Any readers who can provide me with Singapore’s average household income since 1960’s or 1970’s, please email me: [email protected]
Written by Ng E-Jay
18 December 2009
An interesting statistic was revealed by the Straits Times in its article “Flat prices will rise but still be affordable” on Monday, 14 Dec.
As an example of how HDB flat prices have soared, a three-room flat in Queenstown in 1964 cost $6,200, but would fetch at least $200,000 today. This translates into a 32.3 times gain over a 45 year period, or around 8 percent compounded annually.
But have wages risen 8 percent annually over the same period?
According to the Singapore Department of Statistics website, the average household monthly income rose from $5,322 in 1997/98 to $7,440 in 2007/2008 at an average annual rate of only 3.4%.
Since 1990, average household monthly income has only risen at an average annual rate of around 5% compounded.
Specifically, for the past decade since the Asian Financial Crisis, wages for the working class have more or less stagnated due to the huge influx of foreign workers who are competing with them for jobs. Given that the large rise in property prices was concentrated in the past 10-15 years, it is safe to conclude that the purchasing power of working class Singapore citizens relative to HDB flat prices have declined significantly.
Wages before 1990 were presumably rising at a higher rate. But the lackluster performance of wages since 1990 can only mean that property prices have become more and more expensive relative to income.
Older generations of Singaporeans presumably can enjoy the windfalls of asset appreciation, but only to a limited extent. The large majority of Singapore citizens own only one home — the one they live in. They cannot monetize the full value of their property even if they have made a large paper profit.
Starting from 1 Mar 2009, the HDB has implemented a lease buyback scheme in which elderly owners of 3-room and smaller flats can sell the tail-end of the lease of their flats back to HDB. However, the catch is that most of the cash has to be ploughed back into a compulsory annuity administered by the CPF Board. Asset monetization effectively becomes asset confiscation.
Younger generations of Singaporeans not only have to deal with rising costs of basic necessities, but are also heavily burdened with large mortgages arising from having purchased expensive flats whose prices have risen much faster than total income.
And the Government calls this “having a stake in the nation”.