Earlier this week, Yahoo! Singapore showed a PropertyGuru report “HDB flats are more unaffordable than private homes”. On March 23, the Housing Development Board (HDB) issued a response to the report. The letter from HDB is published in full below.
HDB wishes to stress that the PropertyGuru report, “HDBs more unaffordable than private homes”, is misleading, as it is based on a simplistic analysis of incomplete data. We regret that PropertyGuru was not prepared to wait for HDB's response, in order to present readers with a balanced picture.
Cross-country comparison of data is often fraught with challenges, as countries differ greatly in their policies, state of development, and physical context. In housing, for example, the extent of our public housing programme (one of the largest in the world) and the use of CPF for housing (unique in the world) make us quite special. As a result, our rate of home ownership, at above 90 percent, is the highest globally.
PropertyGuru used the House-Price to Income (HPI) ratio to compare Singapore with other countries and cities. But the report missed out some important details.
First, PropertyGuru relied only on the market prices of HDB resale flats. This is not an appropriate parameter for computing the affordability of public housing, as most Singaporeans buy their new flats directly from HDB via the Build-To-Order (BTO) programme. These new flats are deliberately priced considerably lower than comparable resale flats, to ensure affordability.
Second, PropertyGuru did not factor in the substantial housing grants received by Singaporeans when they buy their homes, either directly from HDB or even through the resale market. These grants make up a significant portion of the purchase price.
The Government is committed to make HDB flats affordable to Singaporeans. We do this through a three-pronged strategy:
i. By offering a wide range of new flats, with different flat types (from 2-room to 5-room flat), in different locations (including both non-mature to mature estates), to cater to the different income groups.
ii. By pricing new HDB flats affordably, and offering various forms of housing grants to help lower income families own a home.
iii. By offering housing loans at reasonable interest rates.
With careful pricing and generous housing grants, all homebuyers who make prudent choices will find new HDB flats within easy reach. Households buying new flats in 2011 used an average of 24 percent of their monthly income to pay for their housing loans. This is well below the international benchmark for housing affordability of 30-35 percent. And with CPF, the majority of the household can pay their monthly instalments entirely using their CPF contribution, with zero or minimum cash outlay:
1. Selling prices are based on flats in non-mature estates offered in 2011.
2. The median income is based on first-timer applicants in 2011 in non-mature estates.
3. Monthly mortgage instalments computed based on 90% of the selling price, at HDB current concessionary interest rate of 2.6% over 30 years.
4. The Additional CPF Housing Grant and Special CPF Housing Grant are used to offset the 90% maximum loan where applicable, assuming that buyers have sufficient saving for the 10% downpayment.
At the same time, the rise in HDB resale and private property prices in recent years is not sustainable. That is why the Government has been intervening with both supply and demand measures, in order to correct the imbalance. The market has moderated considerably. For all newly-wed first-timers, their access to a new and affordable HDB flat is now largely assured. This year, HDB will focus on second-timers. As we assist second-timers in getting a new HDB flat, the impact will be felt in the HDB resale market. Meanwhile, URA will continue to push out land supply for new private property development, to match the demand. The affordability of housing in Singapore should further improve in the months ahead.
Housing & Development Board