Affordable flats still available? Are you sure?

Written by Ng E-Jay
31 January 2010

A Sunday Times article “Affordable flats still available” (31 Jan 2010) stated that there are still “gems” to be discovered in some housing estates, with 4-roomers in the suburbs like Jurong or Woodlands going as low as $300,000.

$300,000? Is that considered affordable?

According to the latest Monthly Digest of Statistics (Dec 2009) published by Statistics Singapore, the average monthly nominal earnings for CPF members was $3,500 in Q3 2009.

Assuming a combined monthly gross household income of $7,000, it would take a married couple at least 20 years to pay off their mortgage for a $300,000 flat, and they would have paid around $85,000 in interest over the duration of their housing loan, assuming a very conservative 2.5 percent interest rate.

Needless to say, a 20 year mortage is not a good recipe for retirement planning. What are this couple going to live on after they have fully paid off their home?

What about those individuals earning below the average nominal wage of $3,500 per month? Even with the cheapest flats in towns, which are in reality anything but affordable except to the upper middle class, low wages earners would most likely have to straddle themselves with 30 year mortgages and spend their entire working lives working to pay for their home.

Can you really blame home buyers for being disgruntled when resale flat prices have risen 40 percent from 2007 to 2009, especially when average nominal wages have remained stagnant over the same time interval? This means affordability of flats has fallen sharply for the average Singaporean in the last couple of years.

We pay Mr Mah Bow Tan, Minister for National Development, a multi-million dollar salary, yet he has been asleep at the switch, having allowed supply to fall far short of demand, resulting in escalating prices.

We have seen housing prices rise even in recessionary times. And if a 40 percent rise in 2 years is not a sign of rampant speculation, what is?

An asset appreciation scheme to “unlock” the value of home ownership, as the PAP puts it, is a bona-fide scheme that allows property prices to evolve as the economy grows only if prices stay more or less in line with demographic and economic fundamentals.

But fundamentals have been thrown out of the window in recent years. Instead, market manipulation and price fixing has become the order of the day.

The Singapore market is so small that it is extremely easy for it to become cornered by speculators. Once this takes root, a bubble becomes almost inevitable. It is insane for the Government to allow such a thing to occur by refusing to properly regulate the market.

The asset appreciation policy devised by the PAP has thus degenerated into a farcical scheme that amounts to nothing more than a pyramid game with speculators hoping to buy high and sell even higher, regardless of underlying fundamentals.

The PAP Government started off providing truly affordable housing to citizens, but in the past twenty years this has been abandoned in favour of quick gains and a clear desire to milk the Singapore demographic for what it is worth, never mind the long term future.

Hopefully it would not take the electorate another 20 years to realize what is happening to their own basic livelihood.

  1. Using a metaphor of credit cards, the PAP government is milking future value of our HDB flats for short term political gain. The negative consequences are catching up with us all.

  2. Mind you, 4 room at Jurong cost me only $50k, and I paid it within 5 years. This HDB is really blood sucker, can somebody start a signature campainge against MBT ?

  3. The whole basis of such prices, Mr. Ng, is to tie Singaporeans down to Singapore: making them financially indebted is one of the surest way to stop people from emigrating to other countries once they decided to buy a house here.

    There is a reason why financial education isn’t being taught in our schools here: by teaching them such, the children will grow up with better financial mobility, and with it, the ability to move out of Singapore when the going gets tough. I sincerely do not understand why the Ministry of Education do not emphasize the need for financial education, considering we’re looking at a bleak future for Singapore economy (social considerations aside).