HDB Mortgage SLAVES

[theDoors]

Stretching a HDB loan up to 30 years is a bit too long.

Firstly, the segregation of the HDB price increase that is due to inflation outside of the PAP's control and those due to PAP's policies has never been attempted.

Thanks for pointing out the massive inflation in HDB prices.

5 years ago I bought my new 103sqm 4 room flat in Jurong West for $127k.
5 years later, a new 4room flat 90sqm 4 room flat in Jurong West for $270k.

PAP has done absolutely nothing to dampen the effects of inflation for Singaporeans. In fact Singaporeans are left to face full spectrum of price increases from electricity, to oil prices to medical cost.

 

[Glaringly]

The reason I chose 1974 is to show how prices have risen over 30 years. Painting an empirical fact. In another 30 years time, we will go well past the current figures as the same basket of goods cannot be purchased by the same dollar. The formula and the methodology is the same. To an economist, money more valuable now than later.

I once cited the case of 3 civil servants of the same grade in the old SBF.
1) Person A bought a semi-D in the newly developed private housing estate in Serangoon Gardens
2) Person B bought a HDB flat and kept the rest in FD, continously putting his savings in it.
3)Person C never believing in borrowing money, saved up and bought his first house , a 3 room flat when he retired while staying in Govt qtrs.

After 30 years, Person A now owns a $2M asset that is unencumbered.Person B a 5 room flat valued at $650K and Person C a 3 room flat valued at $300K. Guess who paid the most in interest and came out best in terms of asset - Person A. The person C who was the most frugal had the least valued asset and he never paid a single cent in interest. So what went wrong with Person C?

The trick is put your money in an investment that grows the fastest with acceptable risk. There is only one in land short Singapore - property.

Though the eventual winner may still be A, but the gap in outcome may not sounds that wide apart.

If all started at the same footing with initial and subsequent cash outlay.

Don't forget FD rate back in the 70s and to early 80s is > 10%, and loan rate is also in double digits. How much A has to fork out to repay the interest of his semi-D will eventually eats into his profit. While C is enjoying the 10% FD rate, will have a cash rich nest egg, much more then his hdb property.

 

[theDoors]

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I think the honourable member of parliament, Mr Chiam See Tong should contest against Mah.

Mr Chiam holds the record of defeating Mah in an election.

 

[scroobal]

My point is don't focus on such things because, the loan servicing 30% of affordable income, loan tenure and the capital appreciative value is the same all over the world ( with variations for the respective local condition)

The singapore housing issues with this govt are

1) The starter price for acquiring a HDB flat for a young couple are astronomically high compared to the rest of the world plus uncertainty of getting it except if they are patient over years.
2) Its public housing and not private housing. Why are there so hoops to jump thru.
3) For the price that we pay, we can't choose, too many rounds of applications, lucky draw and in some cases hobson's choice
4) what subsidies? They have never presented a convincing case for the last 40 years
5) Poor planning in providing housing and singaporeans have to wait anxiously for years before family planning can begin. Is this contributing to the low birth rate and the record number of annulments that Singapore is famous for.

ps. I used real comparison over 30 years because people have little idea how the whole loan process works.

Dear Scroobal,

I think you don't get my point.

First of all, even with real capital appreciation on our HDB flat, we cannot capitalize on it as those private property owner.

Secondly, if you bought the flat at $300K, I pay only $260K due to grant, and I sold it off at $400K as it appreciates, I will have to pay HDB $100K as resale levy before I could buy another flat. I might have "gained" $40K but seriously, this amount may just be enough to cover my interest cost.

This would mean that in effect, I gain nothing in spit of a capital gain of 33%!

Goh Meng Seng

 

[theDoors]

My point is don't focus on such things because, the loan servicing 30% of affordable income, loan tenure and the capital appreciative value is the same all over the world ( with variations for the respective local condition)

The singapore housing issues with this govt are

1) The starter price for acquiring a HDB flat for a young couple are astronomically high compared to the rest of the world plus uncertainty of getting it except if they are patient over years.
2) Its public housing and not private housing. Why are there so hoops to jump thru.
3) For the price that we pay, we can't choose, too many rounds of applications, lucky draw and in some cases hobson's choice
4) what subsidies? They have never presented a convincing case for the last 40 years
5) Poor planning in providing housing and singaporeans have to wait anxiously for years before family planning can begin. Is this contributing to the low birth rate and the record number of annulments that Singapore is famous for.

ps. I used real comparison over 30 years because people have little idea how the whole loan process works.

I did a calculation based on the 127k 4 room flat I bought 5 years ago using the old rule of 20% down payment, and remaining lump sum service by 30 years mortgage.

You need to take out $25,500 from your cpf account to pay the 20% downpayment under the old rule. After 30 years at 2.5% compounding interest rate, the total amount you need to return cpf with accured interest is $53,487.97.

As for the remaining lump sum, $102,000 that you will pay with installments over 30 years to HDB at 2.6% interest rate. The total sum with interest that you will need to draw out from your cpf is $147,005 to pay up the mortgage.

$147,005 will be split into 360 installments of $408.35 to be withdraw from cpf every month to service the mortgage. Every month, once the $408.35 is out of your account, cpf will start calculating the interest as if the money has remained inside. Over 30 years, the principal with interest accured with be $218617.34 ($147,005 principal/ $71,117 interest)

So the final grand total amount you have to return to cpf if you flat is EN BLOC in 30 years is $272105.31. (20% deposit $53,487.97, 30 year mortgage monthly payments $218617.34)

Now compare this with the upfront payment of $127.5k compounding at 2.5%. Grand total:$267,349.

The difference is $4756.

However, if you take a 30 year mortgage, the total amount that you have withdraw from cpf is $172,505 ( $25,500 for 20% downpayment, $147,005 for monthly installments). As you need to use $45,005 of your cpf ordinary account balance as interest payments to HDB.

At the 31st year, $172,505 will compound at a faster rate then then the $127,500 as the principal is bigger.

However, do note that at 50 years old, your CPF OA contribution rate drops. At 55 years old, it is further reduced again.

 

[theDoors]

However, do note that at 50 years old, your CPF OA contribution rate drops. At 55 years old, it is further reduced again.

http://mycpf.cpf.gov.sg/Employers/Gen-Info/cpf-Contri/ContriRa.htm

Refer to table A for contribution rates at 50 and 55.

I am not sure how many Singaporeans taking 30 years mortgages with the maximum loan limit is aware of the reduction in CPF contribution rates at 50 and 55 years old.

 

[theDoors]

http://mycpf.cpf.gov.sg/Employers/Gen-Info/cpf-Contri/ContriRa.htm

Refer to table A for contribution rates at 50 and 55.

I am not sure how many Singaporeans taking 30 years mortgages with the maximum loan limit is aware of the reduction in CPF contribution rates at 50 and 55 years old.

Pricing HDB flats that requires a 30 years mortgage to service, with 2 consecutive reduction in contribution rates.

How kind.

These days, everyone is taking up 30 year mortgage. Effectively, you are signing away 30 years of your adult working life to servicing a loan. But the ironic part is that, once you reach 40, there is a high possiblity that you might get retrenched. So in actual fact you might have only 10 years to service your mortgage.

Even if you manage to pay off your flat. So far there is no precedent of a flat lasting more then the stated lease of 99 years. The first generation of flats are being en bloc under the SERS scheme. If the cost of the new replacement flat is higher than your compensation. You would have to take another mortgage again.

Seems like there is an incidental insidious policy of keeping everyone in perpetual debt.

 

[scroobal]

Wrong, thats what I am trying to tell. Even with 10% FD over 30 years, it does not come close to the power of capital appreciation. Total assets means everything including savings. A is ahead of B and B is ahead of C. Just go ahead and do the sums. The compounding effect will never outstrip capital appreciation.

The old cliches and adages covering finances and frugality are interpreted wrongly. Frugality means not to spend on expensive cars, unnecessary renovations, KTV nights. In the 1980s, 1990s, when you visit friends in HDB flats, their renovations were quite high. When you visit friends in landed property in Bt Timah, East Coasts etc, the renovation are quite spartan in comparison. They could not afford expensive renovation because most of it going towards house payments.

The trick is to keep ahead of inflation plus a bit more for asset appreciation. The best investments are property and equities.

I was shocked to learn of HDB dwellers havings savings of a few hundred thousands in savings accounts. No issues for those retiring but middle aged ones. The value will keep depreciating beacaue the interest cannot keep up with inflation. Some end up putting it in investment instrumnets that they can spell.

While C is enjoying the 10% FD rate, will have a cash rich nest egg, much more then his hdb property.

 

[theDoors]

Wrong, thats what I am trying to tell. Even with 10% FD over 30 years, it does not come close to the power of capital appreciation. Total assets means everything including savings. A is ahead of B and B is ahead of C. Just go ahead and do the sums. The compounding effect will never outstrip capital appreciation.

The old cliches and adages covering finances and frugality are interpreted wrongly. Frugality means not to spend on expensive cars, unnecessary renovations, KTV nights. In the 1980s, 1990s, when you visit friends in HDB flats, their renovations were quite high. When you visit friends in landed property in Bt Timah, East Coasts etc, the renovation are quite spartan in comparison. They could not afford expensive renovation because most of it going towards house payments.

The trick is to keep ahead of inflation plus a bit more for asset appreciation. The best investments are property and equities.

I was shocked to learn of HDB dwellers havings savings of a few hundred thousands in savings accounts. No issues for those retiring but middle aged ones. The value will keep depreciating beacaue the interest cannot keep up with inflation. Some end up putting it in investment instrumnets that they can spell.

You are correct.

The trick is to pay off your first home, and start investing in the 2nd,3rd,4th and so on and so forth.

PAP has raised the bar for paying off the first.

Now the price of the first is priced so high, the current generation of post 80s will most likely spend their entire working life paying for it.

 

[scroobal]

Thats what we have to do - fight and force the PAP to make first homes for young singaporean couples affordable and obtainable within a reasonable timeframe. With certainly, I am sure our birth rate will rise as well.

Its a ridiculous price to pay for a 99 tenancy agreement.

You are correct.

The trick is to pay off your first home, and start investing in the 2nd,3rd,4th and so on and so forth.

PAP has raised the bar for paying off the first.

Now the price of the first is priced so high, the current generation of post 80s will most likely spend their entire working life paying for it.

 

[theDoors]

I did a calculation based on the lower range current price of 255k for a new 4 room flat using the new rule of 10% down payment, and remaining lump sum service by 30 years mortgage.

You need to take out $25,500 from your cpf account to pay the 10% downpayment under the new rule.

As for the remaining lump sum, $229500 that you will pay with installments over 30 years to HDB at 2.6% interest rate. The total sum with interest that you will need to draw out from your cpf is $330761 to pay up the mortgage.

$330761 will be split into 360 installments of $918.78 to be withdraw from cpf every month to service the mortgage.

 

[theDoors]

I did a calculation based on the lower range current price of 255k for a new 4 room flat using the new rule of 10% down payment, and remaining lump sum service by 30 years mortgage.

You need to take out $25,500 from your cpf account to pay the 10% downpayment under the new rule.

As for the remaining lump sum, $229500 that you will pay with installments over 30 years to HDB at 2.6% interest rate. The total sum with interest that you will need to draw out from your cpf is $330761 to pay up the mortgage.

$330761 will be split into 360 installments of $918.78 to be withdraw from cpf every month to service the mortgage.

Note: 5 years ago $25K is sufficient for 20% down payment.
Currently the same $25k only pays for 10% down payment.

 

[theDoors]

Thats what we have to do - fight and force the PAP to make first homes for young singaporean couples affordable and obtainable within a reasonable timeframe. With certainly, I am sure our birth rate will rise as well.

Its a ridiculous price to pay for a 99 tenancy agreement.

Singaporeans' wealth are entrapped in bricks and mortar and digital numbers in CPF accounts that you can only see but cannot touch.

Our next generation will be born in bondage of HDB mortgage slavery.

 

[ccchia]

The issue is not "affordability", but how much it actually costs the HDB to construct one of the flats that they are "selling" (actually leasing for 99 years) to the citizen peasants. Since HDB is not in the business to lose money, then it would be reasonable for them to add on a profit margin over their construction cost (maybe 10%-20%?) before they sell or lease the flat to peasants.

Unfortunately we will never know how much profit HDB makes, or the actual cost of building or construction is secret and is never going to be revealed to us. My guess is that the average cost of a typical HDB flat less than 90 sq m in size (does not depend on location or floor level) is below S$30K, assuming that the land has to be purchased at market price (actually most of the time it is free to the HDB, since the land has been acquired free, or at a very low cost by the gahmen and then transferred to HDB). A quick way to determine the construction cost for a typical HDB flat is to divide the awarded tender cost of a development by the number of units built. Therefore, I wonder if anyone has this "inside" info?

Anything that HDB sells (or leases) to the peasants above that price is profit to them.
However, we will never really know the truth since all the details are secret and hidden from us by either creative accounting or other means.

 

[theDoors]

We all know it's very cheap to build them as 2/3 of HDB tenders goes to the cheapest quote.

Mah is not wrong. Financing isn't an issue, the government encourages you to take a 30 year mortgage. Stretching the loan makes it affordable. In fact, you are encouraged to take the maximum loan tenture, with insurance scheme such as home protection scheme.

Pricing is the main the issue.

Huge housing debt of individual families is used as a form of populace control. Collectively every household has a vested stake.

PAP have been playing the mind game, if they lose the majority in the parliament, prices tumble everyone's paper wealth evaporates.

But remember in 1996, HDB prices were all time high no different from now. It crashed in 1998. Everyone is well and alive.

It's time to call their bluff.

 

[Glaringly]

Wrong, thats what I am trying to tell. Even with 10% FD over 30 years, it does not come close to the power of capital appreciation. Total assets means everything including savings. A is ahead of B and B is ahead of C. Just go ahead and do the sums. The compounding effect will never outstrip capital appreciation.

The old cliches and adages covering finances and frugality are interpreted wrongly. Frugality means not to spend on expensive cars, unnecessary renovations, KTV nights. In the 1980s, 1990s, when you visit friends in HDB flats, their renovations were quite high. When you visit friends in landed property in Bt Timah, East Coasts etc, the renovation are quite spartan in comparison. They could not afford expensive renovation because most of it going towards house payments.

The trick is to keep ahead of inflation plus a bit more for asset appreciation. The best investments are property and equities.

I was shocked to learn of HDB dwellers havings savings of a few hundred thousands in savings accounts. No issues for those retiring but middle aged ones. The value will keep depreciating beacaue the interest cannot keep up with inflation. Some end up putting it in investment instrumnets that they can spell.

I standby what I have said in entirety. I did say A is the eventual winner but by not much. You don't need a math genius or use flowery accounting to work out the sum.

May I present you another option D which is the winner.

D start buying a new 3 room hdb flat back in the 70s, sell it, buy another new 4 room, sell it, buy another new 5 room, sell it.

Migrate.

 

[theDoors]

I did a calculation based on the lower range current price of 255k for a new 4 room flat using the new rule of 10% down payment, and remaining lump sum service by 30 years mortgage.

You need to take out $25,500 from your cpf account to pay the 10% downpayment under the new rule.

As for the remaining lump sum, $229500 that you will pay with installments over 30 years to HDB at 2.6% interest rate. The total sum with interest that you will need to draw out from your cpf is $330761 to pay up the mortgage.

$330761 will be split into 360 installments of $918.78 to be withdraw from cpf every month to service the mortgage.

CPF Contribution & Housing Mortgage Loan


Written by a older forumer Lai CF, I don't know if anyone recalls him. He gave a rather detail account of intricate workings the HDB-CPF system.

http://www.findsingapore.net/forum/viewtopic.php?t=260

During the 80?s, CPF contribution was at 20% with a limit capped at S$6,000 pm. That is, my employers contributed:
S$1,200 in the 90?s before PM Goh restructuring in 2003.
S$960.00 (16%) in 2003, capped at S$6,000 pm.
S$715.00 (13%) in 2004, capped at S$5,500 pm.
S$550.00 (11%) in 2005. capped at S$5,000 pm. (CPF rates for over-50 years old)
S$300.00 (6%) after April 2005 when you are over-55 years old.

And worse news, by 2006, the CPF maximum limit will be reduced from S$5,000 to S$4,500 pm.

If you have the time, click on the link, give it a read, there is a lot insights to be gained.

 

[theDoors]

Hunger is the key

Hunger is the key
http://theonlinecitizen.com/2008/07/hunger-is-the-key/

Thursday, 24 July 2008, 11:09 am | 911 views

Make sure that our young people are hungry. If our young people are not hungry enough, bring in hungrier ones from overseas. Make them feel hungry, increase the hungriness index.

Philip Yeo

 

[scroobal]

No need to standby anything. Just download a savings calculator that compounds interest and a mortage amortisation calulator and you have your answers.

Your second and third point is however right.

I standby what I have said in entirety. I did say A is the eventual winner but by not much. You don't need a math genius or use flowery accounting to work out the sum.

May I present you another option D which is the winner.

D start buying a new 3 room hdb flat back in the 70s, sell it, buy another new 4 room, sell it, buy another new 5 room, sell it.

Migrate.

 

[Glaringly]

Why don't you list out the inital figures and the yearly saving, the interest rate of the loan, the year etc...

I will base on A, who would have to took out a 30 years loan, and whatever saving from salary into serving this loan. While C would have dump this extra into fixed D.