Housing not ‘more affordable’ now even if measured against income growth

I refer to the 20 Jun 2013 Straits Times report “Housing ‘more affordable’ now if measured against income growth” [1].

A DBS economist reportedly said that Singapore property prices are more affordable today than 10 years ago. The following table shows that the 2012 URA private property price index is 1.81 times compared to 10 years ago while the 2012 household income or employment income is between 1.40 to 1.71 times compared to 10 years ago [2]. So property prices are not more affordable today than 10 years ago.

2002 2012 2012/2002
URA private property price Index 115.4 208.3 1.81
Resident households Average household income Include employer CPF $5,667 $9,394 1.66
Exclude employer CPF $5,069 $8,637 1.70
Median household income Include employer CPF $4,096 $6,772 1.65
Exclude employer CPF $3,628 $6,000 1.65
Employed resident households Average household income Include employer CPF $6,229 $10,348 1.66
Exclude employer CPF $5,572 $9,515 1.71
Median household income Include employer CPF $4,590 $7,566 1.65
Exclude employer CPF $4,038 $6,712 1.66
Median gross monthly income of full-time employed residents Include employer CPF $2,380 $3,480 1.46
Exclude employer CPF $2,083 $3,000 1.44
Average monthly earnings per employee $3,158 $4,433 1.40

The following table shows that even if we were to compare 2013 Q1 to 2003 Q1, again property prices are not more affordable today than 10 years ago.

2003 Q1 2013 Q1 2013 Q1 / 2003 Q1
URA index 114.1 213.2 1.87
Average monthly nominal earnings per employee $3,283 $4,948 1.51

DBS managing director Mr David Carbon also said that incomes have grown much faster compared to the 55% increase in property prices since Mar 2009.

The following tables show that unlike what Mr Carbon said, whether we compare with 2009 Q1 or 2009 Q2, incomes have not grown much faster than property prices but the other way round.

2009 Q1 2013 Q1 2013 Q1 / 2009 Q1
URA index 139.9 213.2 1.52
Average monthly nominal earnings per employee $4,155 $4,948 1.19
2009 Q2 2013 Q1 2013 Q1 / 2009 Q2
URA index 133.3 213.2 1.60
Average monthly nominal earnings per employee $3,609 $4,948 1.37

Finally, he said home prices have risen in tandem with income over the past five years and that home prices are now 15% lower compared with 2000. Five years ago is 2008. The following graph shows that both 2000 and 2008 were peak years for the URA private property price index. Comparing against previous peaks will make any price increase appear smaller. It is fairer and more appropriate to compare against a period where the price is more stable like between 2002 and 2006.

URA price index graph

The following four plots of ratios of median URA private property [3] price to median annual household income between 2000 and 2012 shows that except for a small dip in 2009, private property prices have indeed become more unaffordable since 2007 compared to between 2001 and 2006. More importantly, it shows that throughout the entire period, our private property price to household income ratio was more than double the limit for severe unaffordability [4].

Median URA private housing price to household income ratio graph

The following four plots of ratios of median HDB resale price [5] to median annual household income between 2000 and 2012 shows that median HDB resale price hovered around the line of severe unaffordability throughout this period.

Median HDB resale price to household income ratio graph

The following table [4] shows that our HDB resale flat affordability is comparable to private housing affordability in top Anglo Saxon cities while our private housing is roughly twice as unaffordable as those in top Anglo Saxon cities comparable to that of Hong Kong’s.

City with more than one million population Country Ratio
Singapore (Median private property price / Median annual household income of resident households, excluding employer CPF) Singapore 14.8
Hong Kong China 13.5
Singapore (Median private property price / Median annual household income of resident employed households, excluding employer CPF) Singapore 13.3
Singapore (Median private property price / Median annual household income of resident households, including employer CPF) Singapore 13.1
Singapore (Median private property price / Median annual household income of resident employed households, including employer CPF) Singapore 11.8
Vancouver Canada 9.5
Sydney Australia 8.3
San Jose US 7.9
San Francisco US 7.8
London UK 7.8
Melbourne Australia 7.5
Plymouth & Devon UK 7.3
London Exurbs UK 6.8
Auckland New Zealand 6.7
Singapore (Median HDB resale price / Median annual household income of resident households, excluding employer CPF) Singapore 6.6
Adelaide Australia 6.5
San Diego US 6.4
New York US 6.2
Los Angeles US 6.2
Singapore (Median HDB resale price / Median annual household income of resident employed households, excluding employer CPF) Singapore 5.9
Toronto Canada 5.9
Perth Australia 5.9
Singapore (Median HDB resale price / Median annual household income of resident households, including employer CPF) Singapore 5.9
Brisbane Australia 5.8
Bristol-Bath UK 5.7
Liverpool UK 5.3
Singapore (Median HDB resale price / Median annual household income of resident employed households, including employer CPF) Singapore 5.3
Newcastle UK 5.2
Boston US 5.2
Bimingham UK 5.2
Sheffield UK 5.1
Montreal Canada 5.1
Stoke UK 5
Nottingham UK 5
Blackpool UK 4.9
Seattle US 4.8
Manchester UK 4.8
Hull UK 4.8
Glasgow UK 4.7
Miami US 4.5
Derby UK 4.5
Portland US 4.3
Denver US 4.3
Calgary Canada 4.3
Washington US 4.1
Leeds UK 4.1
Providence US 4
Milwaukee US 3.9
Philadelphia US 3.8
Baltimore US 3.8
Salt Lake City US 3.7
Riverside – San Bernadino US 3.7
Edmonton Canada 3.7
Hartford US 3.6
Dublin Ireland 3.6
Austin US 3.6
Ottawa Canada 3.5
New Orleans US 3.5
Virginia Beach US 3.4
Richmond US 3.4
Birmingham US 3.4
San Antonio US 3.3
Sacremento US 3.2
Nashville US 3.2
Chicago US 3.2
Charlotte US 3.2
Tampa US 3.1
Raleigh US 3.1
Oklahoma City US 3.1
Phoenix US 3
Houston US 3
Orlando US 2.9
Louisville US 2.9
Dallas US 2.9
Minneapolis US 2.8
Las Vegas US 2.8
Buffalo US 2.8
Pittsburgh US 2.7
Memphis US 2.7
Kansas City US 2.7
Columbus US 2.7
Jacksonville US 2.6
Indianapolis US 2.6
Cleveland US 2.6
Saint Louis US 2.5
Rochester US 2.5
Cincinnati US 2.5
Atlanta US 2
Detroit US 1.5

[1] Straits Times, Housing ‘more affordable’ now if measured against income growth, 20 Jun 2013

[2]
• URA property price index is from URA, averaged over four quarters
• Eight variations of household income from Singstats
• Two variations of employment income from MOM

[3]
2011 median URA private property price is obtained by extracting all private property transactions including executive condominiums from URA for that year. From the 2011 median price, median prices for all other years approximated through direct proportionment via the URA private property price index.

[4] 9th Annual Demographia International Housing Affordability Survey: 2013

A median housing price to median household income ratio above 5.1 is considered severely unaffordable.

[5]
• Median HDB resale price for 2009 Q4 is obtained by extracting all transactions for that quarter from HDB
• Quarterly HDB resale price index compacted into yearly HDB resale price index by averaging the price indices of all four quarters for each year
• Median HDB resale price for each year approximated through comparison of each year’s average HDB resale price index with the HDB resale price index for 2009 Q4

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One Response to “Housing not ‘more affordable’ now even if measured against income growth”

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