A friend of mine who got married last year and has been looking for a home in the resale market told me he has given up looking. The COV sellers are asking for is just too high and being financially conservative, he & his wife would rather squeeze in a bedroom in his parents place than to be deep in debt. He still hopes to get a flat via the HDB balloting but that is like winning lottery these days.
"Providing Affordable, Quality Homes" - HDB's Role
One of the words frequently abused in Singapore is affordable. Affordable?...What does it mean? After rising something like 35%-40%, the word affordable can still be used. HDB was selling the most expensive public housing in the world before that sharp rise. Minister Mah keeps repeating this phrase "HDB flats are still affordable" based on the fact that 'most' people can pay for their monthly instalments. The simple trick to making the instalments small is to stretch the loan repayment period. This is not a good way of measuring affordability. Singaporeans shouldering high debt burdens in a 'hire & fire' economy (vs lifetime employment) has resulted in 33,000 defaulting (3 months arrears) on their HDB loans[Link]. That is 1 in 12 or 8% of HDB loans. In the height of the subprime crisis the 90-day deliquency of housing loans in US was less than 5%[Link]. How can the word 'affordable' be used on our public housing when it results in such a high default rate? The problem will be worse because the recent surge in prices means Singaporeans will have heavier housing debt.
The other word I have an issue with is AVERAGE. You notice that I rarely use terms like such as "average income" in my blog. See, the word "average" is highly misleading because our income distribution is so skewed: the 2008 average household income is $6,800 but the median income $4,800[Link].
A 3-room flat goes for $250-300K on the resale market. $370-$400K for a 4 room flat and $470-$600K for a 5 room flat. Prices are still going up and you can expect transactions at higher prices because the COV has surged[Link]. It is quite remarkable since we have been in recession and facing anaemic growth for the next 1-2 years. The above letter attributes the rising prices to changes in our demographics - we have a large and increasing number of PRs and new citizens. HDB has not responded to the increase demand and Singaporeans have to pay higher prices for housing. Such high prices can only lead to higher default rates and more trouble ahead. The way for Singaporeans to avoid trouble is to buy a very small unit, say a 2-room flat or stay with their parents. A 2-room flat which is about 45 sq meters in size has one bedroom and a living room - one reason why some Singaporean couples don't have children is they don't have space for children. Singaporean workers will find it very hard to compete when their cost of living is so high....the only way to compete globally is to live miserably - small homes, late or no retirement, foregoing little luxuries and not having children.....life can only get tougher for Singaporeans...