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Coffeeshop Chit Chat - TOC DEBUNKs MBT/HDB affordability crap!</TD><TD id=msgunetc noWrap align=right>
Subscribe </TD></TR></TBODY></TABLE><TABLE class=msgtable cellSpacing=0 cellPadding=0 width="96%"><TBODY><TR><TD class=msg vAlign=top><TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR class=msghead><TD class=msgbfr1 width="1%"> </TD><TD><TABLE border=0 cellSpacing=0 cellPadding=0><TBODY><TR class=msghead vAlign=top><TD class=msgF width="1%" noWrap align=right>From: </TD><TD class=msgFname width="68%" noWrap>Fkapore <NOBR></NOBR> </TD><TD class=msgDate width="30%" noWrap align=right>Feb-26 7:07 pm </TD></TR><TR class=msghead><TD class=msgT height=20 width="1%" noWrap align=right>To: </TD><TD class=msgTname width="68%" noWrap>ALL <NOBR></NOBR></TD><TD class=msgNum noWrap align=right> (1 of 2) </TD></TR></TBODY></TABLE></TD></TR><TR><TD class=msgleft rowSpan=4 width="1%"> </TD><TD class=wintiny noWrap align=right>29273.1 </TD></TR><TR><TD height=8></TD></TR><TR><TD class=msgtxt>By Leong Sze Hian
I refer to the article ¡°HDB resale prices: Don¡¯t just find a scapegoat ¨C It is not an issue of us-versus-them, but one of a rise in demand¡± (ST, Feb 11).
It states: ¡°But actually, what exactly is the issue? Are rising HDB resale prices an issue?¡±
Well, the issue is that the HDB¡¯s Market Subsidy Pricing policy pegs the prices of new flats to that of the resale market. This makes new flats increasingly an affordability issue for Singaporeans.
As for the statement ¡°Surely not to the majority of 880,000 or so households who already own an HDB flat, to whom rising flat prices means rising asset values¡±, what good is a higher priced HDB flat if you need to downgrade to a smaller flat in order to have enough money to retire?
Under current rules, downgraders can only purchase a resale flat. As the price differential between a larger and smaller resale flat may not be very substantial, the alternative of downgrading to a new smaller flat may mean a wait of 5.5 years (2.5 years waiting period plus 3-year Build-to-order (BTO) construction period).
This problem may be further compounded by the change in policy last year that after age 55, any shortfall in the CPF Minimum Sum (MS) must be topped-up from property sale proceeds (CPF monies utilised plus accrued interest), before the balance can be used for housing again.
With the MS at $117,000 now and projected to increase to $161,000 and $271,000, in 2013 and 2023 respectively, anyone selling to monetise their flat may not have much left after meeting this Minumum Sum rule and the price of a smaller resale flat.
The article also stated: ¡°What of the charge that some people are buying HDB flats for rental income? Actually, this is patently the case ¨C and rightly so. HDB¡¯s 2008/09 annual report states there were 22,754 flats that were sublet. No one knows how many more flats are being sublet illegally. A number of HDB flat owners will also be renting out some bedrooms for income¡±.
Actually, the 22,754 flats that were sublet as stated in HDB¡¯s annual report had their applications approved in just one year.
So, how many flats in total are being sub-let entirely?
How many applications were not approved?
How many are sub-letting their flats because of financial difficulties?
For those in financial difficulty, is it possible to apply for a waiver of the 5-year and 3-year rule before flats purchased with or without a housing subsidy can be entirely sub-let?
For those with genuine financial difficulties, this option may be better than compulsory acquisition of their flats at 90 per cent of valuation.
I agree with the statement that ¡°(people have) to acknowledge that the market is moving faster than one¡¯s income and savings can keep up with¡±.
In this context, the problem may be that some of the HDB¡¯s policies are out-dated and do not reflect the reality of a changing environment, such as the 2.5 year waiting period, because in the past the HDB built to sell, as opposed to today¡¯s BTO approach. This may effectively mean waiting for another threee years for a flat on top of the usual 2.5 years.
The income ceiling of $2,000 and $3,000 for eligibility for 2-room and 3-room new flats have also not been changed for many years, despite rising new flat prices and the higher cost of living.
I also refer to the ¡°Special report : Homeless wanderers ¨C Number of homeless people doubles¡± (Sunday Times, Jan 31).
It states that ¡°About 60 flats are voluntarily surrendered to the HDB every month¡±.
Many of the occupants became homeless because they could not afford to pay for HDB flats.
In this connection, I refer to the articles ¡°New flats to stay affordable¡± (ST, Jan 27) and ¡°HDB flat supply will meet demand : Mah¡± (ST, Jan 14).
The latter states that ¡°a family with a monthly income of $3,000 can buy a flat worth up to $250,000 and spend only 30 per cent of their income every month on the mortgage ¡­. This means they can comfortably buy any of the flats (three-room and some four-room) offered in the latest BTO projects this month¡±.
A typical financially prudent household of four persons (couple with two children) may find it hard to make ends meet with a disposable monthly income of $2,100 ($3,000 less 30 per cent for the HDB mortgage).
A breakdown of a typical household¡¯s expenses is as follows:-
food ($40 x 30 days) $1,200
education ($200 x 2 children) 400
transport 300
utilities 150
insurance (various) 100
telephone/internet 70
service & conservancy charges (S & CC) 40
property tax 20
television license 10
medical 10
_________
Total: $2,300
The household may be left with no savings or any money for leisure activities.
If the household has more than four people, like those staying with their parent(s) or have more children, it may be quite difficult for them to survive.
As there are hundreds of thousands of people with a disability or chronic illness, a household surviving on a $3000 per month income with such a family member may also find themselves stretched financially.
Affordability depends on individual circumstances, and it may not be quite appropriate to generalise that a $3,000 household can afford a HDB flat.
According to the Department of Statistics¡¯ Household Expenditure Survey report, there are about 106,000 households with less than a $1,000 monthly income, and about another 116,000 households with less than a $2,000 monthly income.
I therefore estimate that there are about 300,000 households earning less than $3,000 a month.
So, does it mean that about three in 10 households may find these new BTO three-room flats beyond their means?
The issue of affordability may be further compounded by the HDB¡¯s Income Ceiling policy, whereby a household earning over $3,000 a month is not eligible for a new three-room flat, and has to purchase a new four-room or bigger flat.
As the HDB celebrates its 50^th anniversary this year, instead of just the HDB determining affordability, I would like to suggest that an independent third party be engaged to study the affordability of HDB flats.
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I refer to the article ¡°HDB resale prices: Don¡¯t just find a scapegoat ¨C It is not an issue of us-versus-them, but one of a rise in demand¡± (ST, Feb 11).
It states: ¡°But actually, what exactly is the issue? Are rising HDB resale prices an issue?¡±
Well, the issue is that the HDB¡¯s Market Subsidy Pricing policy pegs the prices of new flats to that of the resale market. This makes new flats increasingly an affordability issue for Singaporeans.
As for the statement ¡°Surely not to the majority of 880,000 or so households who already own an HDB flat, to whom rising flat prices means rising asset values¡±, what good is a higher priced HDB flat if you need to downgrade to a smaller flat in order to have enough money to retire?
Under current rules, downgraders can only purchase a resale flat. As the price differential between a larger and smaller resale flat may not be very substantial, the alternative of downgrading to a new smaller flat may mean a wait of 5.5 years (2.5 years waiting period plus 3-year Build-to-order (BTO) construction period).
This problem may be further compounded by the change in policy last year that after age 55, any shortfall in the CPF Minimum Sum (MS) must be topped-up from property sale proceeds (CPF monies utilised plus accrued interest), before the balance can be used for housing again.
With the MS at $117,000 now and projected to increase to $161,000 and $271,000, in 2013 and 2023 respectively, anyone selling to monetise their flat may not have much left after meeting this Minumum Sum rule and the price of a smaller resale flat.
The article also stated: ¡°What of the charge that some people are buying HDB flats for rental income? Actually, this is patently the case ¨C and rightly so. HDB¡¯s 2008/09 annual report states there were 22,754 flats that were sublet. No one knows how many more flats are being sublet illegally. A number of HDB flat owners will also be renting out some bedrooms for income¡±.
Actually, the 22,754 flats that were sublet as stated in HDB¡¯s annual report had their applications approved in just one year.
So, how many flats in total are being sub-let entirely?
How many applications were not approved?
How many are sub-letting their flats because of financial difficulties?
For those in financial difficulty, is it possible to apply for a waiver of the 5-year and 3-year rule before flats purchased with or without a housing subsidy can be entirely sub-let?
For those with genuine financial difficulties, this option may be better than compulsory acquisition of their flats at 90 per cent of valuation.
I agree with the statement that ¡°(people have) to acknowledge that the market is moving faster than one¡¯s income and savings can keep up with¡±.
In this context, the problem may be that some of the HDB¡¯s policies are out-dated and do not reflect the reality of a changing environment, such as the 2.5 year waiting period, because in the past the HDB built to sell, as opposed to today¡¯s BTO approach. This may effectively mean waiting for another threee years for a flat on top of the usual 2.5 years.
The income ceiling of $2,000 and $3,000 for eligibility for 2-room and 3-room new flats have also not been changed for many years, despite rising new flat prices and the higher cost of living.
I also refer to the ¡°Special report : Homeless wanderers ¨C Number of homeless people doubles¡± (Sunday Times, Jan 31).
It states that ¡°About 60 flats are voluntarily surrendered to the HDB every month¡±.
Many of the occupants became homeless because they could not afford to pay for HDB flats.
In this connection, I refer to the articles ¡°New flats to stay affordable¡± (ST, Jan 27) and ¡°HDB flat supply will meet demand : Mah¡± (ST, Jan 14).
The latter states that ¡°a family with a monthly income of $3,000 can buy a flat worth up to $250,000 and spend only 30 per cent of their income every month on the mortgage ¡­. This means they can comfortably buy any of the flats (three-room and some four-room) offered in the latest BTO projects this month¡±.
A typical financially prudent household of four persons (couple with two children) may find it hard to make ends meet with a disposable monthly income of $2,100 ($3,000 less 30 per cent for the HDB mortgage).
A breakdown of a typical household¡¯s expenses is as follows:-
food ($40 x 30 days) $1,200
education ($200 x 2 children) 400
transport 300
utilities 150
insurance (various) 100
telephone/internet 70
service & conservancy charges (S & CC) 40
property tax 20
television license 10
medical 10
_________
Total: $2,300
The household may be left with no savings or any money for leisure activities.
If the household has more than four people, like those staying with their parent(s) or have more children, it may be quite difficult for them to survive.
As there are hundreds of thousands of people with a disability or chronic illness, a household surviving on a $3000 per month income with such a family member may also find themselves stretched financially.
Affordability depends on individual circumstances, and it may not be quite appropriate to generalise that a $3,000 household can afford a HDB flat.
According to the Department of Statistics¡¯ Household Expenditure Survey report, there are about 106,000 households with less than a $1,000 monthly income, and about another 116,000 households with less than a $2,000 monthly income.
I therefore estimate that there are about 300,000 households earning less than $3,000 a month.
So, does it mean that about three in 10 households may find these new BTO three-room flats beyond their means?
The issue of affordability may be further compounded by the HDB¡¯s Income Ceiling policy, whereby a household earning over $3,000 a month is not eligible for a new three-room flat, and has to purchase a new four-room or bigger flat.
As the HDB celebrates its 50^th anniversary this year, instead of just the HDB determining affordability, I would like to suggest that an independent third party be engaged to study the affordability of HDB flats.
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