Our Houses Aren't As Affordable As HDB Says

According to ERA, there are more PR buyers of resale HDB flats now, double the proportion for 3 years ago. Hence the amazing recession-defying price increases could be partly due to these additional PR buyers, who are the direct beneficiaries of our foreign talent policy - and as for the merits of the FT policy, we can discuss ...

"The government's target population of 6.5 million is steadily increasing the
pool of PRs; and they have to buy their HDB homes from the resale market as they
do not qualify to buy new flats directly from HDB. ERA's resale transactions
show that PR buyers make up some 40 per cent compared to 20 per cent three years ago." - Eugene Lim, assosiate director, ERA Asia-Pacific.

[Husky]

Our Government defines affordability as not using more than 35% of your gross monthly household income to pay for the monthly installment.

Let’s look at the scenario for typical young couple that have recently graduated from University and been working for 2-3 years.

Combined monthly income: $7,000, take home pay = $5,600 (80%)
Amount that goes to Ordinary Account: $1,610 (23%)

Suppose they buy a flat at $600k. After emptying their Ordinary Account, they have to take a loan for $520k @ 2.6% over 30 years.

Monthly Payment = $2080 (about 30% of their gross household income)
From CPF, we have $,1610 (23% of gross income)
Cash Top Up: $470

Take home pay of the couple after topping up the cash component
= $5600 – 470
= $5,130

Sounds quite okay…

But… what if say, the wife kenna retrenched one day or wants to be a homemaker. Leaving the husband to finance the flat alone. Assuming the husband earns $4k monthly.

Monthly Payment = $2080
From CPF, we have $920
Cash Top Up: $1,160

Take home pay of the couple after topping up the cash component
= $3,200– $1,160
= $2,040

Is it a “comfortable” figure? We will come back to that again in a short while.

What HDB might say in response to my post…

1)They can always buy a cheaper flat.

The truth is there ARE flats costing more than half a million that are supposedly meant for applicants with household income below $8k. And if a couple earning $7k can barely afford it, who can?

2)Why do you assume they will get retrenched along the way? Why plan for an event that may not happen? If you think like that, you will never be able to afford a flat.

I am sure if you drive, you do keep a spare tyre in your car boot. No?

Further more, it used to be that households with a single income earner were able to finance a flat alone. The figures show clearly flats are no longer “as affordable”. I just hope our government will acknowledge it instead of dismissing our concerns with a wave of the hand.

The government is always telling us the importance of having children, staying near your parents and supporting them etc. We must also try to save and plan for retirement. Seems like mission impossible in Singapore nowadays. How to do that with $2,040? One of my friend told me he’s planning to get a car, cos his mother is getting old and he’s also expecting a 2nd child. I told him to forget about it. If the young couple in our example has a family car too, they have like $1,000 left per month!

3)Look, there are flats that cater to different budgets. We are going to repeat ourselves again, just get a cheaper flat! Maybe at a less central location. Don’t be picky!

Yah… we are going to buy something that will take us 30 years to finance. And we are not supposed to be picky… hmm… For Pete's sake, we are not buying vegetables at the market, if the vegetables don't taste good, just throw!

The reason why I am looking at flats in central location is because, my family lives at Toa Payoh, while my fiancee's family stays near Outram. I just want a place near to them.

I am not looking at buying a luxurious condo. I just want a simple 4 room flat that is near to either on of our families! Is it too much to ask for?

[admin]

Hi Husky,

You have some excellent arguments. Can I repost what you wrote above to the main site as a blog article?

[Husky]

Originally Posted by admin

Hi Husky,

You have some excellent arguments. Can I repost what you wrote above to the main site as a blog article?

Hi,

my pleasure. Feel free to quote me also. PM or email me if you need further info.

I consider myself very lucky, being perhaps among the 'last batch' to purchase a first-hand flat from the HDB for under $200,000 before their prices skyrocketed.

I own a 4-rm apartment on the 20-something floor at Farrer Park Rd that cost me just $186,000. Farrer Park has an MRT at its doorstep, Mustafa Centre, The Verge, City Square Shopping Mall, United Square, Novena Square/Velovity within walking distance. Schools like SJI Junior and ACS are within 1km, and for girls, there's St Margaret's Primary also within 1km. If you want a neighbourhood school, there is Farrer Park Primary. And on National Day, I can see fireworks from my bedroom window.

Recently, I thought of upgrading to a 5-room flat, and so I did a valuation on my unit which is valued at $445K now. I definitely cannot afford moving to a 5-room flat in my current area; I have been priced out of the market. And I cannot imagine living elsewhere. So I decided not to move in the end, even though the COV range for my neighbourhood is between $20K-$50K.

But so what if I can pocket a high COV for my flat? I'm very very shocked that in the space of 6 years, the housing situation has become this bad. It makes no sense for me to overall fork out more money for my next apartment in a less convenient heartland that is far away from the city. I can foresee my monthly loan being more than $1,000, even for somewhere as 'ulu' as Bkt Panjang or CCK. Right now my loan is less than $600 a month; split 50/50 between me and my husband, both of us pay not more than $300 from our OA every month for this flat. I will never, ever have it this good again.

How did I manage to move here in the first place? In 2003, a balloting exercise for Kallang/Whampoa was conducted, for the locations of Jellicoe Rd, Jln Tentaram and Farrer Park Road. Most of the successful applicants were eyeing the new blocks at Jellicoe Rd (along Victoria Rd, off Lavender St) and they gave up their queue number after those were sold out. Very few of them wanted a unit in Jln Tentaram (in Whampoa, off Balestier Rd) because the area does not have MRT and is not served well by busses. Even fewer considered buying the new apartments at Farrer Park Rd because of its proximity to Little India.

To me, that's not a good enough reason for me to give up the chance of living so close to the city! In fact, foreign workers are not a problem at all -- and I'm raising 2 young kids in the neighbourhood. From Mon-Sat, Little India is really very quiet with no foreign worker crowds. They only come on their rest day, on Sunday. To me, that's acceptable -- I choose to stay home too, on that day. After so long, I've become used to it too. I think S'poreans are overreacting as foreign workers do not necessarily make your neighbourhood a dangerous place. In fact, it is safer as there are more police patrols.

It's the nature of Singaporeans to be fussy and maybe, a little snobbish and paranoid regarding foreign labourers. Ironically, I have to thank them. If not for my fellow citizens being picky and having misconceptions, I don't think there would have been so many good units at Farrer Park.

Honestly, S'poreans should learn to compromise, lest they let other opportunities slip by. Not every expectation can be met, nor can everything be perfect... what is important is to learn to adapt, like how I have learned to live with foreign workers in my neighbourhood.

I guess my other piece of advice is -- try to pay off your monthly loans with money from your OA, with no cash top-up. Or else your OA is going to remain at $0 for decades! Newlyweds should try to avoid resale apartments at all cost, unless they can really afford it with money only from their OA. I waited 5 years before I finally bought my Farrer Park apartment, and it was a huge risk. I already had a queue number for a BTO project in Sengkang, but I had to give it up even BEFORE I found out the results of the balloting. Imagine, if I had failed in the ballot, I would be back to square one. But don't be disheartened. Even if it takes you 5 years like me (and I had a young baby then too), don't give up on applying directly to the HDB as a first-time buyer. Your finances will really be ALOT more stable.

[Husky]

Originally Posted by Unregistered

I consider myself very lucky, being perhaps among the 'last batch' to purchase a first-hand flat from the HDB for under $200,000 before their prices skyrocketed.

You are quite lucky indeed. I am really glad there are people like you who have already bought your flats but still can empathise with flat hunters like us.

I'm not sure whether to ballot for the Oct's Sale of Balance Flats OR to wait for the next supply of balance flats OR to wait for the bubble to be burst (accumulate & save more $ till the next property market crash)..

$600k flat at mature estate yes. If household income is $4000, why the couple never think of getting a 4 room flat from news estate such as Seng Kang? And if you know your situation will be back, found a job quickly.

Bottom-line... are we realistic and flexible?

HDB figures put perceptions in perspective

High number of BTO applications does not equate to urgent housing need

Slightly more than half of first-timer applicants invited to book a flat under HDB’s Built-To-Order system between May 2008 and June 2009 did not book a flat, although this rejection rate is lower than before HDB refined its BTO application process in May last year.

That fine tuning saw HDB removing first-timer priority for those who had turned down two chances to select a flat.

Ninety per cent of flats in each BTO project are set aside for those who have first-timer priority.

HDB issued figures yesterday to debunk the perception that a high number of applications for BTO projects equates to urgent housing need, given the relatively still high rates of rejections by first-time applicants.

The average rejection rates furnished by HDB yesterday refer to BTO flats in non-mature estates, where the vast majority of such flats are located, and exclude studio apartments. HDB’s figures yesterday showed that between March 2007 and March 2008, before the application process was refined, 9,088 or 67 per cent of the 13,605 first-timer applicants invited to make their selection did not book a flat. Between May 2008 and June 2009, the rejection rate had fallen to 52 per cent or 6,747 of the 13,080 first-timer applicants invited.

The rejection rate for first-half 2009 has declined to 45 per cent.

Reasons cited by applicants who did not book a flat include that their preferred units had already been taken up, they are reconsidering other housing options and the completion dates for the BTO projects are too long.

HDB also sought to debunk the perception that BTO applicants often made numerous unsuccessful attempts, pointing out that there is an 80 per cent chance of success for first-timer applicants to be invited to select a BTO flat. And the success rate of first-timer applicants being invited for flat selection within two tries is 96 per cent.

The BTO system remains the major source of supply of new HDB flats. HDB starts building flats in a BTO project only after it achieves a certain level of demand. Feedback from some potential buyers is that the three to four years it takes for the new flats to be built under BTO is too long. HDB officials urged young couples setting up home to plan ahead for their new flat purchases and apply for BTO flats under the existing fiance-fiancee scheme before they even get married.

Meanwhile, there has been strong demand for the 2,132 flats, which are either completed or nearing completion, that were launched on Oct 1 under the new Sales of Balance Flats scheme. As at 5 pm yesterday, 13,741 applications had been received. Applications close on Oct 14.

HDB is also ramping up the supply of BTO flats to be launched for the whole of this year, from 8,000 units planned previously to 9,000 units. With close to 4,000 BTO units launched in the first nine months of 2009, another 5,000 units in eight projects will be launched for application in Q4 this year. This month, HDB will release a project each in Sengkang and Jurong West, followed by two projects in Punggol next month, and four in December – including two in Dawson and one each in Bukit Panjang and Sembawang.

National Development Minister Mah Bow Tan, who spoke to reporters yesterday after visiting HDB sales counters, reiterated that the supply of new flats under the BTO programme is more than adequate.

He urged potential buyers including newly married couples to look for workable solutions and to weigh the trade-offs if they can’t find a flat in a mature estate where their parents live.

He also said HDB takes into account additional demand for resale HDB flats from the influx of permanent residents when it builds new flats as these units will eventually filter into the resale market.

Source : Business Times – 8 Oct 2009

Hard to get that first flat? Not so

NATIONAL Development Minister Mah Bow Tan has refuted claims by some first-time buyers that they could not get an HDB flat despite repeated applications.

Mr Mah said yesterday that some of the assertions that have appeared in media reports recently were ‘not entirely truthful’.

Home seekers had claimed that they were unsuccessful despite making several applications, while one hopeful said he lodged 18 attempts but still did not secure a home.

But Mr Mah said: ‘What is actually happening, is not a matter of buyers getting a flat, it’s a matter of them getting it and not selecting it for one reason or another.’

HDB figures yesterday showed that eight in 10 first-timers could get a flat on their first try if they were not choosy; the success rate was 96 per cent for the second try.

This is under the build-to-order (BTO) scheme, the HDB’s main supply of new flats. Projects get built when a certain demand is reached and flats typically take three to four years to be built.

‘If you look at this, you’ll know that the supply of new flats under the BTO programme is more than adequate, that is an assurance that I want to give to younger couples setting up homes for the first time,’ said Mr Mah.

‘Don’t worry, there are flats available for you, in different parts of Singapore at prices that are affordable. But we need to impress upon flat buyers that you may not get the dream flat of your choice the first time, but you have to make the decisions, and consider the trade-offs.’

This could mean living in a more affordable home but further away from the city, he said.

One of the media reports that prompted Mr Mah to speak out featured Mr Soh Say Kiat, who said he and his wife had applied 18 times since 2001 but did not get a flat.

The HDB said yesterday that its records, which started from 2002, showed that the couple made 12 applications and were offered flats three times but did not take any.

In another instance, Mr Jayce Ng and his wife told The Sunday Times that they applied at least eight times but were offered only one unit, which they turned down.

The HDB said records showed the couple were offered a flat seven times but did not select any.

Mr Ng, 30, however, pointed out that buyers who reject flats could have been offered leftovers with undesirable attributes.

‘You can’t blame me for having high expectations and not wanting to live on the second floor when I’ll be living there for the next 10 years – and this is a lifelong investment,’ he told The Straits Times.

The prospect of living on the second floor also proved a deal breaker for Mr Soh, who gave up the chance to book flats when he found out what level they were on.

‘I don’t want to be forced to get a flat I don’t want,’ he said.

The HDB data yesterday showed that even when applicants have the entire block of flats to choose from, three in 10 buyers still reject units.

In February’s launch of Champions Court in Woodlands, the rejection rate on the first day of selection was 24 per cent. The rate was 36 per cent for Fernvale Crest in Sengkang launched in June.

The rejection rate for BTO projects by first-timers was as high as 67 per cent in 2007 – meaning almost seven in 10 applicants rejected any flats offered to them.

This figure has since come down to about 52 per cent after the HDB introduced new rules in May last year to penalise non-serious buyers by removing their first-timer priorities.

Mr Mah acknowledged yesterday that three to four years might be a long wait for some young couples but noted the best way to cut short the waiting time was to plan ahead.

Couples can book a flat under HDB’s Fiance/Fiancee Scheme, which lets them join the flat queue early – before they get married, he said.

Mr Mah was speaking to the media after chatting to buyers at the sales counters at the HDB Hub in Toa Payoh.

One home buyer the minister spoke to, Ms Lim Yu Fang, 22, signed up yesterday for a five-room flat at a Punggol BTO project which cost $331,000.

‘Although the wait is long, we still went ahead because it’s more affordable compared to resale flats,’ said Ms Lim.

ENOUGH, AND AFFORDABLE

‘Don’t worry, there are flats available for you in different parts of Singapore at prices that are affordable…But we need to impress upon flat buyers that you may not get the dream flat of your choice the first time. - National Development Minister Mah Bow Tan, on the supply of HDB flats and buyers’ expectations

Source : Straits Times – 8 Oct 2009