Written by Ng E-Jay
The ST letter “How HDB keeps it affordable” (31 Aug 2009) penned by Mr Ignatius Lourdesamy, Deputy Director (Marketing & Projects) of HDB, overlooked several critical issues and failed miserably in its attempt to refute claims that public housing has become too expensive for Singaporeans.
Mr Lourdesamy was responding to earlier queries regarding the proliferation of housing agents and sellers demanding exorbitant “Cash Over Valuation” amounts that in effect corner an already tight property market and cause hardship to families purchashing resale HDB flats.
He was also trying to address issues raised by other ST readers who highlighted the fact that public housing has become too highly correlated with private property prices, as exemplified by the HDB resale price index which has surged 35% over the past two years despite the downturn and now stands at an all time high.
In particular, Mr Chew Kim Cheer argued in his ST letter “Squeezed even harder” (22 Aug 2009) that the Government needs to increase supply to prevent property prices from escalating out of control. Mr Chew also urged the Government to review the $8,000 household income ceiling as an eligibility criterion to qualify for subsidized public housing and a discounted HDB loan.
Many of these pertinent points however were sidestepped by Mr Lourdesamy of the HDB who offered little more than the usual platitutes that the HDB is steadily increasing the supply of new flats to meet demand and that HDB aims to make public housing affordable for eligible first-time households by providing them subsidies for new and resale flats.
In the past few years, property prices in Singapore have increased sharply due to huge foreign fund inflows as well as unfettered immigration. The compactness of our property market has also resulted in public housing prices becoming highly correlated with private property prices which has mushroomed despite the downturn because of lack of market regulation.
Clearly the Government has not done enough to ensure that supply keeps up with demand.
The escalation of property prices has also evolved into a mini-bubble that will have to come crashing down one day because there is a limit to how large our population can grow and a limit to how far foreign fund inflows can sustain such an exponential rise in asset prices. If and when this happens, families that purchased property when prices were high will suffer untold financial hardship.
As usual, HDB makes the spurious claim that its subsidies make public housing affordable to first-time home buyers. To begin with, HDB’s subsidies are market subsidies, not cost subsidies. This means that HDB flats are sold to first-time buyers at a discount to the prevailing market rate rather than at a price that is pegged to the construction cost of the flats.
The problem with such a policy is that as general housing prices rise rapidly, the amount that first-time buyers need to fork out to pay for their home rises rapidly in tandem despite the market subsidies.
In effect, the Government has turned public housing into a giant profiteering exercise, by allowing prices to rise at such a fast pace across the board and providing only market subsidies rather than cost subsidies to first time home buyers.
What has happened to the Government’s promise to provide affordable public housing to all citizens?
Mr Lourdesamy of the HDB also quoted statistics which state that 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, and that these figures are well below the international affordability benchmark of 30 per cent.
Mr Lourdesamy does not clarify how he obtained the international affordability benchmark of 30 per cent, nor was it apparent why mature estates were excluded from the survey. He also did not clarify whether the figures of 21% and 25% of income used for loan servicing for new and resale HDB flats respectively refer to percentage of gross income or percentage of take home income (excluding CPF contributions).
But more importantly, just because first-time households use only one quarter of their monthly income for housing loan payments does not mean housing is necessarily affordable. These households could still be over-leveraged if their total loan amount is very large compared to their annual income, and they could easily be underwater should housing prices suffer a fall.
Mr Lourdesamy’s statistics also mask that fact that many households are forced to take loans that stretch up to 30 years. With a loan of such lengthy duration, the amount of interest paid is phenomenal, and there are no prizes for guessing who profits from it. Is public housing really affordable as claimed by the Government, or are citizens paying through their nose just to have a home to live in?
Despite the steep rise in property prices over the past few years, the median salary of Singaporeans opting for 3 or 4 room HDB flats has remained more or less stagnant. Coupled with the rapid increase in the general cost of living, how does the Government expect these families to cope if it continues to do so little for them?
High asset prices in Singapore have resulted in a situation where Singaporeans have their liquidity tied up in property, and many are unable to retire with peace of mind as a result. The Government has clearly reneged on its promise of providing affordable housing and a dignified life for born-and-bred citizens.
Is it no wonder then that so many of our best and brightest are opting to migrate in order to escape the gross materalism that has infected our nation and left it soulless?
Source : Sgpolitic.net – 1 Sep 2009
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