the prices of new flats to that of the resale market. This
makes new flats increasingly an affordability issue for
Singaporeans.
As for the statement “Surely not to the majority of 880,000 or
so households who already own an HDB flat, to whom rising flat
prices means rising asset values”, what good is a higher priced HDB
flat if you need to downgrade to a smaller flat in order to have
enough money to retire?
Under current rules, downgraders can only purchase a resale
flat. As the price differential between a larger and smaller resale
flat may not be very substantial, the alternative of downgrading to
a new smaller flat may mean a wait of 5.5 years (2.5 years waiting
period plus 3-year Build-to-order (BTO) construction period).
This problem may be further compounded by the change in policy
last year that after age 55, any shortfall in the CPF Minimum Sum
(MS) must be topped-up from property sale proceeds (CPF monies
utilised plus accrued interest), before the balance can be used for
housing again.
With the MS at $117,000 now and projected to increase to
$161,000 and $271,000, in 2013 and 2023 respectively, anyone
selling to monetise their flat may not have much left after meeting
this Minumum Sum rule and the price of a smaller resale flat.
The article also stated: “What of the charge that some people
are buying HDB flats for rental income? Actually, this is patently
the case – and rightly so. HDB’s 2008/09 annual report states there
were 22,754 flats that were sublet. No one knows how many more
flats are being sublet illegally. A number of HDB flat owners will
also be renting out some bedrooms for income”.
Actually, the 22,754 flats that were sublet as stated in HDB’s
annual report had their applications approved in just one year.
So, how many flats in total are being sub-let entirely?
How many applications were not approved?
How many are sub-letting their flats because of financial
difficulties?
For those in financial difficulty, is it possible to apply for a
waiver of the 5-year and 3-year rule before flats purchased with or
without a housing subsidy can be entirely sub-let?
For those with genuine financial difficulties, this option may
be better than compulsory acquisition of their flats at 90 per cent
of valuation.
I agree with the statement that “(people have) to acknowledge
that the market is moving faster than one’s income and savings can
keep up with”.
In this context, the problem may be that some of the HDB’s
policies are out-dated and do not reflect the reality of a changing
environment, such as the 2.5 year waiting period, because in the
past the HDB built to sell, as opposed to today’s BTO approach.
This may effectively mean waiting for another threee years for a
flat on top of the usual 2.5 years.
The income ceiling of $2,000 and $3,000 for eligibility for
2-room and 3-room new flats have also not been changed for many
years, despite rising new flat prices and the higher cost of
living.
I also refer to the “Special report : Homeless wanderers –
Number of homeless people doubles” (Sunday Times, Jan 31).
It states that “About 60 flats are voluntarily surrendered to
the HDB every month”.
Many of the occupants became homeless because they could not
afford to pay for HDB flats.
In this connection, I refer to the articles “New flats to stay
affordable” (ST, Jan 27) and “HDB flat supply will meet demand :
Mah” (ST, Jan 14).
The latter states that “a family with a monthly income of $3,000
can buy a flat worth up to $250,000 and spend only 30 per cent of
their income every month on the mortgage …. This means they can
comfortably buy any of the flats (three-room and some four-room)
offered in the latest BTO projects this month”.
A typical financially prudent household of four persons (couple
with two children) may find it hard to make ends meet with a
disposable monthly income of $2,100 ($3,000 less 30 per cent for
the HDB mortgage).
A breakdown of a typical household’s expenses is as
follows:-
food ($40 x 30 days) $1,200
education ($200 x 2 children)
400
transport 300
utilities 150
insurance (various) 100
telephone/internet 70
service & conservancy charges (S
& CC) 40
property tax 20
television license 10
medical 10
_________
Total: $2,300
The household may be left with no savings or any money for
leisure activities.
If the household has more than four people, like those staying
with their parent(s) or have more children, it may be quite
difficult for them to survive.
As there are hundreds of thousands of people with a disability
or chronic illness, a household surviving on a $3000 per month
income with such a family member may also find themselves stretched
financially.
Affordability depends on individual circumstances, and it may
not be quite appropriate to generalise that a $3,000 household can
afford a HDB flat.
According to the Department of Statistics’ Household Expenditure
Survey report, there are about 106,000 households with less than a
$1,000 monthly income, and about another 116,000 households with
less than a $2,000 monthly income.
I therefore estimate that there are about 300,000 households
earning less than $3,000 a month.
So, does it mean that about three in 10 households may find
these new BTO three-room flats beyond their means?
The issue of affordability may be further compounded by the
HDB’s Income Ceiling policy, whereby a household earning over
$3,000 a month is not eligible for a new three-room flat, and has
to purchase a new four-room or bigger flat.
As the HDB celebrates its 50^th anniversary this year, instead
of just the HDB determining affordability, I would like to suggest
that an independent third party be engaged to study the
affordability of HDB flats.
ts, cann try to ask Leong Sze Hian opinion about housing
loan aka financing a house here - read this site -
http://theonlinecitizen.com/2009/12/sporeans-more-able-to-afford-larger-flats/
