Within a family’s reach

I refer to the HDB’s letter “Within a family’s reach” dated 12 Sept 2009.

The HDB claims that one of its key responsibilities is to sustain flat values over the long term. The first of HDB’s four mission statements is to “provide affordable homes of quality and value”. There is nothing in that statement that says that it is HDB’s responsibilty to sustain flat values over the long term. In fact, none of the four mission statements or even the vision statement remotely suggests that it is the HDB’s duty to sustain flat prices over the long term. So where did HDB get its mission of sustaining flat prices over the long term?

Next, sustaining flat prices over the long term is different from letting it rise faster than salary increases because clearly, salary increases hasn’t been keeping up with increases in flat prices.

The notion of generous housing subsidies is unconvincing. In the span of months, HDB prices shot up by $100,000 easily across the island. Can the $30,000 HDB subsidy make up for $100,000 increase in flat prices?

Affordability

The HDB claims that it is reasonable for a couple earning $4,000 to pay for a flat costing $300,000 with a monthly instalment of $920 + $81 = $1,001. Let’s see if this sum is truly reasonable by taking into consideration the daily as well as retirement needs of a family of four.

Suppose each member in a family of four requires $500 for basic sustenance. That will take $2,000 away from the monthly income. Take $1,001 HDB housing loan away from the remaining sum of $2,000 and we are left with $999. If both husband and wife were to set aside $500 each for retirement purposes, they would have perpetually nothing left for utilities, education and all other purposes. Is this HDB’s so called “affordable”? Seems like HDB’s so called “below the international benchmark of 30%” means having absolutely nothing left over for spending. No wonder Singaporeans have little to spend or if they spend, have insufficient funds for retirement.

Only new flats count

HDB says that the figures quoted by me is not reflective of Singapore’s situation. According to the HDB, the true figure should only be based on the price of new HDB flats. In other words, HDB is saying is that housing affordability in Singapore should solely be judged by the price of new HDB flats only, the prices of resale flats and condominiums don’t count. Is this a reasonable assumption?

According to the HDB website, there were 16,630 resale flat transactions in the first half of the year. Assuming the same number will be transacted in the later half of the year, the total number of resale flats to be bought this year would amount to 33,260 units. This is more than four times the number of new flats that will be built this year. In other words, HDB’s definition is only confined to less than 20% of Singaporeans’ needs for HDB flats. Yet HDB is claiming that that this 20% reflects the true housing affordability in Singapore. This is akin to picking out the poorest 20% of Singaporeans and saying that that they represent the general income situation in Singapore.

While no one is disputing that DSR is simple, no one can appreciate where Singapore stands unless Singapore is ranked against other developed countries using the DSR. Also, HDB shouldn’t only compare the DSR of the cheapest 20% of Singapore’s houses against the DSR of all houses in other countries. That simply wouldn’t be comparing apple to apple. If HDB is bent on comparing so-called new HDB flats only, then comparison should be made against similarly “subsidised” housing in other countries.

Flat supply

HDB claims that it is responsive to rising demand due to immigration and new marriages. But it still hasn’t shown us how the 8,000 new flats to be built this year is sufficient for Singaporeans when the number of resale flats bought in the first half of this year is already 16,630.

Having admitted that the HDB cannot build sufficient flats where and when citizens want them, the HDB should then refrain from always saying that resale flat prices are determined by “willing buyer, willing seller” since the willingness of buyers will always be constrained by the inability of the HDB to build new flats where and when citizens want them.

The HDB says there are plenty of resale flats available in mature estates which are affordable. This is again another myth. Are there hundreds of thousands of empty resale flats waiting for people to buy and occupy? Obviously not. For every resale flat that is sold, another house has to be provided for unless the occupant is emigrating from Singapore. So the fact that there are hundreds of thousands of HDB flats in Singapore doesn’t mean that there are hundreds of thousands of HDB flats available for people’s choosing. Just like there are 400,000 cars in Singapore doesn’t mean that there are 400,000 second hand cars available for people to choose and buy from.

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