12/24/2010

Just musing

Is it possible that a 5 rm HDB flat costs less than one year’s combined income of two young graduates? Young graduates refer to those working less than 5 years after graduation. And this could also be extended to mean any two young executives with the same income. Definitely. At one time a 5 rm flat cost only $27,500 in Holland Village. If the couple were earning $1,500 pm each, that’s $3k pm or about $40k pa inclusive of bonuses. I know some of you are shaking your heads. KNN. How could this be possible when we are supposed to better off than before? Those people then could pay off the whole $27k with less than a year’s income and with plenty to spare. And they could set aside some money as savings in their CPF or in their bank accounts. Better still, with that kind of price, today the same flat could have appreciated and may be valued at $600k! Damn nice feeling huh. Using the same magic formula, a $400k flat today could well be valued at $8m in the future, using a multiple of 22 times. But things are not that easy now. In the first place, an average young couple would have a combined income of $6k pm or an annual income of $90k. This would not even be enough to pay for half the price of a 3 rm flat. So it would be a no go to begin with. Buying a 4 rm flat will probably eat into all their CPF savings for the next 20 years, leaving very little as savings. Can things be the same again? Can they really believe that their $400k flat be worth $8m in the future? The catch is that many workers, especially the CBF workers, would not be able to see their salary go up in leaps and bounds to be able to pay for a 4 rm flat. Who can afford an $8m public flat? If a public flat is selling at $8m, then a plate of char kway teow would likely cost $100 and an average young couple should be paid like $30k pm. Maybe, just maybe, when everyone is using banana currency.

2 comments:

Matilah_Singapura said...

Aiyah, how far back you want to go? At one time a semi-d in Serangoon Gardens was $15,000 and most people paid cash or at least 50% up front.

Buying a property to live in Singapore will be a challenge for those entering the market. We can predict that many folks are going to be living with their parents a lot longer, and that more parents will have to financially help their married kids set up home, or maybe the whole family pitches in to help. Maybe each party could also take a stake (part ownership) of the property for the newly weds.

There are many ways to solve this.

The easiest way for the govt to help is to stop with that unrealistic levels of liquidity and tighten up all that credit and printed "stimulus" out there.

Let the stock market and property prices fall. Allow some temporary unemployment, don't interfere with the impending deflation...take the pain, and allow the capital to re-structure "naturally".

But forget it. That would never happen.

Matilah_Singapura said...

P.S. Forget about any "crash" before an election. Expect higher and higher valuations.

The govt can interfere all it likes in the HDB and private markets but those of us who understand know that it is just making things worse.

The HDB resale market has to collapse, and a nice downward correction in the private market should also be welcomed.

But like I said - if it happens, it'll happen because it simply had to. Before election, the powers-that-be will probably interfere (pump up the jam) to keep everyone feeling "rich".