20130718 Diploma holders marrying cannot hope to buy 3 rm resale HDB

The PAP government’s definition of affordability requires a serious relook by all Singaporeans. Unless we’re not a developed and wealthy nation:

– most of us should not be requiring any form of subsidy/grant from the government to own a basic housing unit.
– the government, which has full land control, should not continue to dictate where we live (move to a new town, away from family etc.)

Public housing in every country in the world is meant for lower income citizens but the PAP has used it to control and dictate where ordinary citizens should be located and whoever supports the PAP gets priority in upgrading.
The majority of ordinary Singaporeans are subjected to such a bias, except the rich.

A reasonable definition of affordability should therefore mean the financial ability to live in any location other than central parts of Singapore eg. Pasir Ris, Woodlands, Tampines, etc.
Using a new public housing unit subsidised with taxpayers’ money masks the issue of an opposite situation.

It is not unreasonable for a Singaporean couple to expect the ability to purchase at least a 3 rm HDB unit after working almost 10 years, just before starting a family. What is the objective of so much investment in education if few can afford a lower end public housing unit?

We proceed now to use the HDB 3 rm resale flat as the yardstick to determine affordability, with statistics pertaining to reality instead of the government’s textbook scenario. Reasonable assumptions are: (some from singstat)
– A male marries at around 30, having worked only 7 years due to NS liability. (awaiting poly course and NS, job application time loss)
– A female at around 28, having worked 8 years.
– Both are diploma holders.
– Starting salary of about $1900, last drawn of $2700, average of $2300 for the period.
– Annual salary includes 1 extra month.

Below is a typical financial situation before a couple with diploma purchase a resale flat.
The couple’s CPF monthly installment is $1242.

Husband Wife Total
Salary 2700 2700 5400
less CPF 20 % 540 540
Cash balance 2160 2160 4320
Monthly CPF instalment 621 621 1242

From the chart below, the couple’s CPF covers the monthly installment for a 3 rm flat but has a shortfall of $230 for a 4 rm flat.

3 rm HDB (Tampines) and 4 rm (Pasir Ris)

Tampines 3 rm Pasir Ris 4 rm
Price 375000 459000
20% Down 75000 92000
HDB loan 300000 367000
Mthly instal 1202 1470
Cash needed
COV 27000 35000
5% Cash 19000 23000
Basic reno 30000 40000
Stamp 7000 9000
Legal fees 2000 2000
85000 109000

HDB website: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatMedianResalePrices
COV median price: http://www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatMedianCOV?OpenDocument

The elephant in the room is the cash component required i.e. $85,000 and $109,000 for a 3 and 4 rm flat respectively.

How many young couples have so much savings for a 3 rm flat? Do they not need to keep some savings for a rainy day or when baby arrives?

Instead of addressing the issue of affordability, the PAP continues with the same approach of providing grants and forcing young couples to apply for flats in locations far away from their families.
Should Singaporeans then go through so much stress in our supposedly world class education system only to find themselves struggling to buy a 3 rm resale HDB?

Increasing grants and perpetually tweaking the system are all signs of system failure.

What is worse, this happens at a time when interest rates are at a historical low. Should there be a likely spike in mortgage rates, only university graduates may be able to afford a 3 rm HDB flat.

A basic housing unit requiring a dual income to service a 30 year mortgage carries significant risks as there is no guarantee of good health. Economic cycles have also become more vicious.

MND Minister Khaw has yet to provide any solution to our high cost of public housing. Building more BTO flats have not translated into affordable resale prices for ordinary Singaporeans.

Phillip Ang

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