Leong Sze Hian made an outstanding speech about HDB at Hong Lim today:
Part 2 is here : [LINK]
Mr. Leong did quite a thorough job to explain the problems caused by HDB policies. I have just a few more points to add.
HDB sells the most expensive public housing in the world but stilll claims that it's flats are affordable. The default rate for HDB concessionary loans has escalated to 8% - this is higher than the 5% default rate in the US at the height of the subprime problem. When confronted with this grim statistic, the govt put the blame on Singaporeans saying they should only buy what they can afford . This is an insult to the intelligence of Singaporeans - the HDB has income ceilings to force Singaporeans to purchase bigger flats and they now turnaround to say people have been buying flats they can't afford.
In the 1980s, the CPF was liberalised for the purchase of private housing. This single rule change caused the price of private property to surge. Shortly after, the govt decided to liberalise the use of CPF for HDB flats. The property index went up from around 40 in 1986 to 180 in 1996 a surge of 450% in one decade outpacing the growth in household income. The use of CPF for housing caused a severe insufficiency in retirement funds for Singaporeans. The govt kept raising retirement age and asking people to work harder and longer to fix the shortfall. Last year the govt introduced compulsory annuities in the form of CPF Life. The point is we had serious problems during the "good times" because of bad policies and these are simply going to get worse as we move ahead. The 8% defauilt rate occurred before the mass retrenchments started and at the beginning of this recession.
In the 70s, when you bought a home, you pay for it in cash....settled on the spot...$30K for a landed private property....zero debt...and you slept well at night. Financing for home started to expand - housing loans started stretching from 10 years to 15 years to 25 years to 35 years. At the same time, job security disappeared over time and the income gap ballooned. This is a formula for disaster. A person is supposed to have uninterrupted and continuous employment for decades to service his housing loan....the high household debt makes the balance sheet Singaporean households very fragile. The problem gets worse with a large segment of the population whose income is actually stagnant or declining. Servicing a loan for 2 or 3 room flats at HDB's prices causes them to live under tremendous strain and misery.
These problems caused by bad policies have existed for a while. However, they are masked by the good times when Singaporeans held on hoping that the rising tide can lift them. The PAP govt's first reaction to the worsening situation is to blame Singaporeans for buying flats that they cannot afford. Given the govt sets the policies on how flats are priced, allocated, financed and sold to the public, such a claim is simply absurd.