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19-09-2009, 01:36 PM
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Senior Member
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Join Date: Jun 2009
Posts: 45
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Our Houses Aren't As Affordable As HDB Says
A forum letter to the Straits Times highlighted a different way to measure affordability.
Based on Numbeo's "house price to income ratio", Singapore ranks below major cities like Tokyo, Barcelona, Milan, Dublin, Toronto, New York City, Geneva, Oslo, Rotterdam, San Francisco, Sydney, Vienna, Stockholm, Amsterdam, Zurich, Copenhagen and Berlin.
This means: if we use all our annual income to pay for our mortgages, we need more years than these other cities.
Our houses are less affordable.
Contrast the above with HDB’s explanation that our houses are very affordable:
Quote:
“On average, first-time households used 21 per cent and 25 per cent of their monthly income to service their loans on new and resale HDB flats respectively in non-mature estates. These figures are well below the international affordability benchmark of 30 per cent.” (Straits Times, 31 Aug 2009)
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First, note that HDB specifically refers to “non-mature” estates. Is there a special reason? What about mature estates? Do they breach the international affordability benchmark?
Next, HDB doesn’t take into account the Cash Over Valuation (COV), which is over and above the 10% minimum downpayment needed to buy a HDB flat. And we all know that COV has been rising to unaffordable levels recently.
Remember HDB’s “market-based pricing approach"? This time, is HDB trying to humour us again?
Our Houses Aren’t As Affordable As HDB Says | Salary.sg - Your Salary in Singapore
Last edited by Salary.sg; 19-09-2009 at 01:40 PM.
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19-09-2009, 08:18 PM
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the uniquely singapore system here feeds into itself.
with “stable” HDB prices, which i take to mean “prices can’t fall”, cost of new flats will trend upwards or at the least stay constant.
HDB will use reasons like market-based pricing to justify this. i think the real reason is they don’t want singaporeans to feel poorer. maybe the election is coming. but in my opinion this is unhealthy.
prices of new flats will serve to support prices of resale flats. otherwise, if resale is cheaper, HDB won’t be able to sell new flats.
and with jobs protected by the artificial jobs credit scheme, flat dwellers unaffected by the recession, some even feeling richer by the day, upgraders and condo-queuers will help push up private condo prices. hence the exorbitant prices we see at amk centro and soon many others.
it is a bubble. when stronger forces of supply and demand come into play, and when the government realize it can’t continue with artificially protecting the people’s interest (and its own interest), the bubble will burst.
just my 2 cents.
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19-09-2009, 08:18 PM
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The prices for Singapore’s 2nd DBSS site at Boon Keng: 99 Years HDB
3rms - $349,000 to $394,000
4rms - $523,000 to $597,000
5rms - $536,000 to $727,000
0.8 KM away, FREEHOLD condos, 3+1(size of 5 room flats) cost around 750K-850K.
What gives? =)
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19-09-2009, 08:19 PM
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As interest rate is lower and take home pay as a % of income is higher (lower taxes) compared to other industrial world, it can have a higher than normal HousePricetoIncome ratio and yet a servicing cost as a % of income that is lower.
So, to determine whether HDB value are overcalued, 3 questions needs to be answered:-
(a) Is this subzero interest rates sunstainable?
(b) Can income tax remains at this level?
(c) Can the wage growth trend before the financial crisis sustained..
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19-09-2009, 08:26 PM
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Bears be careful. The market can, has and will remain irrational for as long as you and many others can remain solvent, and then longer.
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19-09-2009, 08:28 PM
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irrational : shouldn’t it be Bulls be careful?
After all they are the people heavily vested in the markets and playing musical chairs now.
Bears are staying out with their cash safely in their bank accounts.
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19-09-2009, 09:08 PM
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disposible income is income left after deducting monthly “fixed” bills like cars and house what. So this mean you should calculate how much you want to devote to your mortgage from your total income + employers’ CPF contribution + bonuses. This is because you’re trying to calculate how much from your total (combined if married) earning power should the mortgage take up.
My suggestion is calculate your monthly income, multiply by 12, add bonuses, divide by 12, do the same format for your spouse’s income if married, add the two figures up, that is your monthly “spending power”, your monthly mortage should be no more than 30% of that.
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