New HDB flats still affordable: Mah

Dear Mr Mah,

I refer to the Straits Times report of your reply to Mr Lim Biow Chuan in the parliament dated 27 Apr 2010.

First, it was incorrectly reported that the annual increase in median household income from 1999 till last year was 3.9% when it ought to have been 3.3%. Next, even though in percentage terms, the 3.2% increase in resale flat price was marginally lower than the 3.3% increase in median household income, in absolute terms, the increase in resale flat price was a staggering $97,373 compared to an increase of only $1,354 in monthly household income. When we annualise these figures, we find that the yearly increase in resale flat price was $9,737 compared to the yearly increase of $1,625 in annual household income. In other words, over the last decade, resale flat price has been increasing at an average of $9,737 every year while the corresponding increase in annual household income is only $1,625. So clearly, in absolute dollars and cents, growth in resale flat price has far outstripped growth in household incomes by a factor of nearly six times over the past decade.

Also, it is not true, even in percentage terms, that growth in resale flat price exceeded income growth only in recent years like 2004. If we were to set our base year to 1998 or 2000, just one year before and after your chosen base year of 1999 respectively, we find growth in resale flat price exceeded income growth as well. In fact, over the last decade, 1999 is the only base year whereby household income growth exceeded growth in resale flat price marginally. If the base year were to be any other year other than 1999 over the last decade, growth in resale flat price exceeded growth in household income. Even if we were to extend back to 1995, there were only three out of fourteen years where household income growth outstripped growth in resale flat price. So by and large, resale flat price has outgrown household income.

You said that what matters ultimately is that first time home buyers can afford a flat at all times. Referring to the table you have provided, the median household income of a 3-room flat applicant is $2,100 and his / her monthly mortgage payment is $528. Currently, the public assistance scheme pays a family of 2 adults and 2 children $1,210. Assuming $1,210 is the minimum sum that a family requires for basic subsistence, if we add to that a monthly mortgage of $528, the family will only be left with $362 for all other expenses including school fees, public transport, utilities as well as saving for two persons’ retirement, hardly what you would call ‘affordable’. Hence, even though the debt service ratio falls below the international benchmark of 30%, by Singaporeans’ standards, the flat is quite simply unaffordable.

You said that the flat is an investment and a significant store of value. But the investment also leads to massive indebtedness that will take a lifetime of toiling to discharge. You said the average Singaporean family has $100,000 in flat asset that can be monetised. If you have to sell your house to pay for your retirement, doesn’t it show that you have never earned enough to keep your house to begin with? Also, two old folks sharing $100,000 leaves each with $50,000 only. Again assuming a minimal subsistence of $360 per month or $4,320 per year per person, the sum of $50,000 will not even last 12 years without even considering inflation. Not a pretty picture at all. You said the government is subsidising 80% of the population. It is the other way round, 80% of the population is subsidising the government instead with their massive HDB monthly payments.

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2 Responses to “New HDB flats still affordable: Mah”

  1. fievel Says:

    bravo

  2. Nabs Says:

    Amen! Is this being published?

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