Commentary: Is housing still affordable for first-time homeowners?
SINGAPORE: Singapore has one of the highest dwelling ownership rates in the world. Today, every 9 in x public housing dwellers ain their flats in Singapore.
The Home Ownership Scheme introduced in 1964 has been i of the key pillars underpinning Singapore's public housing organization, which is enviable to many countries facing acute housing shortage problems.
Just COVID-19 is throwing upward new challenges and created a few jolts to the housing market.
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Pent-up demand due to the cancellation of BTO launches during the excursion breaker and delays in completion of BTO flats shifted part of the need away to the resale HDB market.
This in turn saw a surge in the resale HDB prices by well-nigh seven.six per cent over the three consecutive quarters since the reopening of economic system in 2020. The individual marketplace besides saw similar spikes.
HOUSING AFFORDABILITY
A primal question that has arisen from this news is the affordability of BTO flats.
In particular, netizens have asked if the income growth of young people has kept up with these rising prices in the public and individual markets.
They point to housing prices growing at a pace outstripping income growth. From 2001 to 2020, BTO flat prices (at the upper range) of 4-room and v-room units have gone up by ii.4 times from $208,250 to Southward$496,760, on average, whereas the median income of employed residents has increased by 1.95 times from S$iv,716 to S$9,189 over the same period according to the data from Department of Statistics.
They as well betoken to the annual compounded growth, where the boilerplate BTO price (4.4 per cent) outgrew the monthly household median income (3.iv per cent) by approximately ane percentage indicate over the 20-twelvemonth period.
I would debate however that housing affordability should look at more than indicators to get a clearer picture. The price to income ratio (PIR) for example, tells a more nuanced story.
Zooming out, research by my colleague Associate Professor Lee Kwan Ok and two economists from the Asia Evolution Bank, estimated an average PIR of thirteen.3 for a sample of 211 cities in 27 developing countries in Asia.
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Compared to the average PIR of 4 estimated for adult countries by Demographia International Housing Affordability Survey (2019), housing in these Asian cities is severely unaffordable.
In comparison, Singapore'southward boilerplate PIR ratio of 4.1 for 4- to v-room BTO flats in the last 20 years from 2001 to 2022 is within a reasonable range of affordability. The ratio is even lower if you take into account the diverse CPF housing grants for get-go-time homeowners.
Currently, these grants ranging from S$v,000 to S$80,000 will be given to HDB buyers with monthly household income of below S$9,000.
The increase in the boilerplate BTO flat prices and too the drop in the median household income in the post-COVID period has contributed to the rise in the PIR ratio. So, affordability has declined marginally in 2022 compared to the pre-COVID ratio of iv.one in 2019.
It is worth noting that while the average PIR measures the overall affordability level for BTO flats in Singapore, the PIR is higher in mature estates and bigger flats.
BTO FLATS IN Pop MATURE ESTATES
Which brings us to the question of those desiring a BTO in highly pop mature estates. Many who gravitate towards these flats considering of the location, amenities, and closeness to transport nodes and malls volition have to accept that those flats will inevitably be more expensive.
For example, in the May 2022 BTO launch, high-floor iv-room units in the Kempas and Boon Keng BTO projects located in the popular Kallang-Whampoa estates were priced upwards to South$674,000.
Nevertheless these BTO flats saw subscription rates as high as 12.89 times, where only one out of 13 applicants were able to buy a unit of the 3- to 4-room blazon.
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The connectivity to MRT and also the proximity to good schools besides describe neat interests of Singaporean couples.
For the ii BTO launches in November 2020, Bartley Beacon located most Bartley MRT station on the Circumvolve Line and ParkView@Bidadari about the Woodleigh and Potong Pasir MRT stations on the Northward-East Line were oversubscribed by 4.978 times, despite an indicative price range of between S$466,000 and S$726,000 for four- and 5-room flats.
In the latest launch of Telok Blangah Buoy that is close to the futurity Greater Southern Waterfront, 4-room flats were oversubscribed by first timers by nigh 28 times.
For 2nd timers, the adventure of getting a flat was even bleaker given more than 412 applicants vying for one available unit there. Fifty-fifty if the applications were successful, buyers will yet have to pay between S$602,000 and S$710,000 for 4-room flats and wait for more than five years for the projection completion.
So, despite the college prices, buyers still want these flats. Other than the attractive locations being near the central region and connected to central transport nodes, the limited supply of new BTO flats and future cost appreciation also contribute to the potent demand in the area. In other words – this is a worthy investment to make for a flat in a good location.
OVERSUBSCRIPTION IN BTO FLATS
Based on the statistics collated on BTO launches since 2011, the oversubscription rates in the popular housing estates, like Bidadari, Ang Mo Kio, Kallang/Whampoa, Bedok, Bishan, Toa Payoh and Clementi, were estimated at about six times and above, on average.
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The preference may exist for both location and a sure amount of space besides. Woodleigh Glen and Woodleigh Village were the most keenly competed BTO projects, where 3-room and bigger units recorded an oversubscription rate of nearly 33 times in 2016.
In comparison, smaller 2-room flats in Fernvale Riverwalk in Sengkang were most 25.6 times oversubscribed when launched in 2013.
Couples know they have other more than affordable options. Afterward all, BTO flats in farther flung neighbourhoods - in Sembawang, Yishun, Bukit Batok and Punggol - are priced much lower. In the Nov 2022 BTO launch, iii-room to v-room flats in Sun Sails projects at Sembawang were priced between S$163,000 and S$388,000.
In the November 2022 released batch of BTO flats, a 4-room flat in the new Tengah district will cost from Southward$243,000 afterward grants while the same size flats in non-mature estate in Chua Cho Kang will cost from Due south$193,000 after grants. So, it boils down to a question of pick.
(Are cooling measures on the cards after four quarters of cost increases in the residential property market place? CEO Propnex Ismail Gafoor and NUS Establish of Real Estate Studies Dr Lee Nai Jia give on their take on CNA's Heart of the Affair podcast)
MOVING INTO Individual HOMES
There has also been talk about whether young couples are priced out of the private housing market place.
After all, moving upwardly the housing ladder from public housing flats to private houses, either landed or not-landed, is the aspiration of many immature couples.
Withal permit'due south not forget that public housing flats form a rock-solid base where well-nigh 1.08 meg public housing flats currently serves the housing needs of more than 78 per cent of Singapore residents.
The jump tin exist steep. If a young family wants to upgrade to a condominium with sufficient rooms for kids, they volition have to set aside almost Southward$1.6 to S$one.7 meg on average.
Let'southward say a couple has a monthly combined income of Due south$12,000. Financing a condominium valued at S$1.seven million will need a 25 per cent down-payment of S$425,000.
Unless there is financial help from parents, many young couples, in many instances, will find it difficult to fork out such a large sum of cash, assuming already that stamp duties and legal fees can be covered using their CPF.
When you consider the mortgage costs, applying a conservative estimate of a 20-yr fixed rate mortgage at the maximum of 75 per cent of the property value, and at an involvement charge per unit of 2.0 per cent per annum (monthly residual), a couple will accept to bear a monthly mortgage payment of almost Due south$6,450.
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Some of this can be first with monthly CPF contributions, but withal leaves the couple with a greenbacks payment of around South$3,690 per calendar month, which makes most 30.75 per cent of their gross combined income.
All things considered, public housing is notwithstanding the most affordable housing choice for many young couples in Singapore. Merely it likewise means they must adjust their expectations especially if they aspire to have private apartments.
And if they want homes almost the urban center center, they must be able to pay a college price.
Professor Sing Tien Foo is Manager at the Constitute of Real Estate and Urban Studies (IREUS) and Head of Department of Real Estate, National Academy of Singapore. The views and opinions expressed herein are those of the authors and do not represent the views and opinions of the National University of Singapore or whatever of its subsidiaries or affiliates.
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