Tuesday, August 26, 2008

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HDB Contributes to Singapore Record High Inflation

MTI has reported that Singapore inflation rate for July 2008 has eased to 6.5% from the 7.5% in the last three months, but still at record high level.

A key contributor to the persistent high inflation is soaring housing costs. A sub-index for housing costs was up 12.5% in July 2008 from a year earlier. To this, some forumers said HDB is responsible to a large extent. Some of their views are given below:

"The median income at 2000 is SGD4030. The median income now is SGD4880. A HDB 5-room flat at 2000 is 190k, now is 330k. 2000, it is 190,000/4030 which works around 50 months. 2008, it is 330,000/4880 which works around 68 months.This means as property price goes up, the 50% of the population has to take longer time to pay up their mortgages.

So what is affordable??? On one hand, we want to control wage increment, on the other hand, we let property price increase due to the balancing act on demand and supply? How we define affordable? And how what the equation of the right timeframe over one annual income? Do not forget the other inflation hitters like food."

"Govt will explain property prices are going up because of inflation of the land value, materials and labour ............how is our salary? it should be kept low to make Singapore more competitive...........................boleh tahan?"

"I think govt promised that every singapore should able to lease (own) a low cost flat from HDB. these days, all flats are BTO and on average a 5 room flat would be from 350k to 450k and those in city are almost 500k to 700k? With minimum CPF sum increasing and high loans taken to finance these flats, what's left in our CPF account?"

"With the BTO scheme, newly-weds would have to wait 3 to 5 years, most would end up separating and breaking up since they have to live apart."

"It is very sad for us and even more sad for the future generations. With our salary rising 3 times every 30 years and HDB flats rising 10 to 20 times at the same time frame, our children will have to take a 99 year mortgage by the time they are eligible for a Sengkang or Punggol flat. Hah, then they can buy the flat and their grandchildren can continue paying the monthly installments, until the day HDB tear down the flat when the 99 year lease is up. It sound so similar to what I heard about Japan in 1991 where a man buy a house and his grandchildren still has to pay."

"Sometimes, i wonder if HDB know what a "subsidy" means.
HDB pricing difference is called a subsidy when in actual fact, there is no accounting loss in its books for flats are sold at cost plus. Petrol taxes are not reduced because it was mentioned that this subsidy will encourage the wrong ideas. A subsidy to me would be like those of Malaysia where retail prices are less than fair market prices."

May also want to read:
HDB Income Ceiling for Buying HDB Flats Not Pro-Family
HDB Resale Flats Price Index from 1990 - 2008
History of Singapore Property 1960 to 2008
Property Price Index Graph Plotter & Online Property Valuation
HDB Subsidies: Are HDB flats really subsidised?
HDB Resales: West Sees Highest Price Increase


Anonymous said...

i think your excellent analysis qualify you to be a good advisor to our Minister of Housing or Government feedback unit. Good stuff!

Anonymous said...

Government can say they have no control over oil and food inflation but surely, pricing HDB is within their control.

Anonymous said...

strongly agree.

Anonymous said...

HOPE and hope govt will do us good......please help those low income...as our Lady MP aready said need to take care of low income

xizor2000 said...

I agree with you.

My understanding is this:

The price per unit includes the amount the gahmen says it will be getting if sold to a private developer. No real bidding is done here, just some benchmark calculated by a formula determined by... again, the gahmen.

In other words, our so-called subsidy is based on the amount of money the gahmen says it is not making from selling the land to private developers. Doesn't matter they build a unit at say $55000 - $60000 a piece, as you can calculate from the cost they paid to the contractors to build.

Take the units @ Boon Keng for e.g. They cost like 700K a unit? And if the cost is 100K a unit, they make a neat profit of 600K. And they probably tell you that land would cost a gadzillion.. and so you are getting a nice little subsidy you can only cash out when some other sucker buys it. And after that... I don't know where you are going to live!

Anonymous said...

Really doubt the HDB's function and motto so called providing affordable flats and subsidy.

When economy is good, it's affordable and subsidised, so when economy is bad and the "assessed " land costs slump is it still subsidised and affordable to the one who bought earlier?

Got a friend who bought a 5 rm flat direct from HDB in Sembawang for 280+k around in 1998. A few years later HDB is selling the surplus leftover flats for around 220k. Now the resale value is around 340k the purchased price plus her renovation costs.

HDB should sell flats to citizens based on construction costs and maybe a fraction say a quarter of landcosts assessed to private developer as it is state land.
When owners wants to sell their flats can only sell back to HDB at purchased price or whatever based on the above.

Then maybe we can call HDB affordable and we will not see ridiculously price rise in BTO flats.

Anonymous said...

Other countries high inflation is for food and energy, but housing price is down with property crash. why is Singapore different ?

Singapore2India said...

HDB's pricing policy makes it tougher to buy flats. The approach is not "cost based"; rather they say it is "market based". If the resale flats price go up, then HDB prices also go up. Even the valuation strategy for resale flats makes prices only going up and never goes down.

Anonymous said...

Businesses are impacted by the high inflation too. Won't the government do something about that?

Anonymous said...

i know of a friend who used to pay $4000/mth for the rent of his shoe shop but this year it's gone to $12000. Business isn't too good but the high rent is his biggest problem. He's considering just closing shop..

Anonymous said...

As indicate by above comments. The gahmen want to attract wealthy people to come and keep the property price as high as possible, similiar to Hong Kong. I suspect we will have to be like Hong Konger soon, work the 1st job just to pay off mortgages and Have a second job to feed the family.

Anonymous said...

HDB is doing something, isn't it? Read the report below:
SINGAPORE: More first-time owners are turning to the resale market to meet their housing needs, said the Senior Minister of State for National Development Grace Fu.

Replying to a question from MP for Sembawang GRC Lee Wee Kiak in Parliament on Monday, Ms Fu said that in the second quarter of this year, there were 1,470 cases of first-time flat buyers purchasing resale flats using the CPF Housing Grant.

This is a 75 per cent increase compared to an average of about 840 cases per quarter from the third quarter of 2007 to the first quarter of this year.

However, she also assured the House that first-time flat applicants for public housing are getting more chances under the Balloting Scheme for build-to-order flats.

Tighter rules introduced in May this year on the number of times couples can reject a unit have also resulted in more considered applications and higher acceptance rates.

Still on the housing issue, Parliamentary Secretary for National Development Mohamad Maliki Osman said some low income families are better off owning rather than renting their home.

For example, a family earning S$1,000 a month would pay S$200 in monthly mortgage payments for a two-room flat. This would be covered by CPF contributions.

On the other hand, the open market rental rate for a two-room flat could be as much as S$1,000.

Dr Maliki drew this example when responding to a question by West Coast GRC MP Madam Ho Geok Choo on the relevancy of home ownership versus renting.

He said home ownership is still important because it not only gives people a roof over their heads but it is also an asset which appreciates alongside the country's economic growth.

Anonymous said...

Let's be fair to the government. New HDB flats are still affordable .. today news report said HDB new 4-rm flats are priced between $200-$260K .. Without the HDB flat option, many home buyers will have to be squeezed by private property developers to pay at least a million dollar for their homes. Let's give credits when credits are due.

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