In a reply to queries from Singaporeans on affordability of public housing, HDB Deputy CEO Yap Chin Beng wrote a letter to the Straits Times Forum with the usual reassurance that the flats are “within a family’s reach”.
Echoing similiar statements issued previously by ministers and HDB officers, Mr Yap wrote:
“The Government provides generous housing subsidies. HDB flats are thus affordable by any measure. On average, first-time home buyers use only 17 to 29 per cent of household income for their loans, below the international benchmark of 30 per cent.”
Mr Yap claimed that “a first-time couple earning $4,000 a month buying a resale four-room flat at $300,000 will need only 25 per cent of their monthly income. Their Central Provident Fund (CPF) contributions ($920) will cover almost all of the instalment, with only $81 paid in cash.”
However, Mr Yap failed to mention that the couple will have very little savings left in their CPF at the end of the thirty loan period for retirement. Neither did he take into account the annual inflation rate of 4 to 6 per cent and mortage interest rates which will need the couple to pay more than $300,000 eventually.
Mr Yap also wrote that HDB has increased the number of Build-to-Order (BTO) flats to 8,000, up to more than 2,400 in 2006. This figure is still lower than the average number of 15,000 flats which HDB had been building between the years 1991 to 2000.
Given the increase in Singapore’s population due to the relentless influx of foreigners, 8,000 new flats may not be sufficient to meet the needs of the residents.
Furthermore, the flats are not expected to be completed in the next 2 to 3 years, leading to a shortage at the present moment. The record high pricesof both new and resale HDB flats is an indication that demand has already outstripped the supply.
The rising property prices will get airing in the House next Monday when Parliament sits.
At least two MPs – Madam Ho Geok Choo (West Coast GRC) and Ms Jessica Tan (East Coast GRC) – have put in questions on the impact of rising property prices.
It is unlikely we will hear anything new. Minister of National Development Mah Bow Tan said recently that HDB flats remained “affordable” to the masses despite a record high resale price index.
His deputy Grace Fu also quipped that rising prices of HDB flats is a “good thing” as it reflects the “growing wealth of Singaporeans”.
According to Mr Yap, HDB will continue to watch the market closely to ensure affordability, and will consider appropriate measures if the situation warrants.
Hopefully the measures will come in sooner rather than later when prices crash like the sub-prime crisis in the United States.
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