Is Housing In Singapore Still Affordable?

Propertyguru.com did a write up on housing affordability which I shall just discuss a little.

In their article, it was said that public housing (HDB) has become severely unaffordable. The affordability formula was based on globally-recognised formula where the Median Multiple (median house price divided by the annual median household income) where a result of

- 3.0 and below would imply that houses are affordable,

- 3.1 to 4.0 (moderately unaffordable),

- 4.1 to 5.0 (seriously unaffordable), and

- 5.1 and over (severely unaffordable).

It was stated in the article, that private properties median was 6.03, which means they are 'severely unaffordable' but in contrast to Singapore's public housing which stands at a high of 6.7, it is, actually mor affordable to own a private property than a HDB flat.

The HDB's primary role is to provide affordable housing to the masses, but from this recent home prices, they have failed terribly. The HDB is now a profit chunking machine of the government. Here is some simple comparison.

Way back in the mid-1980s, a 4 room HDB flat type cost abou $45,000 per unit while combined household income average at about $20,000-$30,000. Home prices were about 2 times of the combined household icome.

Currently, the same 4rm flat type from the HDB itself, cost about $400,000 (or in some projects, A HELL LOT MORE). Given that same formula, shouldn't the same house hold be earning about $200,000 per annum? NO! An average household is now earning about $60,000-$80,000 per year, which makes affordability median at about 6 times their combined household income.

However, our government always reminds us, we are a city state, and they use Hong Kong's housing prices to 'convince' us that housing is still affordable. An average home for the average Hong Konger is about SGD1 million while the combined household income is possibly near $100,000 or 10 times their combined household income.

How convenient! Shouldn't we expect the government's remuneration to be compared with Hong Kong since we are quite much modelled against Hong Kong, both highly dense city (don't get me wrong, am not getting political... but just comparing)?

Own a HDB Flat with $1,000 Income

Recently, Finance Minister Tharman Shanmugaratnam comment in parliament that a family with combined income of $1,000 could actually afford a small HDB flat. That created an uproar from many people, as $1,000 a month these days, could hardly pay for a basic life.

Emotions aside. Yes, it is indeed, possible to own a flat with an income of $1,000. The question is, what's the mathematics that the minister didn't explain (of course, in parliament, they don't go into the bits and pieces).

Here is the breakdown.
- New 2 room BTO flat (1 bed room) cost : $100,000
- Enhanced Additional Housing Grant : $40,000
- Special CPF Housing Grant : $20,000
- Loan needed : $40,000

The monthly installment (CPF/HDB Loan) :
- 30-year loan: $161 per month
- 25-year loan: $182 per month
- 20-year loan: $214 per month

So, actually, a family with $1,000 combined income, can actually afford to buy. Monthly installment is by CPF. As compared with RENTING from HDB, the same flat would cost $123 and $165 monthly and this amount is payable in cash.

This may free up a little more cash for such families (since installment is from CPF).