Monday, May 23, 2011

453. Comment on affordable HDB housing for Singaporeans

My comments to the Singapore Watch website while my brain still retains my CEA REA lecture notes on Singapore Housing. The website is at:

May 23, 2011 (2 days before the CEA REA exam on May 25, 26, 27)

It is great to read about your ideas on how to make HDB housing affordable to first-timers. It must have taken you many hours to think and write about the subject. I presume you are an architect or related to the profession to give such a thorough presentation. As I am taking my CEA's approved REA exam in 2 days' time, I am perhaps able to comment on your proposal since I have to study everything about Singapore housing to pass all 3 subjects or repeat all 3.

My feedback on your Type B flat

1. Buyers cannot rent just because they buy Type B flats. This is tough as the Buyer's family may suffer deaths or loss of the job of the bread winner due to poor health or economic downturn.

Renting a room may help to provide income in times of financial difficulty which can't be predicted. Therefore, Type B flat buyers are forced to rent out illegally and risk HDB acquisition and fines. Nobody can predict the future and so for this reason alone, this prohibition on room rental should not be one of the restrictions.

2. My proposal is to make use of the concept of the CPF Housing Grants to make HDB flats affordable for first-timers depending on the pricing. Presently the CPF housing grants are extremely generous. $30,000 for a brand new HDB flat purchase and an additional $10,000 (making it $40,000) if the buyer lives within 2 km of parents/married children. This is subsidy for the first-timer and is present only in Singapore as I doubt any government will dish out such a large amount of cash. There is still the Additional CPF Housing Grant subsidy.

Taking an example. Assume a household income of $4,200/month per couple buying a 4-room flat with the CPF Housing Grants,(as illustrated by Mr Mah Bow Tan in one of his speeches in the Straits Times prior to polling day), the couple has no difficulty in paying the monthly instalments for the flat. Lower income groups have more grants including the Special Housing Grants introduced.

3. Property cooling measures of new HDB flat owners not allowed to buy private property till after 5 years of occupation and private property owners having to sell their private properties within 6 months of purchasing the HDB flat are excellent measures that should have been introduced 2 years before the General Elections.

These measures definitely will decrease speculation and property investments from the better off Singaporeans. This will make HDB prices more affordable, together with the Seller having to pay 16,12,8 and 4% of the purchase price if they sell their private properties within 1,2,3 and 4 years respectively, as the investors and speculators have been better controlled than in the past years.

Companies can now only borrow 50% from the bank also reduce speculations by non-individuals as these companies have the monies to flip properties before the introduction of the Seller's Stamp Duties of 16,12, 8 and 4% of the purchase price.

There are other property cooling measures which I think are effective. However, the increasing cost of living is the issue that the government may want to look into as it affects housing and food prices.

The cost of living continues to rise due to the government's inability to rein in costs. I believe each Ministry has to justify its existence (to pay its own civil servants amongst other things). It has to "recover cost" and make money. So the bureaucrats think of how to increase fees, introduce new regulatory fees of as much as $20,000/item to get a permit to import and sell some pharmaceutical goods. Therefore, the cost of living will increase, making it harder for the first-timer or those with financially difficulty to be afford to purchase HDB flats.

I hope my comments are OK with you. Keep up the good work.

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