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Are HDB Flats Affordable? by Mah Bow Tan

It's a little tough to copy/paste this article from TODAY written by Mah Bow Tan, so I have attached it here in its entirety for your reading pleasure.

Basically, he is arguing (again) that HDB prices are TRULY affordable! There's the same talk about:-

1) Pricing new flats below market value, instead of below COST. So technically if market value hits $1,000,000, HDB can price it at $950,000 and still say there's a "subsidy" given!

2) I notice he used "resale flats in non-mature estates" to compare for income affordability. And he is using Hong Kong as a comparison?? Hong Kong has the highest housing prices in the world!

3) Debt-Servicing-Ratio (DSR) - This is as high as 29% using premium projects like Punggol Waterways for a 30-year loan, based on median income for the age group 25-35 years old. This is pretty scary considering the loan is 30 years and you assume nothing else comes along (e.g. a child, or loss of income or job).

4) He also stresses that CPF can be "drawn down" to pay for the flat, but then again if this is done, what will be left for retirement after 30 years? In fact, you are just coughing up interest to feed HDB!

5) The worst part is this - "If we increase housing subsidies, what
would we have to give up? The quality of education for our children? Healthcare services for our parents? Or do we impose a higher tax burden on Singaporeans?" He seems to imply that he acknowledges housing prices ARE high but that there's no other choice unless we give up the following! So must there truly be a trade-off? Government coffers are over-flowing with surpluses from previous years, and Government servants here are paid better than in most developed countries..... Undecided

It's a very skewed article, IMHO.

Comments are welcome. Smile
I have a lot of comments but I hesitate to proceed, coz eventually, the govt doesn't come here to read these comments. It really doesn't matter what we say here because eventually, nothing changes. The govt have been having their way for quite awhile, we have been giving them this mandate to do as they like every election. Hence, it is not surprising that they have become high-handed and unfeeling. So as such, there really isn't much anyone can do and nothing anyone says will make a terrible difference.
(12-11-2010, 01:19 PM)Jon-san Wrote: [ -> ]I have a lot of comments but I hesitate to proceed, coz eventually, the govt doesn't come here to read these comments. It really doesn't matter what we say here because eventually, nothing changes. The govt have been having their way for quite awhile, we have been giving them this mandate to do as they like every election. Hence, it is not surprising that they have become high-handed and unfeeling. So as such, there really isn't much anyone can do and nothing anyone says will make a terrible difference.

At least post in in REACH and TEMASEK REVIEW and ONLINE CITIZEN..

No point keeping quiet now...

We are already at the tipping point !!!
My view of this housing thing may differ from most of you here. I personally think that our govt did an okay job in term of ensuring that everyone, or should I say most of us, has a roof over our head. By any measures, our HDB flats are not cheap, but certainly affordable by the majority. In a way also, our houses can not be priced as cheaply as those you can find in some other countries, and that simply because we are all but a 700 sq km island with a 5 million population and still growing. In spite of these constraints, most Singaporean and PR still have a house to go to at the end of the day. This I must give credit to our govt, but not necessary to MBT.

Just look at some other countries that have land size thousands of times bigger than ours, but with millions of people homeless.

One thing I strongly disagreed with our govt is the way they calculate the so call subsidy to public housing. We all know that they are using market value instead of cost as the basis of calculating such subsidy, which make no sense to me at all. Anywhere, this topics has been bought up countless times but they just stick to it.

Just my personal view of this matter.
(12-11-2010, 01:52 PM)Ben Wrote: [ -> ]One thing I strongly disagreed with our govt is the way they calculate the so call subsidy to public housing. We all know that they are using market value instead of cost as the basis of calculating such subsidy, which make no sense to me at all. Anywhere, this topics has been bought up countless times but they just stick to it.

Just my personal view of this matter.

So, how do you propose to valuate a HDB flat?
What should be the price of a 4-room flat in Pinnacle Duxton and a 4-room flat in Punggol?

To some , a 30- million GCB in Nasim road also affordable. They always use words that are arguable.
Affordable HDB but many need a loan of 30 years.
(12-11-2010, 02:18 PM)yeokiwi Wrote: [ -> ]
(12-11-2010, 01:52 PM)Ben Wrote: [ -> ]One thing I strongly disagreed with our govt is the way they calculate the so call subsidy to public housing. We all know that they are using market value instead of cost as the basis of calculating such subsidy, which make no sense to me at all. Anywhere, this topics has been bought up countless times but they just stick to it.

Just my personal view of this matter.

So, how do you propose to valuate a HDB flat?
What should be the price of a 4-room flat in Pinnacle Duxton and a 4-room flat in Punggol?

Anyone old enough will know that HDB did a great job in "transforming Singapore into the most liveable city in Asia", to quote from the annual report. And they had already done the job before the turn of the millennium. Their primary goal of providing affordable housing for the citizens has already been achieved. If I were a policy maker, I will dismiss HDB and offer a fixed-sum subsidy (with conditions of course) to all qualifying citizens for buying a home.

1. The subsidy becomes real because it is paid from the government to the seller, and can be used for offsetting either a newly constructed private property or one purchased from the open market.
2. There is no need for HDB to innovate. e.g. to engage is fanciful design of public housing such as the Pinnacle @ Duxton.
3. Reduced government spending/budget, and hopefully tax.

Everything that HDB is doing today is secondary. There are no more slums in Singapore. And I don't think HDB should be responsible for providing "affordable luxury".

For interest sake, one can look at the number of dwelling units developed by HDB for this decade and compare that to what they had already put in place before year 2000.

http://www.hdb.gov.sg/fi10/fi10221p.nsf/...istics.pdf
(12-11-2010, 02:18 PM)yeokiwi Wrote: [ -> ]So, how do you propose to valuate a HDB flat?
What should be the price of a 4-room flat in Pinnacle Duxton and a 4-room flat in Punggol?

That's a million dollar question, and those drawing million dollar salary should answer that. But if you want my humble view, I feel that the cost for building a flat in Pinnacle Duxton and building one in Punggol is the same, if both flats are of the same size and design. Perhaps the only difference is the land cost as obviously Duxton land is much more valuable than Punggol. However, the same flat will be able to sell at a much higher price in Duxton than Punggol not just because of the land value, but also because of the location. A private developer will therefore add a fat markup to the cost and people will still buy. HDB is taking the market value of a flat in that area, which of course is inclusive of the fat markup, and gives a "discount" as subsidy. My guess is that the selling price of a HDB flat will be more than enough to cover the cost of construction + cost of buying that piece of land. So that is why the term "subsidy" is really subjective, depending on which angle you look at it.

Anyway, going by the sell out response when Pinnacle was launched, obviously many Singaporean are able to afford it. The question of taking a 30 years loan or 3 years loan does not seem to matter.

(12-11-2010, 04:08 PM)Stocker Wrote: [ -> ]Affordable HDB but many need a loan of 30 years.

Think carefully here. Many people took up a long duration loan when they buy their first flat. But how many actually stay in the same flat for 20, 30 years? Most will sell and cash out after staying for a few years and upgrade. Also, quite a number are able to fully redeem their loan before the full term. I have many friends who took up 25 years loan when they bought their first flat but paid off completely by the 10th to 15th years. I am sure many in this forum are also able to pay off their loan way ahead of schedule.
Is HDB flats Affordable?

If this question asked 40 yrs ago, the simple answer is a big 'YES'

But today the answer will be ' Struggle for next 30-40 yrs'...long live asset inflation.
Today's Sunday Times features no other than MM Lee proclaiming that we should NOT sell our flat and start to rent.

With such impeccable logic, how could housing prices ever FALL? HuhTongue
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