Who Moved My Singapore Cheese

The report mentions citizens' concerns with soaring HDB prices (about 35% increase over 2 years) and quoted a NUS Real Estate professor (程天富), who said that the HDB flats, if based on debt-to-income ratio, is still affordable. He then went on to state that one of the public's concerns, instead of affordability, is that of the high COV required these days in the market, meaning to say that instead of the willingness to pay over 30 yrs for the current HDB prices, it is the inability to fork out the upfront cash required that is worrying us. The report is also peppered with mentions of the public asking for the current $8k income ceiling to be raised, and for the government to scrap the COV system etc etc.

I have a point to make below but let me preface that with my views, which might run contrary to what some fellow petitioners have suggested, in that the COV system is a necessary evil, and that it should not be scrapped; and yes, the $8K income ceiling is an archaic benchmark level and the implementation of which is currently a blanket system that fails to take care of citizens in that it does not take into account the number of dependents in a family.

I think that the COV is important because it limits the financing power of buyers in a quickly rising market and provides a price floor for the owners against quickly dropping prices. It acts as a dampener to the price volatility of HDB prices and it gives buyers an idea how much over and above the recent market prices they are paying for. Once the COV system is scrapped, what we have in a supply crunch market like the current one, would be rampant outbidding by desperate buyers who are throwing their financial prudence to the wind since they are able to finance that irrational decision with a bank loan.

$8K income ceiling? Well that is a self-explanatory issue once I had read about the plight of a certain petitioner whose family had 2 kids and 2 non-working old folks (note I do not classify them as "retired") living together. I do not pity those whose family planning is careless and irresponsible, with 3 or more kids when their earning powers are obviously not sufficient for such a large family; but 2 kids? Is that too much? Is a combined income of $8k (stress: with both husband and wife working) sufficient for a couple who has 2 kids and aging parents in Singapore to purchase a condominium apartment large enough for their family of 6? Where is their government-mandated CPF retirement minimum sum (currently at $117,000) going to come from? Would it drop from the sky? Also note that even that sum will only afford a very modest lifestyle in retirement.

Finally, my point is this. I do not think our HDB flats are affordable even if you use debt-to-income ratio. The problem is that in Singapore, we have relatively fragile careers (apart from those plying their trades in the government sector) that can be reduced from hero to zero in one economic policy change or industry trend shift. (Just ask the manufacturing-plants PMETs how secure they feel about their future) The income-to-debt ratio does not take into account the long duration of our mortgages often necessary to keep it "affordable", nor does it take into account of the fact that our household income are dependent on both parents being locked in the workforce. In other countries, it is often a choice for the wife to be working or to be a home-maker.

Next, for the elephant in the room; nobody wants to admit it - apart from the new HDB apartments in the "immature" a.k.a "ultra-ulu" locations (such as Punggol and Sengkang) which are only available to us if we got lucky with the bi-annual ballot, most of the resale market apartments in mature estates are really such sh*tholes they are not worth the high absolute prices being asked for in the market today. Not to mention most of these "mature" flats come with shorter remaining lease of around 70 to 80 yrs lease balance, which lends weight to the rich-gets-richer-poor-gets-poorer situation in Singapore because of inheritance issues.

Many young Singaporeans wish to upgrade to something better eventually. But once locked-in and laden with such high mortgages (relative to absolute wage levels here), many of us are aware that the fight to move upward in Singapore in this lifetime is perhaps so critically threatened that we might as well forget about it once we sign our names on the HDB lease. Our next 10 years or so of our mortgage payments will be going primarily towards interest payment and very very little principal owed is actually paid off. Our "asset" wealth is not going to go up by virtue of our faithful monthly payments unless there is a significant appreciation in HDB prices going forward from this point on. HDB is over-looking the fact that their apartments are really not worth that much prices in the alternate reality had they been building sufficient supply to meet demand.

HDB mentioned that they are limiting the number of new flats supplied (to 2,500 new flats in 2006) because despite a figure of 25,000 new marriages last year, there was really only 15,000 applications for new flats or 1st timer housing grants in the resale market, explaining further that the discrepancy is due to foreigners getting married in Singapore.

This is a REALLY DUMB explanation because HDB is still not admitting that many Singaporeans are looking for new flats in locations they want and not PongKang (Ponggol+Sengkang), or are not willing to wait 3 to 4 years for a BTO flat and are hence lingering in the resale market, or are unwilling to pay the high prices for the market rates, hence ONLY 15,000 couples were "lucky" enough to get a good ballot number or decided they couldn't wait any longer and finally took the plunge into the resale market.

The 10,000 balance of the figure did not signify that they were not looking to purchase a flat!? It signified that many more are waiting, lurking in the market, hoping that their financial prudency will pay off finally, building up a pent-up demand. But alas, HDB will never see it that way. They will rather worry about their bottom line in the event that they have an over-supply of flats. I ask aloud if that is such a terrible thing? Has HDB forgotten its DNA? It is NOT a FOR-PROFIT organization.