Singaporean worried he has no money for retirement after paying
for over-priced HDB flats
A Singaporean by the name of Kang Choon Tian has written a
letter to the Straits Times Forum today expressing the concerns,
worries and fears of many Singaporeans on the sky-rocketing prices
of HDB flats – that they may not have any money left in their CPF
when the grow old.
Mr Kang revealed that he took a loan of $80,000 some 20 years
back and the interest came up to $70,000 after he had
finished paying for his flat.
He is concerned that many Singaporeans may end up with little in
their CPF accounts at current prices of HDB flats:
“The Government should look into this or Singapore may end
up with many retirees with little in their CPF account, assuming an
average household income of $3,000 to $4,000. Since HDB flat buyers
may use 30 per cent of household income, they may be able to
service their loans, but little is left for retirement. Besides,
along the way, husband or wife may lose their jobs.”
He added that though Singaporeans may well afford to pay for
their flats now, their ability to do so may decrease as they grow
older:
“Buyers are allowed to take up to a 30-year loan. By then,
their earning power may also diminish when they reach 60, assuming
they bought their flat in the early 30s.”
More than 85 per cent of Singapore’s population living in public
housing built by government agency Housing Development Board or
HDB.
While HDB flats used to be easily affordable by Singaporeans in
the 1980s, prices have ballooned in recent years caused partly by a
limited supply of new flats and rising demand fueled by the
relentless influx of foreigners into Singapore.
The prices of HDB resale flats hit a record high last year and
increase by 8.2 per cent with median Cash-over-Valuation (COVs)
doubling from $12,000 to $24,000.
In contrast, the median monthly salary of Singaporeans remain
stagnant at around $2,600.
Despite rising frustration, resentment and anger on the ground
over the increase prices of public housing in Singapore, National
Development Minister Mr Mah Bow Tan and other HDB officials
continue to insist that they are “affordable” to ordinary
Singaporeans.
Mr Mah even chided first time home buyers for being “choosy” and
said that “the onus is on Singaporeans to play their part by buying
a home within their means.”
Quoting the affordability benchmark of 30 per cent used
frequently by HDB to show that HDB flats remain affordable to
ordinary Singaporeans, Mr Mah said 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.
“Similarly, a family with a monthly income of $4,000 can
afford to buy a new flat worth up to $333,000 without spending more
than 30 per cent a month on the mortgage. This means they can
comfortably buy any of the flats offered in the latest BTO projects
this month,” he added.
However, Mr Mah fails to take into account the bank interest
rates and inflation over the years which will lead eventually to
the family spending more than 30 per cent of their monthly income
on the mortgage as pointed out correctly by Mr Kang above.
Furthermore, after depleting their entire CPF for these
over-priced 99-year leasehold HDB flats, they will have little or
no savings left for their retirement.
Mr Kang ended his letter by urging financial experts to give
their take on the issue:
“Since there are many in this income bracket, I hope some
financial experts will be able give their take on this important
issue or Singapore may end up with many retirees with little to
live on. Many buyers are not aware of the final price of their
flat, including the interest over 30 years.”
Singaporeans who need a roof over their heads now are stuck in a
quandrary. On one hand, they are unwilling to make a purchase at
the height of the property market, but they are also worried that
prices may continue to go up.
Minister Mentor Lee Kuan Yew expressed optimism that HDB is an
“asset” which will continue to appreciate in value so long the
Singapore’s economy is doing well, but what if Singapore were to
enter another protracted recession as a result of a global
financial crisis?
One does not need to be an economist to realize that there are
always ups and downs in any market and it is impossible to expect
prices of HDB flats to continue to be increasing forever.
With wages lagging far behind the phenomenal increase in
prices, they will have to come down one day when there are
too few buyers in the market who can afford to buy them or worse,
come crashing down if foreigners were to leave Singapore in the
event of a recession.
At the rate the prices are going up, some Singaporeans may have
to wait till their parents pass on to inherit a roof over their
heads.
What's your view?
If you are in Kang Choon Tian shoe, what would you do.
Let's discuss.
