Housing in S’pore still affordable

Dear Prof Yu and Prof Tu,

I refer to the commentary you wrote for Straits Times that was published on 27 Feb 2010.

Dominance of public housing in Singapore

You first pointed out that the HDB is the dominant housing provider in Singapore, accounting for 82% of the population’s homes. This in turn makes Singapore unique compared to other cities where normally, private housing dominates instead. What you could have also pointed out is the passing of the Land Acquisition Act in 1966 which allowed the government to buy land as cheaply as $1 in the name of national development. The forcible acquisition of land at dirt cheap prices is normally referred to as expropriation in other countries and is normally illegal too.

Furthermore in Hong Kong, when mortgages of public flats are fully paid for, the flats can be traded in the open market and are classified as private instead. If we were to adopt this definition, more than half of our flats would have been classified as private already.

Public home ownership in Singapore is for 99 years only

You next pointed out that only Singapore has significant home ownership when it comes to public housing. But you omitted to say that public home ownership in Singapore is for 99 years only which is comparable to long tenure or even perpetual rental contracts in other countries.

We are compared to expensive Hong Kong and London but not Sydney

While your study began with the comparison of four cities, Sydney was dropped when it came to actually comparing housing price to income ratio, leaving only notoriously expensive Hong Kong and London to be compared with Singapore. If affordable housing in Singapore can only be established in comparison with the most expensive cities in the world, doesn’t it say something about how expensive Singapore really is?

Wrong to consider expensive Hong Kong Island only

Your figures show that Hong Kong’s housing price to income ratio is almost four times those of Singapore’s. But the calculated ratio of 19.8 for Hong Kong is ridiculously high and dubious.

Using only the figures provided in Table 2 of your commentary, we can work out Hong Kong’s median housing price to be HK$ 74,593.93 per square metre which matches very closely with the average per square metre price of private residential units in Hong Kong Island as given on Page 7 of “Housing in Figures 2009”, a source quoted in your commentary. However, we know that Hong Kong doesn’t comprise of Hong Kong Island only and that the latter is much more expensive than Kowloon and the New Territories. Considering the housing prices in Hong Kong Island only is like considering the housing prices in Bukit Merah, Toa Payoh and Marine Parade only while ignoring those in Woodlands and Jurong West. You’d invariably end up with a distorted pricing picture. In fact, the same source you quoted showed housing prices in Kowloon and New Territories to be 71% and 54% that of Hong Kong Island respectively. Furthermore, the same source also shows that housing on Hong Kong Island forms only 10% of all housing which makes it all the more distortionary if we were to base housing prices on Hong Kong Island only. In other words, your supposed median housing price for Hong Kong is more like the price of the top 10% of housing in Hong Kong.

Wrong to compare Singapore’s public housing to Hong Kong’s private housing

Next, we need to consider the fact that the median housing in Singapore is actually public housing so when we compare with Hong Kong, we cannot ignore Hong Kong’s public housing. The median housing price cannot be based on private housing only. Since 55% of all housing in Hong Kong is private, the median price of housing in Hong Kong ought to correspond quite closely with the cheapest forms of private housing in Hong Kong. That would have more than halved the ratio you worked out for Hong Kong to less than 9.9 easily.

Still, there is no denying that housing price to household income ratio is higher for Hong Kong than for Singapore. This can easily be reconciled with the the fact that Hong Kong’s liveable space per person is less than half that of ours as shown in Table 2 of your commentary. Thus, Hong Kong’s higher housing price is due to they being more overcrowded than us. The lesson we must glean from this is that the more we choose to overcrowd ourselves, the more expensive our housing will become.

Public housing omitted for Greater London Area

Similarly, you have omitted to take public housing into account which makes up 23% of all housing in Greater London Area. In order for an apple to apple comparison, we need to apply Singapore’s situation to London and consider what happens when the 23% of Londoners staying in rental housing are forced to buy their houses using their retirement money and leaving them with little or no money for retirement much like what is happening in Singapore. These 23% public housing would automatically be counted for in the computation of housing prices and will significantly reduce London’s median housing price.

Is Singapore housing much affordable?

Hence, contrary to what you claim, there is no empirical evidence that housing in Singapore is very much affordable by any standard. Since the empirical evidence you provided is highly flawed, the only standard by which Singapore can be ajudged to be affordable is one that is twisted and that which omits all but the most expensive cities. Therefore, it is not true that Singapore has achieved a lower housing to income ratio. If interpreted correctly, your figures do not reveal that our housing system delivers affordable housing to the majority of Singaporeans.