Saturday, August 22, 2009

The Problem with Housing ....

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.

"HDB flat still very affordable for average S'porean" - Article by Alvin Foo, Feb 18, 2008.

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 can only get tougher for Singaporeans...


Anonymous said...

The average HDB home cost about $500,000 in a lifetime, after you factor in interest payment for the housing loan.

The average Singaporean couple probably won't even earn close to that amount by the time they reach 45, by when they are dangerously close to retrenchment or being replaced by cheap Foreign Talents.

Our HDB homes are getting more expensive, and our pay is shrinking drastically due to huge influx of PRs and FTs who depress local wages.

Our million-dollar ministers have no solutions to this, except to retrain us to accept lower-paying jobs which require us to work even longer hours under poorer working conditions.

If Malaysia was to cross over the Johor Straits, and promise to cancel the heavy HDB loan burden on all Singaporeans' back, I wonder how many of us would gladly sing 'Negara Ku' in return?

DanielXX said...

Singapore is becoming a Chindonesia play:


I think it's better to play the stock market here than to work, because wages are too low anyway. You work to spend time, not to make money.

Unless you're a minister of course.

Anonymous said...

The govt forcibly acquired lots of land in the 1960s and 1970s at below market price using the Land Acquisition Act.

The acquired land is later resold to developers and HDB at a hefty profit, who in turn, sells the completed public housing apartments to us at even higher prices.

And HDB still says public housing is subsidized and affordable.

LuckySingaporean said...

DanialXX (of hot.stocks.not),

There is one way for the STI to hit 4000 in the next 12-24 months. That is when the money printing machine of Bernanke run out of control and we see inflation get out of hand. We will see $1M on the HDB resale market. The losers? The real value of CPF money will get wiped out. We are seeing oil at $72/barrel as we come out of recession...if this recovery gets stronger, inflation has a good chance of being the next big problem. Already we are seeing it in the property market in Singapore.

There is one way for those rushing in to buy at sky high prices to be proven right ...INFLATION.

Bernanke gave a positive outlook on Friday. His job however will not be so simple in the coming months as he has to struggle between rising prices and a weak recovery.

Where is the stock market going? Daniel tell me. The tide has risen all boats including leaky ones...

Anonymous said...

The word affordable will still be used in future, even the loan stretched to 2 generations.

Anonymous said...

penny stock is the next wave.

Anonymous said...

I wondered if it is a conspiracy.

When you pays for high HDB prices, the prices will dropped from current high levels if papa is voted out and replaced with some quality opposition that do something about reducing PRs and FTs.

As a result, people once again 66.6% for papa due to smart for one but dumb for all like the estate upgrading.

The high prices bought now can only be sold or worth more if the demographic profile of jobs, incomes and population can support it 10 years or more later.

Though SIBOR rate is low now and resulted in high prices for private property to a certain extent but hdb prices are more or less related to private counterparts.

Anonymous said...


Well said on "The problem with Housing..."

Actually the Gahmen has the following control "buttons" on property prices and reasons to ensure high prices. They are:

1. They own almost all the land and they control HDB price (base price). No prices can go below that.

2. They control foreigners coming in and also how many to be become PRs or citizens.

3. They control how many and type of HDB flats to be built and how much and often land sales and the development charge for private developers.

4. Through income tax/CPF data they know better than anybody else how many can afford the current HDB prices. If only 70 to 80% can afford, that's good enough. The 20%or 30% who suffer, let it be, let it be, no impact on votes anyway.

5. High HDB or even private property prices is good for Gahmen, for revenue and taxes and billions for the reserves.

Also for CPF no need to pay them back when due since almost all have been used for housing. Haha!

Anonymous said...

This rising property cost is simply irreversible likewise the cost of living, if possible it will take a long time. I can't understand why people vote for papa despite suffering for so such a long time. WHY? It is true that the current world economy is bad, but the pap make it worse. Wake up ppl!

Anonymous said...

Sg gov policies in favoring foreign talents/workers, but caused much unhappiness among citizens.

Decreased in fixed deposits interest rate, lower than inflation, caused people to seek avenues to grow their wealth, like recent stock market rally.

Recent changes to cpf, annuity no longer guarantees amount paid in future, people are afraid, better to use it to invest in something, cpf can be used to buy houses, and real estate is a good hedge against inflation but provided the price is not too high.

Wtih GLCs/TLCs owning stakes in the three main local banks should have the means to increase/decrease SIBOR. You may wonder why SIBOR is low now.

Given that Singapore citizens stood at 3 million with birth rate at 1.29 and decreasing, without favorable foreign talents/workers policies, the three main factors - jobs, incomes and population that determine whether real estate will worth more than now 10 years or more later, will be undesirable for those owning rental properties.

At the end of the day, even though there are many reasons to dislike current gov, some people may have no choice but to vote them in due to investments in properties at too high a price and need the tenants from “grow GDP at all costs.”

Other opposition parties and Singaporeans in general know that certain foreign talents/workers policies are detrimental to their futures and jobs but once again like the estate upgrading, smart for one but dumb for all.

Onlooker said...

HyperInflation caused by hyperinflated ego of self-righteous Greater mortal with hyperinflated "Salary" who lived in ivory towers.

What to do? It happened....

Anonymous said...

HDB pricing and CPF for retirement are really 'time bombs' going forward. We mounted the tiger and have no way to get off.

Most ordinary Singaporeans will forever be poor and indebted to the HDB while their CPF money will become smaller and smaller in value.

The Government's solution is obviously to keep more and more of Singaporean's money in the CPF retirement account, and will only give retirees a small amount each month for them to survive, so that they can continue to work until they drop dead.

Singaporeans do not even have the luxury of dying with dignity like the Malaysians or mainland Chinese.
At least they can retire at 55 years of age and live in carefree retirement until they pass away.

In fact some Chinese students studying here are asking their Singaporean schoolmates why is it that the elderly Singaporeans, with hunchbacks and limping and obviously struggling, and almost as old as their grandparents in China, are still working with such handicaps.

Are we not ashamed? I guess not. On the contrary our Government seems to be very proud in proclaiming that we are so merciful in reserving such jobs for the elderly people, who would otherwise be unemployed and be a burden to the State.

But I am really ashamed!

Anonymous said...

I can assure you all that Singaporeans are not the only suffering from the high prices. I'm a PR from Malaysia and I'm also watching in horror the escalating HDB prices. When the financial crisis started, I was relieved and even thought prices would start coming down but how wrong I was! I forgot to factor in the deliberately-planned short supply of flats and the opening of the immigration flood gates for more PRs. Haha, I guess that's 'retribution' for us foreigners eh?

Frankly, I have no idea where those PRs get their cash from. And the funny thing is they seem to think taking a bank loan on ever increasing valuations is ok since there is no cash for that part. Maybe to them bank loan is not money but just lifeless numbers to manipulate.

I'm with you, poor Singaporeans. I think we are in the same boat together. If only HDB would build more new flats for Singaporeans (and in turn lessen the demand for re-sale flats) but with the painful lesson learnt from the 1996 over-supply debacle, I think that would be a remote possibility.

Let's toast to a world of ever-increasing flat prices, or shall we all wish for another financial crisis to bring back some rationality :P

Oh, by the way, I've given up looking for a flat to buy now and staying put in my rented room.

Anonymous said...

there is a reason why we call mah "mah-the-fuxker" nowadays.
his brain is totally gone.

people are smart and can do calculations. if they cannot afford it, off course they won't buy and live w parents or worse don't get married.

saying that its affordable because those that do buy feel say so is totally ridiculous.

pegging price to median income of singaporeans or anything at all is smarter than his brain dead arguement.

DanielXX said...

My business is not to predict the future, but to go with the flow. Predicting the market is only for useless market economists and for those with inflated egos.

To me, when garments worldwide are committed to injecting liquidity, the best thing to do is to pick the sectors with the highest ROE because that's where all the cheap money will go. Liquidity, like liquids, follow the path of least resistance. Yes, we're back to good old stock & sector picking.

But I cannot believe that Singapore properties can be strong (those in other countries is another thing). The best sign of developer fear is when they ignore convention and continue to launch into the Ghost Festival. Tell me, if that is not the best sign of pessimism, what is? Quack quack quack.

Anonymous said...

At some point, Singaporeans are going to figure out that it is far better to sell off the HDB flat and go buy a bungalow in Johor Bahru.

Is it easy to get PR status in JB?

Anonymous said...

I wanted to get one in Malaysia too. You have to be eligible for the Malaysia My second home scheme. Take a look.

Anonymous said...

"Average" is indeed a very misleading word. Just to share a joke here.

When Bill Gate dines in a restaurant, the average net-worth of everyone in the restaurant is multi-million US dollars! :)

Anonymous said...

Heard from a friend in bank's loan section: More often PRs are the ones daring to take up to 90% property loan. At 90% the interest rates are also much higher. During the last financial crisis, foreigners who bought properties unable to service the loans will just simply "disappear". So that is something to consider.

Terence Goh said...

I hope that the price of my HDB flat will rise to $1 million. I can sell it, move to China as a multi millionaire and retire.

The way things are going, Singapore is going to be another China city, just more expensive that's all.

Anonymous said...

Spore had been 'threatened' that vote for opp will bring down the price of the hdb/property.

Thinking about it, not a bad thing after all.... That's one big incentive for me. Better to be free from slavery of debt than to have illusion of wealth....

LuckySingaporean said...


I thought you were a Buffett inspired stock picker. Now you are transformed into a "go-with-the-flow" investor. How more "hot-stocks-not" updates on your site. Instead since you are going with the flow, you ought to be seeking out stocks that will get hot. Hot stocks - yes!

DanielXX said...

Too busy nowadays to write those articles .... it would have been daft to do those writeups in Dec 08or Mar 09 would it not? ;-)

Never been true Buffett style. I always been a hybrid jack of all trades, including politics.

Anonymous said...

My 4 room flat, if put for sale on the resale market now, costs around $200k (if lucky) to $220k. TOP before 1990.

Yishun and Sembawang have the lowest-priced resales flats around if I'm not wrong.

Anonymous said...

Good article. I wonder whether it is possible for Singaporeans to commute to and from work in JB.

Just like the way people commute from the suburbs in the US.

Maybe that is a solution.

maomao said...

Hi Skeptic, it is possible to commute from Sing to JB to work and back. i do it everyday, not bcoz of high home prices but bcoz bf is a malaysian.

Yes, property prices here a fraction of what u pay in sing. Maybe MYR300K for a 2,100 sq ft terrace hse but the trade-off for living in JB are : 1)security. the security here is terrible. u can get rob anytime if you are not careful and u always hv to look behind yr back juz in case robber rush in when u close the gate.

2)Jams. U hv to wake up early to beat the jams on the road and to endure customs queues sometimes.

Anyway, there's no 100% gd or bad in every place. It depends on what u want at the end of the day. Juz my 2 cents worth

Anonymous said...

'If Malaysia was to cross over the Johor Straits, and promise to cancel the heavy HDB loan burden on all Singaporeans' back, I wonder how many of us would gladly sing 'Negara Ku' in return?'

I will sing to it as ex-singaporean. Hmmm actually it makes no diff becos i am already in msia and enjoying life, every minute.

sgcynic said...

Your article may also explain why the government was non-chalant about the losses at Temasek and GIC. The amount was probably affordable.

Anonymous said...

When Johore becomes safe, the price of housing will shoot up to something like Singapore due to demand and supply.

Chee Wai Lee said...

Yup, home prices are so affordable, a person would see his parents' home the moment he got his hands on it.

Chee Wai Lee said...

Gah dyslexia catching up with me ... I meant "sell", not "see" in the previous post.

Anonymous said...

On average, human being has less than 2 legs.

Anonymous said...


"There is one way for those rushing in to buy at sky high prices to be proven right ...INFLATION."

So you mean inflation would cause house prices to go even higher? Would'nt this eventually cause a collapse in demand, as job market fails to improve and wages are stagnant? Moreover, there will be many completed units up in the market by 2010/2011.

Fievel said...

These days, I don't see the govt reacting to responding to the people's concerns anymore. Perhaps it is because they don't have time to tend to these "little" things...and when they have the time to scan through the newspapers all they see are the censored, edited, yes-men publications.
I wished our opposition parties can set aside their differences and just come together to form a formidable, united opposition that can carry enough weight for us to believe in an alternative to this slumbering, mercenary party we call government.

Anonymous said...

Yes, and Minister Mah Bow Tan will jack up the initial selling price of HDB flats due to this higher resale value.

And this leads to higher GDP and higher bonuses for all ministers and civil servants.

That is sad :(

Anonymous said...

Govt won't react to people's concern because there is no need to.

People can grumble and whine when the govt ignores them, but they don't have the guts to vote out PAP.

So, PAP will continue to ignore them.

It is that simple.

Chee Wai Lee said...


Sorry for sounding cynical again, but the government *did* listen to "feedback" ... when property "investors" gave them "feedback" that the proposed tax laws meant to reduce speculation would "confuse them".

So, we cannot say the government does not listen to feedback ...

Anonymous said...


It is waste of time talking about sky high property as singaporean
are largely to be blamed because they enjoy the speculation too!

It is a bubble yes in certain areas.
how do you known is over price?
Like at the rental return and with some risk adjusted for .

If a HDB 5 room can only rent for 2500 dollars and is selling at 800K, then the return is only 3%

Put in the bank you get not even 1%, so current low rate situation, to some people is worth it.

Ang Mo Kio selling above 1000 pSF
rental not even more than 3K, a condo will cost you 1.2 Million, then return is less 2.5%, factor into loan, it is over price!

So look at the rental value in the long and the loan interest rate.

Noting to let singapoeran do so let people feel rich

Couple with the new citizen which equal to "new Hai Gong" the HDB and low end will move now, how much maybe another 20%, then it will peak.

Remember you need the new "hai Gong" from China and India to feed into this Giant Ponzi or Madoff scheme.

I have already paid up my house
ha ha wait to see the rest suffer
for 30 years loan , if you basic salary cannot move, how to move the property price.

Another crisis after this in 2017 will make people wait up again.

Anonymous said...

in first world countries, can buy a freehold landed house for sgd300k easily.

Anonymous said...

Hey Lucky

Isn't "Heli-Ben" Bernanke the same guy u said was doing a great job in saving the world?

Or is it sour grapes 'cos Mr Wang is going to make a bundle (and u are not)?


Seriously, u should still be thanking Mr Mah. High HDB prices is one reason why millionaires (like Lucky Tan) is paying relative nothing in taxes...(the irony is that) ur penniless followers are subsidizing u and making it easier to accumulate wealth\assets.

Anonymous said...

I know u are zero tolerance these days ... but really ... the problem with housing is that ... there is no problem with housing.

The problem is low pay. And low taxes. And easy credit.

As for voting PAP out. its nothing to do with Sinkapooreans having no balls or stupid. Ok. Maybe Sinkapooreans are stupid. But mainly its as explained by game theory. or as some guy said, smart for one, dumb for all.

Parka said...

Housing pricing will forever be a problem until the day HDB decides to reveal the cost of building a flat.

That will probably never happen because the high flat prices makes people work, which benefits the economy directly.

In other words, the pricing of housing in Singapore is a national security issue.

Anonymous said...

Hi Parka

That another another myth.
BBR, Chip-whatever, all have the numbers for the cost.

Mah's line is "subsidized" vs market price.

Anonymous said...

to Anon @1546 and @1602

U know what is the difference between you and all of us here....

Whilst all of us are writing in a way that we are expressing our beliefs and points of views here....

You seem to be doing the same thing except with a 'tone' you are right and you are so 'good' that you fully understamd whatever is going on and second-guessing Lucky's real intentions and motivations.....

You must be helluva of mind-reader or are even sounding like our 'rare in this world' million dollar minister...

Perhaps you are one....but stop trying to put 'words' into Lucky article....sound like as if yours is the only right opinion and 'truth'....

As Lucky being a populist and his other real intentions....I tnk we readers are intelligent or 'stupid' enough to decipher his writings. I certainly don't need your inputs as whether Lucky is trying to compete with Mr Wang...

Lucky has written before...all issues at hand are not that simple and the government is not without its merit...but the way they portray themselves as if they can serve no wrong.......there are many ways to solving the same problem and and there are many factors that underlines a problem.......I am rather sick of your smart-alecky way...especially when trying to point out Lucky flaws in his article and saying that his article serves other selfish purposes......

First of all, please read the title of the blog....I am sure your high IQ will understand the meaning of Diary. Implicit meaning of diary is that it is personal and share thoughts rather than the objective of other in essence, Lucky is trying to share his if you find that his objective is not sharing his thoughts...that is Lucky's don't have to point it out to him. If his intention is to mislead readers like me, I also don't need you to point out to me.....

Summary, you are just behaving like the government.....some things are better left alone because I believe in life and morals....I do not need people to tell me how I should save my $$$, give birth to how many children, infringe on what I believe is my personal space....and last but not least...tell the world that you know how I think and feel.

Anonymous said...

I am an ordinary single 35years old Singaporean earning $3.1k per month and I constantly worry about the security of my job.(FT much cheaper) I am looking for a smaller house like a 70-80m2 house cost about less than $180K.

Oh Sorry- my pay don't qualify a 3-rm flat and a resale will costs me more than $250K. In fact I am willing to settle for a even smaller flat. My main concern is saving up for my old age as job now is so unstable and I know once I am 40+ above I will be in the high risk of being retrenched.

RIGHT NOW AM WAITING - the final shot come this Oct to April 2010. This will be the lowest bottom and if I cannot get a affordable price 3rm resale about $180K. I will say I am 100% irated with the garmen and come the next election will let my view translate to action.

Anonymous said...

anybody read abt the hospitals raising the prices of generic drugs?

i wonder why must GOVT related institutions take the lead to raise prices????

there is one website that shows the generic drug prices in singapore i think...

Anonymous said...

It is clear that most people do not believe HDB or Mah Bow Tan when they claim that HDB housing flats are subsidized.

If you need generic drugs, I suggest you go fill up your prescription at Johor Bahru instead. I go there regularly for my own prescriptions, instead of buying overpriced drugs at our local clinics and hospitals. Very big savings.

Anonymous said...

Anon 18:21

Lucky is no virginal princess in distress who needs u to defend his honour.

If u really believe in him ... spread the word. Translate it to Chinese. Forward this blog to 10 of your friends and ask them to do the same.

Or do u not have the balls to do even that? ... NATO ...

Anonymous said...

Less well off Singaporeans have one thing coming in the years to come, particularly when they pass their 40's. Jobless, empty CPF, plenty of debts - in a word 'pow see'.

The irony is that most do not see the problem now and are still spending like no tomorrow.

Anonymous said...

The problem of asset rich cash poor middle class Singaporeans is something worrying the government which they don't have a good solution. In the mean time, by restricting the withdrawal from CPF and increasing the value of HDB, gives the impression on paper that everything is ok. Everyone is making "paper profit". Will it all come crashing down in the not too distant future? I hope not but it is quite likely. Eventually, the government will have no choice but to use some of the reserves to feed the people. So better hope that is no more bad investments in TH and GIC.

Anonymous said...

Anon @1015

Just look at your attitude..... Did I any way in my write-up say that I believe in everything Lucky says? It is precisely this attitude that irks me. Do I really need to justify myself in order to 'prove' to you. You are really ridiculous and conceited.

I do not know Lucky personally and do not know he is what kind of 'virginal princess'...whatever that means. I was writing because of you convey your points and the way you express your views. Well, I guess that doesn't really matter because this is the internet and everybody can talk behind the veil of anonymity.

In conclusion, I am happy to say my piece and in the real world, happens to dislike the type of person who seems to think he is very intelligent and right and sought to justify something based on his/her own perceived standards and requirements. Anyway, you sound like KTM and I do pass judgments on people from time to time. But mostly, I kept to myself, unless situations and circumstances require me to act otherwise.

You are free to write and comment what you want. But based on how you write your comments, I do not think you are very likable person. Never mind I do not think that matters to you because I think you deemed that you are already so much better than somebody or everybody else.

Obviously, I am not so conceited to really understand you and from a few mere words, able to tell that you are spiteful, jealous or whatever kind of person : )

Anonymous said...

read this nonsense about affordability again with increase in medical cost.


"PUBLIC hospitals have raised the prices of some generic drugs - including some which treat chronic conditions like diabetes - by as much as 25 per cent a tablet.

'The drugs at our hospital are heavily subsidised and we have absorbed most of the cost increases so that the price revision is moderated and drugs continue to remain affordable for our patients.'
... more

A check by The Straits Times with six public hospitals found that all but one had raised their prices for drugs such as tolbutamide and metformin, taken by diabetics.

Generic drugs are non-branded medicines for which the patent protection has expired, and are referred to by their chemical make-up."

Anonymous said...

Both hawker stalls rental hikes and the generic medicines hikes now show that general election is not within six months from now.

Anonymous said...

I noticed that on URA website under "Pipeline Supply Of Private Residential Units" there is a huge dissaperance of units next year 2010. The total units shrunk dramatically from 11728 units in q2-2008 to 5394 units in q3-2009.

I think our shrewd Mr Mah has waved his magic wane to create a 2010 shortage. As a conspiracy theorist, I believe Mah is going to make sure the property market (private and HDB) booms until the coming election next year is over. Hopefully, the (paper)wealth effect generated from the property boom will make most homeowners happy and continue to vote for them. Mr Mah will pay some lip service here and there, but will only deflate the property boom after they get the mandate. So good luck to those who bought 99 year OCR condo at 1 million bucks.

Anonymous said...

i thought the reason the price of our housing and healthcare has gone up is because someone close and dear to us has helped Temasek holdings lose USD50 billion dollars in the last two years....