HDB'S FLAWED MEASURE OF HOUSING AFFORDABILITY

HDB flats have remained affordable

I refer to the article “New HDB flats have remained affordable: HDB” (Channel NewsAsia, Jan 3).

1st-timers pay less than a quarter of income on average? 

It states that “Overall, new HDB flats have remained affordable, the housing board said. In 2014, first-time home buyers used less than a quarter of their monthly income on average to pay for their housing loans, below international affordability benchmarks of 30 to 35 per cent, HDB said.

80% pay CPF, no cash?

It added that about 80 per cent of the first-time new flat buyers also service their monthly installment using only their CPF savings, with no cash outlay required.”

Can’t afford won’t buy?

This logic of affordability may be flawed because if you couldn’t afford it – you wouldn’t buy it in the first place.

Many pay more than a quarter of income?

As to “used less than a quarter of their monthly income on average” – may mean that many may have had enough CPF savings at the time of purchase to take out lower housing loans.

Also, “average” may mean that a lot of people may be paying more than a quarter of their income?

If this is the case – is it still arguably affordable?

Depleting CPF savings for retirement?

Even if you are paying a quarter of your income – plus up to 10.5 per cent (maximum contribution rate) for Medisave contribution – how much do you have left of your maximum 37 per cent CPF contribution, left as savings for your retirement (37 – 23 – 10.5 = 3.5%)?

Here’s what doesn’t sound quite right – if 80 per cent “ also service their monthly installment using only their CPF savings, with no cash outlay required” – and the maximum CPF contribution percentage to the Ordinary Account is 23 per cent for age 35 and below – how can it be at the same time that households “used less than a quarter of their monthly income on average to pay for their housing loans”?

Enough “CPF contribution” or “CPF savings”?

So, do these statements mean that we are talking about “CPF savings” to pay the monthly instalment and not “CPF contribution”?

If so, then arguably we may simply be saying that HDB is affordable (no cash outlay monthly) at the expense of depleting our accumulated CPF savings for retirement.

No 2nd-timer“affordability” statistics?

And why are we only giving the “affordability” statistics for first-timers, since many are not first-timers?

$1.9b housing grants last 9 years?

As to “To keep flats affordable for Singaporeans, the Housing and Development Board (HDB) has disbursed S$1.6 billion in Additional CPF Housing Grants (AHG) to close to 83,000 households since 2006. It has also given out S$297.61 million in Special CPF Housing Grants (SHG) since 2011 to almost 20,000 households, as of November 2015.

Breakdown of statistics on actual grants given to households?

HDB gave this update in a media statement on Sunday (Jan 3). Eligible first-time buyers currently enjoy up to S$80,000 in housing grants, comprising the AHG of up to S$40,000 and the SHG, also up to S$40,000″– this works out to an average AHG of $19,307 ($1.6 billion divided by 82,873 households) and SHG of $15,229 ($297.61 million divided by 19,542 households).

With the average price of a 4-room BTO flat in Punggol in the November sales launch at $324,500 ($277,000 to $372,000) – the grants may in most cases be a very small percentage of the price.

BTOs price increase over the years?

The 4-room average price for PunggolBTOs in 2006/2007 was $213,500 ($173,000 to $254,000).

So, does it mean that the average price increased by more than 50 per cent ($324,500 divided by $213,500) in the last 8 years or so?

And of course – if you are not a first-timer – you may not qualify for the AHG and SHG.

If you are a “First-Timer and Second-Timer Couple Applicants” – for example if your household income is $3,501 to 3,750 – your total grant is only $7,500 (no grant for BTOs before November 2015).

For second-timers upgrading only from a 2-room to 3-room in a non-mature estate – the grant is $15,000.

Ratio of grants to price?

If we are given the ratio of the actual grants to price over the years – will it indicate that flats may be less “affordable”?

Reciprocate trust with more transparency?

LeongSzeHian