High cost of HDB flats a key reason for failure of Baby bonus to boost birth rate
By Jeremy Koh (Guest Columnist) and Eugene Yeo (Consultant Editor)
In a Straits Times report, it was reported that the Baby Bonus introduced by the government has failed to boost the flagging birth rate despite the increment last year. (read article here)
$230 million was given out by the Government in baby bonus payments last year, up from $55 million just five years earlier. But there was no corresponding increase in the number of Singaporean babies born.
The Baby Bonus Scheme aims to encourage Singaporean couples to have babies by easing the financial burden on parents.
A reason commonly cited for the unwillingness of Singaporeans to have children is the high cost of living, especially that of housing.
The price of HDB resale flats and that of new flats whose prices are pegged to it have risen dramatically in recent years.
Data from the Housing and Development Board showed the resale price index rising 1.4 per cent from the previous quarter to 140.2 in Q2. This is the highest level seen since 1990.
Over 85% of Singaporeans living in public housing built by the HDB. Though it is meant to affordable to the masses, the relentless price hike have squeezed some Singaporeans out of the market, especially young couples who are first-time genuine home-buyers.
Last month, HDB launched a premium project offering 769 new flats in Punggol. It offers 615 four-roomers and 154 five-room flats in a central location just five minutes from Punggol MRT station.
Four-room flats of 91 to 96 sq m are going for $264,000 to $322,000, while five-roomers of 114 sq m are on sale from $344,000 to $409,000.
The CPF housing grant and the HDB housing loan are two schemes that have helped maintain the affordability. The combined income ceiling of $8,000 a month to be eligible for the schemes has been in place since 1994. Since then, the HDB resale price index has gone up by a staggering 190 per cent.
The CPF Housing Grant Scheme is a housing subsidy provided by the Singapore Government to assist Singapore Citizens to own a HDB flat at a cheaper rate, or we call it a HDB subsidy.
The grant can range from S$30,000 to S$40,000, however there is a catch ( or in fact many catches!), if you had obtained the grant when you purchase your flat, you will be required to pay a resale levey when you sell it. This resale level can be as high as S$50,000 for Executive flat and you need to occupy the flat for 5 years before you could purchase another flat directly from HDB.
Even with a $30,000 housing grant, a young couple buying a new 4-room flat at $250,000 will still have to fork out $220,000 which amounts to a monthly loan of between $800 to $1,200 a month payable over a thirty year period depending on the type of interest scheme.
For a resale HDB flat in a prime area like Bishan, the price ranges from $350,000 to $400,000. The monthly installments will be between $1,100 and $1,400.
The median pay of the average Singapore worker is about $3,440 a month and it has stagnated over the last few years. (source: http://www.worldsalaries.org/singapore.shtml) After the compulsory deduction of 20% to CPF, the take home pay is only $2,750. The Singapore worker will be left between $1,500 and $2,000 after paying for the mortage loan. It will be very tough for one to start a family with such a pay.
Of course the above calculations are just gross estimates and the government should be in a better position to shed more light on the affordability of HDB flats. However, till now, ministers such as Mah Bow Tan and Lim Hwee Hua remain adamant that HDB flats remains “affordable” to the majority of Singaporeans.
It defies common logic for the government to peg HDB flats to that of the private property market which is extremely volatile and inflationary in the last few years with the influx of foreigners buying up properties in Singapore. About 70% of the buyers of private properties are foreigners.
Throughout these years, it is not known if the government has made any “profit” from the construction and sale of HDB flats. What is the price of the land? A significant proportion of the land in Singapore is owned by a government-linked company, Singapore Land Limited. What is the cost of building each HDB unit? What is the difference, (if any), between the construction cost and sale price and where does it go to?
The government has refrained from answering these legitimate questions on the mind of Singaporeans for the past two decades, preferring to congratulate itself for raising the home ownership of Singaporeans to more than 95%.
Though technically, 95% of Singaporeans “own” their HDB flats, they are merely renting it from the government for a maximum period of 99 years since it is a leasehold and not freehold project. Freehold properties usually command a higher price than leasehold ones in the same vicinity by 10 to 20%. The reason why HDB flats are commanding such a high valuation is that shelter over one’s head is a basic necessity. Unlike in Malaysia, Hong Kong, Taiwan or China, where one can pack up and live in the countryside, there is nowhere to go in Singapore.
In other words, prices of HDB flats will continue to climb unless the government step in and modulate its mode of valuation because there is always a ready market for it. The influx of foreigners and PRs have also helped to artificially inflate the price of HDB flats.
Singaporeans may have “double” or even “tripled” the value of their HDB flats in the last ten years, but don’t forget after making a profit from the sale of their properties, they still have to pay for another new flat at a higher price with the unwanted effect of plunging Singaporeans further and further into debt.
According to an AXA study done last year, it is estimated that for the average Singaporean, CPF savings will provide only a quarter of the funds he or she will need in old age which defeats its original purpose of being a retirement fund for Singaporeansn when it was first formulated in 1967.(source: Asiaone)
With no social safety net to speak of, Singaporeans face a grim and uncertain future, especially those from the middle and lower income group. The middle class will be more severely squeezed as they do not qualify for any government subsidies. The “sandwiched” generation – those with children and aged parents to take of, may find life a continuous struggle to earn enough money to keep afloat.
It is not easy to bring up a child. Not only must one ensure he/she is well fed and clothed, time and resources have to be expended to educate them so that they will become well-behaved, productive and useful citizens to the nation. With so many tasks to juggle at the same time, it is no wonder that Singaporeans are opting to have a smaller family, if any at all.
The government should look at and deal with the root cause of the problem rather than giving cash handouts which does little to ameliorate the difficulties faced by Singaporeans trying to start a family. It has been 15 years since the HDB since the HDB housing grant was first introduced. Given the different set of circumstances we are in now, perhaps it is time to re-evaluate the scheme.
For a start, the cost price of new HDB flats should be pegged not at two-thirds of reslae flats in the vicinity, but at the median pay of the Singapore worker, e.g. 5 times for 4-room flats and 6 times for 5-room flats which work to about a price of $170,000 and $204,000 respectively.
With the decrease in the prices of new flats, the resale market will gradually be cooled and fall to more sustainable levels.
The $8,000 ceiling for the grant’s qualification should be increased to $12,000 or more and the housing grant raised to between $50,000 and $70,000.
Though the government may made a “loss” in doing so, it owes the citizens who voted for it a duty of care. Besides, even at much “knocked-down” prices, HDB may still able to make a hefty “profit”.
How much money did the government gain from the sale of HDB flats, the levies earned from resale flats and the CPF contributions of Singaporeans after all these years? Are they used to finance the investments made by Temasek and GIC? Till today, these figures remain enshrouded in a cloak of secrecy.
Boosting the birth rates of Singaporeans will reduce our dependence on foreigners who now made up almost a third of the population. Reducing the pressure on Singaporeans will lead to a happier citizenry and increase our domestic consumption, thereby decreasing on reliance on foreign exports.
A fundamental shift in the government’s mindset and policy is needed to reverse our flagging birth rates. As history has already shown, giving cash handouts in the form of Baby bonus and recruiting foreigners en masse will not solve the root of the problem.
Related articles:
>> Mass market buyers now inflating property prices by Jeremy Koh
>> Record home sales: a boom or bomb in the making? by Jeremy Koh and Eugene Yeo
>> Budget does not address long-term inadequacies in corporatist model by Jeremy Koh and Eugene Yeo
Loading ...
cy on Thu, 20th Aug 2009 11:23 am
once bitten twice shy,this time HDB refuses to increase supply of flats. But in doing so, they are encouraging a HDB flat bubble to form over time, which would be very bad for everyone,except those who has yet to buy.
to prevent bubble from popping, they are increasing the PRs/foreigners, but we all know the story of “pulling the crop to help it grow faster”. Eventually, the stress/tensions will be too much to bear.
wayangtimes on Thu, 20th Aug 2009 11:38 am
it is true that flat prices and availability are MAJOR considerations for couples before they tie the knot.
assuming that the couple are graduates and meet each other after they have graduated, the girl will be about 21 years old and the guy about 23. throw in about 5 years of career development and courtship before both are ready to settle down, the girl will have been about 26 years old. assuming that the couple are still together, and they decide to get married, they will have to wait about 2 to 3 years for the new flat to be built because resale is just so expensive. by then the girl is about 28 years old. and once the couple get married, many of them will want to spend 1 to 2 years of 2-person-world. after that the girl will be about 30 while the guy is 32. this is abit past their most “fertile” and energetic period don’t you think? and won’t this affect baby productivity levels?
but of course, these ideas are just my assumptions.
Maxonlife on Thu, 20th Aug 2009 2:06 pm
Have u read the TNP yesterday?
82 year old man’s children not want to take care of him….
What a shame…
But who will consider the fact that his children are already in their 50s or even 60s
By the time this old man reach 90, his children are 70 years old, their “children” is older than my grandma…
The “children” are old people too… how to take care of him????
Maybe we have a law to make the great grand children to take care of him…
Because the grand children have to take care of their own children
Now, who is kidding me?
Hairy is Dirty on Thu, 20th Aug 2009 2:59 pm
So rich well to do people have a dozen of kids??
Not true either.
But I have to agree for those not well to do, economic pressure will be a major factor.
If you consider your live sucks, then most likely you will think twice before having more kids.
mike on Thu, 20th Aug 2009 4:48 pm
the high cost in sg is the main cause of couple not to have families.
you dont need rocket scientist to work the sum for you do you?
i have 3 kids and struggling to brought up them and still struggling whether my wife and i can live through the retirement age. how on earth are those kids belong to poor like us to survive and raise family? unless you are belong to rich and elite group.
thecompulsivepianist on Thu, 20th Aug 2009 8:11 pm
CPF Grants are not eligible for new flats unless they are under the DBSS scheme.
Go figure =)
fool on Thu, 20th Aug 2009 10:10 pm
In Developed Singapore,Singaporeans are educated, thats why low birth rate.
In countries that are not developed, high birth rate ?
randomnessinmind on Thu, 20th Aug 2009 10:46 pm
I want to raise a football team in a 4-Room HDB flat. Go figure what happens if I do.
And really, if time allows, and if my mate allows it (If I find any), I really want a football team
A P on Thu, 20th Aug 2009 11:13 pm
“In countries that are not developed, high birth rate ?”
Maybe true, no money to buy contraception
anonymous on Thu, 20th Aug 2009 11:48 pm
my friend told me of story of his friends, both graduates w honors are at wits end after wife lose job.
she applied for associate job but lost out to ft.they hired inexperienced foreigners for the position even when she was qualified, experienced and eager to accept the lower pay.
everyday damn desperate, stressed, and for what? to keep their 4rm hdb.
with one highly paid job, already stressed to keep hdb. how does the freaking gahment expect people to feel secure enough to lay eggs during normal times?
the good thing is that the lady finally wake up and realised that SINGAPORE IS NOT FOR SINGAPOREANS under the pap.
Rainnix on Fri, 21st Aug 2009 4:04 am
With the ever growing Gini Index, the elites are the ones who are most suitable to have children. They can afford it! Maybe this is what the fascist PAP wants. These smart elites copulate and produce more smart children.
Since we don’t reduce GST for necessity goods, because the rich elites consume more necessity good than commoners. Then we should impose a fine to all those rich elites who don’t produce more than 3 children before the age of 35.
PAP ABC ... pap xyz ... zeeeeeee ... PP ONE TWO THREE ... pap 1 2 3 .... zeeeeeeeee ............................... ???!!! slumber ....................................... SLUMBER ................................ DEEP SLUMBER!!! on Fri, 21st Aug 2009 10:14 am
……………. “And Back TO The Future 1 2 3 Michael J Fox lky” for It’s ALL About MONEY MONEY AND MORE MONEY. For Without MONEY, “What can you and I DO”??? And so it is “Back to the Future 8 9 10 Michael J Fox pap” and so on ………………..
SinKaPOOReans HAw!!! Let’s ReCap once again their ’successes” … with some humour “injected” just like they do …………
1. HDB Flats rose MORE THAN TEN (10!!!) Times in the last 30 yrs HAW!!!
2. But “YOUR Wages HAVE GONE UP TO” said old man Leeh. Only NOT said is “Your Wages have NOT GONE UP in tandem with HDB housing leeh! Because I’ve GOT TO REPLACE YOU with FT talents “abc … xyz to keep you employed or you will c (Hokkien for die) you SEE”!!!??? ???
3. And it all started in AMK 4-Rm Simple Flat “As SIMPLE as ABC to XYZ … and … abc to xyz till FINANCIALLY go to zeeee”!!! SO HOW TO make BABIES For YOU But NOT JUST For MEeeeeee …”? Built by PAP for $59,000 and sold TO YOU for just $30,500 and you see IT IS EXPENSIVE??? When It IS ACTUALLY just a BREEZE For YOU HAVE CPF to pay for YOUR BIG HDB Flats From PAP GAHMEN AT “Subsidised NOW, in future To HIGHLY-Susidised To NOW At “HEAVILY-SUBSIDISED” you see. Even when WE HAVE lost like $60-100B Of YOUR CPFunS, WE THE Great FamiLEE STILL “Heavily-Subsdised” your hdb housing DON”T YOU SEE???!!!???!!!???!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
4. We DO Know What our former DPM Ong Teng Cheong did as President you see. But WE REMEMBER BETTER What HE DID as DPM and about our HDB Public-Housing you SEE??? At HALF OUR-HDB building cost, WE SELL “Housing-Don’t-BUY” for yOUr fAmiLy!!! WHY Then do you call them expensive when WE’ve sold them to you WITH EXPANSIVE UPGRADES you see???!!! SO DoN’T COMPLAIN just because YOUR PAY is like ONLY <2 times increased TO OUR HDB’s MORE THAN TEN (10) TIMES you see – even IF your surname is also Lee” Ours Is LEE you seeeeee???
5. YOU GOT JOB pAyinG more Or nOt??? You GOT THE NEXT 35 years AND MORE To pay for it!!! Just KEEP-COOL And WE WILL make REAL-COOL For you after you’ve beeen REPLACE BY FT with PAP ProGress-PACkage, AGED-PACkAgE, EtC you see. Only PROBLEM IS That you ARE Just NOT part of OUR GREATER famiLEE-TrEE!!!
6. Thank you for listening in. We will keep you in tune with our “MINIMUM-sUm UPGRADES to HELP YOU kEEp and nest egg for YOUR EVER Increasing aGe! Only PROBLEM IS HOW TO INCREASE HDB “Studio-Apartments”(SA) Prices in tandem with inCrease for our 30 YEARS Lease????????????????????????????????????????????????
So, if you live BEYOND 85 and 90, We WILL give you A FEW MORE YEARS To LIVE In your studio apartment(sa) till you “Cross A-Bridge provided by PAP to meet our fAmiLEE once again you see”!!! By THEN you WILL BECOME A PART Of OUR FAMILEE!!! NOT TO WORRY, AS WE CAN See and Look Way-Beyond THE GRAVE you see!!!
mon on Fri, 21st Aug 2009 10:52 am
And the best part is:
MBT in his moment of brillance, create a scheme where HDB sold land for private developpers to build expensive HDB flats.
Question : why didn’t S’pore Land Auth did that?
Next: HDB ended up getting the monies first. Didn’t even need to spend money marketing the project. The risk is the developper. At the same time, he gets to push up land prices by asking private developerS to bid. As we know, when you bid, prices usually get higher.
If the property crashed? It is the developpers fault.
sometimes, I wonder why the govt is soaking up all this monies.
They are not producing great investment results.
There must a huge hole some where.
mon on Fri, 21st Aug 2009 10:58 am
this is another example of PAP passing their failed policies to us.
Who does want to Fu*K without protection and have children?
Look at the Taiwanese and the HKers and the Mainland people… we are all the same.
Then they make us work to build the nation.
Against our nature.
Then they claimed that we don’t have enough children and force us to take in foreigners but these foreigners make our life difficult.
Then we don’t dare to have children unlike the Taiwanese/PRCs themselves.
Then they let in more people to cover the gap.
Do you think they don’t know the cycle.
They just don’t care about us.
Day in day out, we will end up voting for them.
That is something I never understood. It is like we like SM.
fair dinkum on Sat, 22nd Aug 2009 12:47 am
2 sides to the coin.
Keep everything cheap and remain distinctly 3rd world,
so that everywhere else in the world seems more expensive ,unaffordable and beyond reach.
Or else, inflate all prices of assets closer to 1st world costs
so that we have similar consumer power and ability.
Buy high sell high.
It is ill conceived only if deflation happens to Singapore and not to other countries and we buy our flats at high prices only to suffer deflationary loss on sale.
newbie on Mon, 24th Aug 2009 9:30 pm
MAINBOARD-LISTED BBR Holdings (S) Ltd
(BBR) today announced that it has secured a S$104.2 million contract — its first from the Housing & Development Board (HDB) to build seven blocks of flats, comprising 864 homes, in Yishun Neighbourhood 4.
The scope of works also includes the building of a Child Care Centre, a roof garden, electrical substation works, sewerage works, a driveway, communal amenities and site works as well as contingency works.
$120k to build each HDB home
HDB is launching Dew Spring@Yishun, a new housing project in Yishun under the Build-To-Order (BTO) System today. A total of 864 Standard flats will be offered, comprising 144 2-room, 216 3-room and 504 4-room flats. This project has the largest number of smaller flat types offered in one BTO this year, with 360 units of 2-room and 3-room flats.
2 Room – 144 units ($76,000 – $90,000)
3 Room – 216 units ($120,000 – $146,000)
4 Room – 504 units ($197,000 – $238,000)
$157 – 190k for each home
And the 30 Yrs ONLY "Studio Apartments" ...??? on Wed, 26th Aug 2009 4:16 am
How much do they cost in YISHUN NOW??? $120K or 120K+???!!!
Didn’t they cost some 80K to 90K in like AMK and more expensive areas??? NO OSME ADDITIONAL-HEAVY FOR WHOM they have BEEN talking so BIG about CARING FOR??? As WHO WILL NEED these flats IF NOT THOSE WHO ARE Financially Strapped FOR THE LONG HAUL UNDER their pap’a’ system??? TROUBLE IS that far too hgihly paid people DO LIVE IN IVORY TOWERS THAT ARE SO DARN HIGH – THEY CAN’T SEE THE REAL GROUND BELOW RIGHT!!! BECAW the ground is too darn FAR AWAY. But there ARE TELESCOPES and BINOCULARS Helping Visual AIds RIGHT!!! Or IS IT … ??? marks ALL oF the way for demn???
Ever heard ON TV, even ministers In PARLIAMENT said, “Der Tree of ‘Da(M)n’ …”??? … Which actually was meant to be “THE THREE of THEM”??? Now WE OSO know how good speaking inglish they are too!!! Been readint and hearing the news in the last few days!!!
singaporeeyes on Thu, 27th Aug 2009 5:31 am
SAD to know this as a Singapore. But the awful truth is SINGAPORE IS NOT FOR SINGAPOREANS ANYMORE.
singaporeeyes on Thu, 27th Aug 2009 5:37 am
My parents couldn’t get white collar jobs for the past 10 years after they turned 50, despite their ample qualifications as architects. As most Singaporeans must know, the govt ONLY CARES ABOUT KEEPING THE SINGAPORE BRAND AND THE MILLION DOLLAR SALARIES ALIVE. THEY COULDN’T CARE LESS ABOUT THE TINY COGS, US SINGAPOREANS. If we don’t have enough eggs, what will they do? Replace us with FT’s lor. Singapore is just one big chicken farm to them.
“Singaporeans want pricer homes”: another misleading headlines by Straits Times : The Temasek Review on Thu, 27th Aug 2009 5:54 pm
[...] High cost of HDB flats a key reason for failure of Baby Bonus by Jeremy Koh and Eugene [...]
Anonymous on Tue, 15th Sep 2009 4:35 pm
Sigh!Wanna to buy HDB???!!!