5/20/2011
Housing policy parameters
The parameters used to determine what is affordable housing should be discarded as it is a wicked way to enslave our young to a home that is no bigger than a shoe box. The formula of 2 incomes, 30% and 30 years to pay up is outrageous as the consequences of paying so much of two persons’ income just for a roof over their head went beyond just financial cost. It has a wide ranging negative social cost for the people and the country as well. Inflation, high cost of living, family formation and bringing up children, even the digits to go into the production of labour, are gravely affected by this sick formula.
The argument that it is an international practice is bull. Why don’t the policy makers adopt the international practice of what is a decent salary for themselves as practiced internationally, which incidentally will be no more than 10% of what they are getting now? What is it that their incomes can be unique and defy all conventions?
Why is it that they are willing to break all rules and norms when their own interests are at stake and persist in sticking to a deadly formula that is wearing down our future generations financially and emotionally? The formula is robbing the income of our young and depleting their savings for retirement. It is a seriously flawed formula and must be changed immediately for the good of the people and country.
All the reasons against this formula have been aired, all the bad and negative consequences arising from this bad formula are there to be seen and are being lived by the bulk of the population. Would this diseased sacred cow be slaughtered? Or would the same song be sung and praised, that this is the best formula for the people?
Who is benefitting from this formula and who is paying a heavy price for it? The beneficiaries are the govt, developers and the rich property owners. The adversely affected is everyone other than these three groups of people. Can we see a drastic and badly needed change in the housing parameters to one that is based on a single income and shorter period of repayment? Two income families are destructive in many ways for bringing up children and building a home.
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12 comments:
IMHO, this formula is but one of Mah's justification for sky high HDB prices.
The real solution would be to sell BTO at much lower prices, hence allowing ALL first time buyers a shot at owning an affordable flat. This will also put pressure on the price of resale flats to drop. As long it does not drop too much its ok.
The key is to make sure ALL first time buyers get cheap flats. Non-first time and PRs not included. Mah's statistic also excluded those first time buyers who were priced out of the market totally. Another of his phony justifications.
The PAP is not telling you the whole truth. Yes, the 30% debt ratio is an international standard. BUT they never tell you that this ratio must be applied to the national/city median household income, NOT just to only those families successful (and rich enough) to buy the flats in the first place. HDB and PAP statistics have pre-selection bias, and is therefore inaccurate on national level. If PAP use the overall Singaporean median household income, the debt ratio will easily be over 30%. All those statisticians in govt and senior civil servants are smart enough to know this, and yet they just obey the orders of their PAP masters.
And all this is based on 30 years mortgage loan!
Another international standard that is more meaningful, and is used by UN and World Bank, is based on how many times the average home price compared to national/city median household income. The international affordability standard is that it should not be more than 4X. This standard is harder for PAP to "fix" as the average HDB 4-rm or 5-rm is already 6X the median household income. That's why PAP never use this international standard.
The young must not accept this policy as the only policy. Their parents too must not allow it to be shafted down the throats of their children and a life of hell should one or both lose their incomes.
BRAVO!
one thing that puzzles me btw is that 85% of pple here live in public housing, meant for the poorer pple. something's wrong if people simply cannot afford private housing. what does this say - that most sporeans are in the lower-income class?
it's even worse once you wake up to the fact that so many of those in private housing are non-singaporeans.
Minister Khaw, who is taking over the National Development portfolio, said on his blog that he is determined to make housing and HDB Singaporeans' icon again.
Were Singaporean's gripe with HDB about icons? Who cares about icons anyway. We just lost an icon and most people seem to be rejoicing.
I was looking forward to my son buying a $8 5 room flat. Now it looks like more hell from the ex-Minister for Hell.
Is sad that the govt is always cherry picking to justify whatever benefits themselves at the expense of Sporeans and with disregard to our welfare at all cost.
They even have the cheeks to lie blatantly by saying HDB flat is an asset. How is it an asset when it is only 99yr leasehold and you're just the lessee and HDB is the owner?
If you're the lessee, why do you have to pay the rent PLUS interest to take up the loan for the rental flat? And how is it an asset when it loses its value nearer to the end of the lease?
I'm sad that many still have not woken up to this fact and bought into the BS that HDB flat is an asset. It is in fact a LIABILITY. Talk about asset only if it is a privately owned property.
It is at best a temporal asset like a car. Once COE expires, the value expires. The same as HDB flat. Lease expires, value $0.
Housing as an asset or liability?
Let's take for example a 4-rm flat with a loan of 300k, mortgage over 30yrs at HDB rate (2.6%).
Looking at this, monthly repayment will turn out to be $1200. Going by a dual income family, burden on each individual will be no more than $600. Fair enough.
But this is where the problem lies. HDB, like all the banks, enjoy splicing the amount to make them look palatable. Has anyone wondered that at the end of 30yrs, you would have forked out an additional 132k on interest? This figure works out to be 44% on the cost of your flat.
Now, say 30yrs down the road, your children are grown up and you decide to sell your flat. That 4rm flat then, might fetch 500k. Have you profited from your 'investment'?
You have already used up a third of your 99 yr lease. WOuld your property still appreciate in value? And what about the opportunity cost on that additional interest paid? Would you have obtained a return on your investment of more than 2.6%?
Then, imagine the next owner taking over your flat with a loan of 500k. Assuming status quo, 2.6% interest over 30 yrs. Total interest payable becomes 220k.
Can anyone see who benefits in the end? HDB!! Inflationary of asset prices is a cash cow for the goverment! 132k earned from you and a further 220k when the flat changes hands.
I see this is gonna be a challenge for the new MND Khaw. How to keep prices affordable without killing their cash cow. Once bank loan rates increase to pre-crisis level of 4-5%, will HDB interests remain at 2.6%??
Hi Yukkeen, welcome to the blog.
Boon Wan is an adminstrative genius. He will do it his way. His track record in the MOH is there for all to admire.
The big, big trouble with Boon Wan is that he still thinks he did a good job in MOH.
Healthcare is still hugely affordable as he has shown with his $8 heart bypass advertisment.
The unsaid part is how much insurance and how much premiums that someone wishing to enjoy the $8 heart bypass will have to pay, and bearing in mind that premiums for hospitalisation insurance go up by leaps and bounds as one ages.
So, if Boon Wan is going to do in National Development what he did with healthcare, I will be getting more uncomfortable.
In any case, he is one of those targeted by voters but managed to hang on. One more term is probably all they are giving him, and both he and the PAP has little to lose by using him to make one more radical and sweeping change to HDB policies and just claiming responsibility after stepping down.
Money is already in his bank with pension for life.
He could make amends in MND. But like you said, he thinks he had done a great job in MOH and wanted to be the white knight to do the same in MND.
Talking about emperor and his naked clothes.
Banks are the other big players who benefit, apart from the other big players mentioned in the article.
For 3-5 years household income, people in other countries live in private housing and many are real houses on land, not public housing that comes heavily encumbered
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