Saturday, February 07, 2009

HDB to help home owners avoid default....

Gee ....HDB is affordable but many have defaulted on their HDB loans. Towards the end of last year 8% of HDB loans were in default. But figures released yesterday showed that the problem started years ago because 6500 are in arrears for periods of more than 2 years and some are in arrears for four years.

"The numbers can only increase" - Dr. Khor

The HDB is trying to help by doing the following:

a. Make exceptions and give a 2nd concessionary loan to downgraders on a case to case basis. Presently, such loans are for upgraders only!! Why?!..Strange.
b. Providing "interim housing" for those who downgrade urgently but cannot get another flat.

c. Allow long periods and reduced monthly payments.

The article also mentions that HDB officers made 60,000 house visits on arrears related matters last year and conducted over 35,000 interviews. The article also says that Minister Mah urges home owners to be REALISTIC and spend WITHIN THEIR MEANS.

This is all very interesting - we have a public housing scheme that sells affordable housing to the people but results in a default rate higher than that of the housing crisis in USA. The thing that HDB is not doing is relooking at the way HDB flats are priced. ...and according the Minister Mah the source of all these problems is not the pricing of flats relative to the income of Singaporeans but it is caused by Singaporeans being UNREALISTIC and NOT LIVING WITHIN THEIR MEANS. When did the people stop living within their means? The truth is the price of HDB flats rose from $30K for a 5 room flat to $500+K today without the corresponding increase in income. Not only that, employment has become "unstable" while buyers need to service their loan for non-stop for 3 decades. The import of foreign labor has resulted in structural unemployment of people above 40 when their financial commitment is highest - employers have an unlimited supply of young workers when the floodgates for foreign workers was opened. Over the years the cost of living keeps rising due to relentless increase of fees/fares/rate by govt owned enterprises far in excess of the wage increase of the lower income group. Yes, I agree Minister Mah that people shouldn't live beyond their means - the problem is HDB flats are priced beyond the means of many people in the long run and they have no choice because they need a roof over their heads.


Anonymous said...

their solution to high cost of hdb = more "cheap" $90k 2 room flats.
pse tell me how is a couple going to raise children with only 1 bedroom??? in the living room,toilet or dining rm?

didn't the gahment want us to have babies? another wayang?
or just a certain class of mortals allowed to have babies?

Anonymous said...

Lucky : "... the source of all these problems is not the pricing of flats relative to the income of Singaporeans but according the Minister Mah it is caused by Singaporeans being UNREALISTIC and NOT LIVING WITHIN THEIR MEANS."


Exactly, people should live within their means like at the void decks or jungle because HDB had been so fond of building the bigger flats that now cost close 300K and more. Now Mr Mah just came to understand many people cannot afford them. You see everybody can do their simple sums except the million dollar ministers.

You see, nobody ever told Mr Mah about it so he never knew ... that is until now with a default rate higher than the US.

Mr Mah is going to have good time answering to his bosses who used to close one eye and may be even approve of his HDB policies. But when time are bad they will be looking for a big scapegoat and that might well be Mr Mah.

In the US, the banks took back the properties from defaulting owners and they became drown in debts. In Singapore, the story is going to be quite interesting. Although the HDB/govt has been abandoning its role as lender to the banks, ultimately it is still the developer and provider of public housing. It will become saddled with the twin problem of unsold properties and a huge social problem in public housing for the young generation.

Anonymous said...

HDB prices beyond people's means?

That is why there is $100 billion (or is it 300 billion) in reserves.

Unfortunately due to investment in western banks, suffer huge "paper loss". But too early to tell , said shortie Dhana. Wait another 30 years.

Anonymous said...

Actually, my parents made the three of us when they were living in a one-room flat with no bedroom.

Possible to have kids anywhere if you really want. Many Singaporeans are just spoilt and want face only.

Anonymous said...

"The numbers can only increase"

They seem to get it right this time.

ly said...

Lucky : "... the source of all these problems is not the pricing of flats relative to the income of Singaporeans but according the Minister Mah it is caused by Singaporeans being UNREALISTIC and NOT LIVING WITHIN THEIR MEANS."

mortal's reply: "... the source of all these problems is caused by Ministers being UNREALISTIC and LIVING WITHIN THEIR (million dollar salary) MEANS."

Onlooker said...

3 room flat?

Taishan said...

The real culprits being the MM and his fondue eating sidekick. The rationale - to keep one perennially occupied and busy. Such, none possessed the time, energy nor inclination to oppose. That they have brought this amazing success that all should be eternally grateful.
And thus we witness the fruits of the preposterous, vindictive policies - low birthrate, rising unemployment, underwater mortgages.
And it will take much time, effort, expenses to unravel these absurdities.

Anonymous said...

HDB's flats are grossly overpriced compared to their actual costs.

There is hardly any land cost since the land either belongs to the govt, or the govt forcibly acquired the land at way below market level using the Land Acquisition Act years ago.

Construction materials are cheap, and flats are getting taller and taller, which means per unit-wise, there are more residents paying for the same supporting infrastructure such as roads and public amenities.

HDB flats don't cost more than
$50k-$70k to build per flat, but are sold at over $300k per unit.

HDB insists it is losing money. But the truth is, HDB is just a middle layer between the govt and the people who buy the flat. HDB makes a loss, the govt makes fat profit by making the people pay through their noses for the land.

And for a loss-making organization, HDB sure can afford a posh-looking HQ at Toa Payoh. I wonder how many more loss-making organizations can do that?

Anonymous said...

i think mr mah may not be aware that the housing dynamics have completely changed since sg earlier years of development(well, as far as the general policies in managing the sale/purchase of properties are concern, not much has changed). if you belong to the pioneer generation, you would have richly benefited - but not as much as our government and business leaders etc would have gain - from rising land/property prices over the years. however, common sense will tell you prices cannot keep rising to no end without serious social/ economic consequences. what has happened is a severe price instability or bubble which has made home commitment highly risky for today's buyers. our government must shoulder the blame for its aftermath due to its unbridled wealth generation programs. we are now reaping from the wealth they have created. but alas, though some of this wealth has trickled down to the masses, more are now struggling from the greed and abuses of the market place and the high cost of living it has brought.

the glaring inequity inflicted not only affected the marginalized in society, which they're trying to help, but has also spread to the largely middle class homeowners and beyond.everyone with a stake in this land will have to pay dearly for what is about to be unraveled from years of excesses or excessive milking of the land.

i doubt the current measures adopted by the government will be adequate to contain the building up of a...."housing avalanche" coming our way.

the way i see it, they may need a revolutionary approach in handling the new housing crisis or suffer the fury of the growing number of .... new poor.

Anonymous said...

Given that PAP had been so highly specialised and greedy as a money-making machine, ministers are really there to make money for the govt and not so much to carry out their actual duty as sane policy-makers. Tis why Mah and his predecessors all kept jacking up HDB prices to preposterous levels.

It's now all money logic that holds the PAP together, not duty, ethics nor loyalty.

But once the reserves have been spent and at the same time there is a need through subsidies and handouts to appease citizens that have been hard hit, there will be a further tightening of the belt within the govt.

This might lead to a culture of exaggerated self-preservation & hence loss of cohesion among the various ministries, depts and factions - such as had happened among the traditionally clannish group of banks in the US.

Well the fall of decadent regimes throughout history has always happened this way. No matter how clever (but not necessarily wise nor intelligent), no matter how tight the ship is, once the resources are lacking through folly in policy-making, cracks will begin to show and eventually do the regime in.

It now depends on how much has in fact been suffered by Temasek and GIC in their investment over the last 2 years. Sure they can cover up the losses, but like those fallen banks, for how long?

Singaporeans should be mentally and emotionally prepared for such a probable eventuality so as to cope better. It is a pain our people may have to bear as a result of giving too much power to PAP over the decades.

The greater blame lies with LKY, who single-handedly destroyed any vertiges of checks and balances in Singapore.

But should a national crisis of such a nature come to pass, resulting in drastic depreciation in property prices and Singapore currency, issues with CPF savings and such like, I am also sure capable men and women will rise to the situation ... just like during the withdrawal of the British in the 60's, so many political leaders suddenly appear on the scene.

Anonymous said...

Hi Anon 10:16am,

I absolutely agree with you. Students of history can definitely predict huge problems for Singapore in future. However, I do believe Singaporeans will step up to the plate because we simply have no other choice. If we don't, we'll end up just like North Korea.

Economist with a Heart :)

Anonymous said...

Thank you lucky.

As mentioned, the cost of a HDB is so atrocious that lesser mortals can ill afford them.

I have not met one financial planner who can plan a good life style for a typical singaporean earning @2,500 per month, with 2 kids, a typical 4 room flat and planning for a comfortable retirement.

Not unless you are a perm sack.

Anonymous said...


you forgot to mention their stupid policy of linking income to the size of the flat..

And the penalty clause of handing over a certain percentage of the capital gain to HDB in return for the purchase of new flat (correct me if I am wrong)

Anyway they reap what they sow.

Sleepy said...

Not only are they making hdb flats more expensive, they are making hdb rental much harder due to limited supply. The income criteria for renting and purchasing is more than $5,000 difference. Can't mah bow tan see how it is no longer meeting our needs and failing in it's mission to provide affordable housing?

Anonymous said...

not sure how they define their 'default'?

does this includes those taking loans from the commercial banks?

the spore ministers had really made hdb affordable and spore flat is so heavily subsidized .....

kelly said...

>>>their solution to high cost of hdb = more "cheap" $90k 2 room flats.

Yes, but you won't be able to sell them for profit anyway, even if you've lived in it for 30 years!

>>>pse tell me how is a couple going to raise children with only 1 bedroom??? in the living room,toilet or dining rm?

One-family of 4 or 5 used to sleep and live in a room under one big house of 5 to 9 other families. But the thing is, if you can't even afford a decent home, why should one bother to have kids? To please the govt is a crazy idea. (Wear only hats that fit your head.)

>>>didn't the gahment want us to have babies? another wayang?

(Again) Why are we thinking of pleasing the govt? Do you know the any govt support does not extend to single unwedded mothers who have a part to decide they want babies and not marriage?

I hate it when the govt views unwedded mums, gays and lesbians as less than humans...even if they don't say. I have known many amazing ppl who are gays or lesbians in their own right. The key is to be honest!

Don't depend on govt - depend on your own mindset and willingness to make change in your life.

Support the right petitions and causes!

rookielim said...

Lucky, I have always have a understanding that the Singapore government being a nanny state believes that we Singaporean do not know how to manage our money (or DO NOT KNOW HOW to put our money to good use). Therefore, they have to conscript our money, suck it out from us by imposing higher HDB prices, higher fees (transport etc) and higher rental on the people and invest on our behalf. The government is doing all these for OUR OWN GOOD. Just like you, I was saying to myself how lucky I am that my government is really thinking for us and protecting us. They are such elites selected from the best of the best. They can do no wrong... until Shin corp, ABC, CITI Group, ML, UBS...

If there are lessons to be learned from history, it is that power corrupts. When you think you are too smart or too almighty, it is when you fall. I sincerely hope that our leaders will really learn from this episode and stop treating their people like little children and give the money that they rightfully deserved back into their own hands and let them decide how use it. Else, the people of Singapore will never be as competitive, and as innovative as the Taiwanese etc,.

Anonymous said...

"The article also mentions that HDB officers made 60,000 house visits on arrears related matters last year."

Assuming 312 working days for the year.

60000/321 = 192 visits(house) per day.

Is the figures realistic? or does it means that truly 60,000 households or more are in arrears?

Anonymous said...

"Can't mah bow tan see how it is no longer meeting our needs and failing in it's mission to provide affordable housing? Anon at 8:22 PM"

Mah bow tan only see $$$$$$$.
To be in debt for housing loan for 10,2030 years is consider AFFORDABLE. That's is why our retirement age is raising and we are encourage to work till 85.

Amused said...

Learn to live within our means?

Heh. Get HDB to change their outdated salary ceiling policy then.

How to, when HDB does not even allow people who earn more than a certain amount to purchase the smaller flats?

A property is most likely the largest single purchase people can make in their lives and HDB is forcing people to buy the bigger flat that they can (barely) afford?