Reasons flats remain affordable​: Good discount, no cash upfront, CPF-servic​ed

Dear Mr Lourdesamy,

I refer to your Straits Times letter dated 26 Feb 2011.

You said HDB flats are priced with a ‘generous’ discount. But that ‘generous’ discount of $40,000 at most is only a fraction of the $150,000 increase in average HDB resale prices over the last four years. Since new flat prices are pegged to resale flat prices, the average price increase for new flats should have far outstripped your ‘generous’ discount as well.

We must interpret the 30% affordability benchmark that the HDB uses more carefully. If a house is deemed to be unaffordable when more than 30% of income is used to pay for it, does it mean that the house suddenly becomes affordable when only 29% of income is used instead? This is like saying 100 degrees Celsius is hot but 99 degrees Celsius is not. Instead, it would be better to use finer sub-categorisations like those used by the Demographia International Housing Affordability Survey which classifies housing into: affordable, moderately unaffordable, seriously unaffordable and severely unaffordable to better portray housing affordability. HDB shouldn’t hide behind just one international benchmark which is more of a benchmark for unaffordability than affordability. HDB should instead demonstrate to fellow Singaporeans that it’s position that Singapore housing is affordable continues to hold true under any other international housing affordability standard.

Finally, the CPF is our retirement fund. Using CPF to pay for housing and in the process emptying our retirement fund does not mean that housing is therefore affordable.

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2 Responses to “Reasons flats remain affordable​: Good discount, no cash upfront, CPF-servic​ed”

  1. sgcynic Says:

    Note that Lourdesamy only says HDB comes with “generous discount” – he does not use the term “(market) subsidy”.

  2. defennder Says:

    Just want to point out something Hazel Poa outlined in her blog when she was still in RP. She said that the debt-to-service ratio (DSR) of 20-30% is not a good measure of affordability because it’s entirely possible that individuals who cannot afford to service it within that percentage range might not qualify to buy the HDB flat in the first place. Survivor’s bias at work here.

    And of course there’s the usual criticism that 30% might not seem a lot, but over how many years does this stretch?

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