How HDB keeps it affordable

I refer to HDB’s letter “How HDB keeps it affordable” dated 31 Aug 2009.

HDB claims that flat prices are determined by “willing buyers, willing sellers”. But in the context of land scarce Singapore, “willing buyer, willing seller” has little or no meaning. Suppose I want to buy a flat in Ang Mo Kio to stay close to my parents and the HDB is not building any new flats there, what choice do I have but to buy from resellers in Ang Mo Kio? Suppose I need to set up a family now and cannot wait for BTO, what choice do I have but to buy from the resale market? So “willing buyer, willing seller” doesn’t depict an honest picture of what’s happening now. If there is an abundance of new flats available for people to choose from where and when they like, who would be “willing” to buy from the resale market? So we should recognise that “willing” buyers actually stem from the HDB not building enough new flats where Singaporeans want them.

The statement that the market value of flats is determined by professional valuers is also meaningless. How do valuers value flats? They base their valuations on recent transactions, which is as good as being determined by “willing buyer, willing seller” with all its associated problems as explained above.

While HDB has claimed to be supplying new flats, they should also furnish the public with the number of immigrants Singapore has admitted over this period as well as the number of marriages in the same period. Can supply meet demand is a question unanswered by HDB’s reply.

HDB’s claim that flats are affordable because they are priced well below the international affordability benchmark is also questionable. The international poverty line is commonly defined as $1 per day. If Singaporeans earned $10 per day, can we consider Singaporeans to be well above poverty levels? Clearly, $10 per day is extreme poverty by Singapore standards yet it is well above the international poverty line. So comparing against the benchmark doesn’t necessarily paint the correct picture.

If we refer to international city rankings of property price to income ratios, a similar indicator to what HDB is using, we obtain a more accurate picture of our situation in comparison to other cities. The table below refers to first world cities according to IMF standards. As can be seen, compared to other first world cities, Singapore has one of the most priciest property prices compared to income, comparable to extremely expensive London. We are even more expensive than Tokyo, Toronto and New York.

S/No City House Price To Income Ratio
1 Seoul, South Korea 21.29
2 Hong Kong, Hong Kong 21.19
3 Paris, France 16.15
4 Athens, Greece 15.97
5 Ljubljana, Slovenia 15.2
6 Rome, Italy 15.13
7 Bratislava, Slovakia 15.1
8 Prague, Czech Republic 14.89
9 London, United Kingdom 14.73
10 Singapore, Singapore 14.35
11 Tel Aviv-yafo, Israel 12.4
12 Tokyo, Japan 10.5
13 Barcelona, Spain 9.32
14 Milan, Italy 9.24
15 Dublin, Ireland 8.25
16 Helsinki, Finland 8.22
17 Toronto, Canada 8.03
18 New York, United States 7.88
19 Geneva, Switzerland 7.87
20 Lisbon, Portugal 7.75
21 Lyon, France 7.4
22 Oslo, Norway 7.32
23 San Francisco, United States 7
24 Rotterdam, Netherlands 7
25 Sydney, Australia 6.52
26 Vienna, Austria 6.36
27 Stockholm, Sweden 6.33
28 Amsterdam, Netherlands 6.24
29 Montreal, Canada 5.29
30 Zurich, Switzerland 5.09
31 Brussels, Belgium 4.28
32 Nicosia, Cyprus 3.97
33 Copenhagen, Denmark 3.21
34 Berlin, Germany 2.7

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One Response to “How HDB keeps it affordable”

  1. The Singapore Daily » Blog Archive » Weekly Roundup: Week 37 Says:

    […] – Sg Pirate Game: Faustian Pact [Recommended] – Yours Truly Singapore: How HDB keeps it affordable – The Temasek Review: The macro factors behind the Housing Crisis in Singapore – The Lycan Times: […]

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