Tuesday, September 15, 2009

Are HDBs affordable at all?

With reference to my earlier article, I have calculated that a couple who bought a decent 3 bedroom unit at Dakota Residences will have paid about $3.3M in interest and principal. It is an awful large amount of money. I would never even dare to dream I have that kind of money!

What about HDB?

Let us now consider the cost of HDB from a cost-salary historical perspective. I draw the following information from Lianhe Zaobao, 6/9/09, written by financial columnist Xu Li Qing.

In 1970s, a 3 room HDB flat costs $8,000. A fresh graduate then earns $1,000 monthly. It is about 8 times his salary. Of course it was extremely rare to have a graduate then!

In 1980s, a 3 room HDB flat in Ang Mo Kio costs $40,000. A fresh graduate then earns $1,600, which translates to 25 times his salary.

Currently, a 3 room HDB flat in Ang Mo Kio costs $270,000. Compared to a fresh graduate’s salary of $2,700, it is 100 times his salary!

HDB prices have increased 12.4% (compounded) annually and our salary has only increased 3.4% (compounded) annually.

In simple words, HDB prices have since increased 30 times, compared to 2.7 times our salary since 1970.

And HDB has always maintained that prices are reasonable and affordable. I supposed it is, for the higher income families!

This explains why dual income is the dominant income model for most families. It makes houses 50% more affordable!

It is not exactly a wonderful feeling to know that my entire portfolio of stocks is barely enough for a 4 room HDB flat or a 20% down payment for a 2 room apartment.

When can I afford to buy my own house?


Musicwhiz said...

Property in Singapore is just too exorbitant. I totally agree with your post....

Let's hope MBT's moves will cool the market a little, including the HDB resale market.


Wealth Journey said...

I would think HDB's classification of affordable is when you are able to service your home using < 35% from your monthly income(CPF included for 20 or 30yrs. It's not correct but it's the way it is done by the govt and accepted by the people.

But I agreed that it does not make sense when suburban condos are selling for a million dollar or more nowadays. This is already a bubble in my opinion. Only in Singapore where a millionaire does not feel like a millionaire. Uniquely Singapore! :P

Kg Folk said...

then what do you think the main reason is for the tremendous and incridible uprising of the prices of even flats only in Singapore? Specualtions or?

JW said...


I would think that it depends on why you are buying it for.

However, I would say it's not wise to buy at the moment, be it for investments or for stay, unless absolutely necessary. There are still a lot of people out there flushed with cash from en bloc sale looking to buy.

Another thing... property speculators. There are many who bought and flipped a few times a year to earn near $200k per flip. My aunt's ex-hubby did that, and that got him filthy rich.