With increasing numbers of million-dollar HDB homes in Singapore, is public housing still affordable?

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Since the end of the Circuit Breaker, demand for housing has pushed resale flats prices to a new high with HDB resale prices rising for the 26th straight month in August 2022.

The sale of million-dollar HDB did not slow down. In September 2022 alone, HDB recorded another 45 million-dollar HDB flats transaction, more than the 33 million-dollar flats transacted in August 2022.

Rising HDB prices coupled with the rising-interest rates over the last year for home loans are a cause of concern as people may run into difficulties servicing their home loans or even default on mortgage payments.

Property Cooling Measures

Committed to keeping public housing affordable to help Singaporeans own their home, Minister for National Development Mr Desmond Lee, on 29 September 2022, announced a slate of property cooling measures by the Government.

  1. Tighten the maximum amount that can be taken for home loans
  2. Set higher interest floor rates
  3. Introduce a wait out period of 15 months for private homeowners buying resale flats

Different Housing to Cater Different Budgets and Needs

On top of the above measures, first-time buyers, whether purchasing a Built-to-Order (BTO) or a resale­, receive significant subsidies and grants to their HDB flats so that purchasing their first home remains affordable.

When purchasing a BTO, first-time buyers get to enjoy brand new HDB flats at subsidized rates and Enhanced Housing Grants of up to $80,000, with more help for lower-income buyers.

As for resale flat buyers, the Government provides housing grants of up to $160,000, which price these flats below market value to ensure they remain affordable for those buying their first home. In 2021, about 7,000 families received grants for their resale flat purchase.

With the increase in subsidized housing, prices for HDB flats remained relatively stable with the average price of a 4-room flat in a non-mature estate seeing a marginal increase from $341,000 in 2019 to $348,000 in the first three quarters of 2022.

Additionally, the new Prime Location Public Housing (PLH) model that was introduced in October last year, provides additional subsidies on top of the substantial subsidies already provided for the BTO flats. This model extends the affordability of prime, central locations flats to a wider range of Singaporeans.

A Global Comparison

Buying a BTO is often the first and popular start for Singaporeans when it comes to acquiring their first home – if they are not in a hurry. With the wide range of BTO flats Singapore has, it caters to the different housing needs and budgets of individuals and families.

Financing a HDB flat in Singapore is made affordable for first timers with both house price to income ratio as well as mortgage servicing ratio remaining relatively low as compared to other countries.

Generally, Singapore’s home price to annual combined income ratio is at about 1:4 or 1:5, which ratio is significantly lower as compared to countries like Hong Kong where it can go up to 1:20.

As for mortgage servicing ratio, first-timers serving their apartment with a HDB loan generally fork out less than 25% of their household monthly income when servicing their housing loans. Essentially, this means that Singaporeans, when using CPF to finance their home loans, fork out little to no cash at all. Singapore’s mortgage servicing ratio is likewise below the international benchmark of 30-35%.

Here is an illustration by CNA that shows how a couple with a combined starting salary of $6,500 would pay for their first home:

Raising Supply of BTOs

Evidently, demand for public housing in Singapore has not cooled.

Considering this, HDB is prepared and on track to launch 23,000 flats per year in 2022 and 2023 to meet the strong demand for Public Housing. This is a 35% increase from the 17,000 flats launched last year. HDB is also prepared to launch up to 100,000 flats from 2021 to 2025, if required. This supply will be calibrated based on prevailing demand.

With many raising their concerns on long waiting times for BTOs, Minister Desmond Lee said that HDB will endeavor to launch more projects with shorter waiting time of less than three years, where possible. The first batch of about 1,000 BTO flats with shorter waiting time was launched in the 2nd half of 2018, in Sembawang, Sengkang, and Yishun.

Public Housing Remains Affordable for Singaporeans

Senior Minister of State for Finance Chee Hong Tat said in a parliamentary sitting that the end in mind is to encourage home ownership and to enable as many families as possible to own their homes. While we see many reports of million-dollar HDB flats, know that these transactions are not the norm and make up less than 1.5% of overall HDB flat transactions. Public housing, in general, remains affordable for Singaporeans, as reaffirmed by PM lee Hsien Loong in the National Day Rally 2022.

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