Mah Bow Tan: HDB resale prices to rise, but still “affordable” as they are “subsidized”
September 3rd, 2009 | 
Author: From our Correspondent
National Development Minister Mr Mah Bow Tan is confident that the prices of HDB resale flats will continue to rise this year despite hitting a record high last month. HDB resale prices rose 1.4 per cent in the second quarter to a record high.
‘The flat prices would probably go up … by 1 per cent, 2 per cent. It will just keep on going up if the economy recovers as people expect, and if confidence returns but affordability will always be there.” Mah said.
Despite widespread concerns on the ground that HDB flats are becoming more expensive, the government is adamant that HDB flats remain affordable to ordinary Singaporeans.
In a letter published in the Straits Times forum on 31 August 2009, HDB Deputy Director Mr Ignatius Lourdesamy wrote that HDB flats remain affordable to eligible first-time households as they use between 21 to 25 per cent of their monthly income to service their loans on new and resale HDB flats which are well below the international affordability benchmark of 30 per cent. (read letter here) This is the standard answer given by the ministers when asked on the affordability of HDB flats.
As public housing, HDB flats should not just be affordable, but easily affordable to all. The international benchmark of 30 per cent should be used only as a guide and not an absolute figure to determine prices of HDB flats.
“‘HDB flat prices should be a reflection of Singaporean’s wealth and it is “not a bad idea” for prices to increase steadily, especially for those holding onto negative assets bought in the previous market peak in the mid 1990s.’”
However, it is a fallacy that rising HDB flat prices will create wealth for Singaporeans all the time. In fact, as prices go up, the financial liabilities of households will increase and more will be plunge into debts.
A study done by two NUS economists, Tilak Abeysinghe and Gu Jiaying, shows that “past episodes of house price escalations have led to a substantial erosion of housing affordability” especially in the private sector. (source: NUS SCAPE) Higher property prices does not necessarily translates into higher wealth for Singaporeans.
Higher property prices, instead of creating a wealth effect, exert a significant and negative “price effect” on consumption expenditures leading to a fall in the average propensity to consume.
As house prices go up, the increase in the value of housing assets is accompanied by a concurrent rise in the financial liabilities of households, in the form of higher downpayments for purchase of residential properties and burgeoning housing loans.
Singaporeans will be plunged into greater debts with rapid escalating of HDB prices. Those who bought their flats years ago at a reasonable price will be in a slightly better position as they may be able to capitalize on the intrinsic asset value of their flats by selling them. However, they will probably need to fork out a larger sum of money to purchase another property at a much higher price unless they downgrade.
For Singaporeans who bought the flats recently, they will be in dire economic straits should the property market crash subsequently as in 1996. Given the record high prices now, it is highly doubtful that the prices of HDB flats will continue to rise due to the economic uncertainties and prospect of higher unemployment rate at the end of the year.
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If money is what we are looking for. I rather I work hard for money and not by the resale value of my flat. Sorry Minister. I rather you dont raise the price and sell it to us at the correct sales price instead of inflating it and made it unbearable for the current generations.
don’t know if mah knows people are cursing him and the PAP because of him..?
A LOT OF HOT HOT HOT AIR TO COOL OUR BY NOW HOT HOT HOT HEADS YAH … AS HE CERTAIN DON’T AND NEVER WILL EVER WANNA LIVE IN AN HDB FLAT … WILL HE … EVER …NO NO NO NO NO NO NO!!!!!
1. BUT THAN … MBT ALLaDy LIVES IN HIS “MOST AFFORDABLE” PRIVAT AND LANDED PROPERTY JUST LIKE ALL THE OTHER MINISTERS AND MOST OF THE OTHER PAP MPs TOO … DON’T THEY!!! …
2. Or IS THERE A NEED FOR A QUESTION IN DOUBT ON THIS …???
HDB flats should not use benchmarks for homes, because they are a hybrid. Benchmarks for homes take into account the value of the homes being freehold, but the majority of the HDB flats are not freehold in the 1st place.
Thus it is just flawed, it just makes HDB flats more affordable than it looks.
Really Talk Cock Sing Song.
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//She said:
//“‘HDB flat prices should be a reflection of Singaporean’s wealth and it is “not a bad idea” for prices to increase steadily, especially for those holding onto negative assets bought in the previous market peak in the mid 1990s.’”
This is bullshit for the following reasons:
1. In theory: It is against the principle of wealth preservation and creation to be overly exposed to one asset class i.e. housing. we are a country where people have mainly one asset (if you consider HDB flat an asset) and that is not good design. Diversiftication is always necessary.
2. HDB is difficult to liquate. Once you do that i.e. sell, you need to buy another place to stay.
3. Difficult to do an arbitrage and that is deliberately so through govt policies. Imagine you own a 5 room flat and wants to downgrade to 3 room. It is not profitable to do so because you will be slapped with a fee of approximately 50K. If you had a condo like Wang Lu Zhiang and sell it during the 2007 peak to buy a 3 room flat, yeah, you will make 100k (which actually is not a lot) but that is not possible now.
Back to the downgrading story. If you do the reverse, start from 3 room to go 4 or 5 room, HDB will lend you money.Provided your income is within (total income) 8K. They won’t even lend you if you are moving from 3 room to 3 room to be nearer to work despite having 2 tries to the hdb loan. So, these policies have the ultimate objective of pushing up HDB housing price. The ultimate beneficiaries are not ordinary you and me because you can hardly get any money out. It is to help fund these MPs salaries.
4. The only way out is to immigrate and sell off everything or to have your parents leave a big house to you.
In the latter case, you cannot buy a new hdb flat still because the rules bar you from that. And you don’t get a HDB loan because the rules bar you from that too. You will have to borrow from a bank and we know what the rates are like. The next other way out is to have very rich parents. don’t we all hope for that.
5. The funny thing is everyone is complaining about housing prices being too high. Everyone seem to prefer having stablier prices and low. Then we have more time to save for retirement. and ended up having monies and home. The govt policies are not helping us to do that and I don’t see why they cannot see that. I only think they deliberately chose not to see that.
They think young people don’t want to stay with their parents but it is possible that old parents don’t want to stay with young couples. Besides, our flats are not that big. So, how are people going to retire?
That latter question was never answered.
We all know why. They don’t want us to have more options.
What does “still affordable” mean in a quantifiable way?
Words can mean different meanings to different mere mortals.
To me, I can afford something when i have the financial means.
If i have to Loan a huge amount of money, then to me, I cannot Afford it . and I would then be affording it by asking for help.
Its ‘affording’ without the money to afford for it.
In this case, I can also say i can afford a bungalow. Just that i have to work till i die.
and what kind of investment would it be if the govt decides to repossess your flat?
it seems we’re on the losing end here.
//“We subsidised you when you buy and we increased the value of your flat when you live in it and… facilitate you to monetise it when you grow old. This is the best form of investment and welfare for the people”, he added.
This is a joke.
If you sell your flat back to them, the monies goes back to CPF life, which you have a chance of not getting anything back. So, you ended up with a home, which they are waiting for you to die while at the same time can charge you exorbitant electrical prices and council taxes, whatever taxes.
I thought the best investment is in the people training? Since you learn to earn your own monies.
Their upgrading programme is widely recognised to be tactic to win votes so that they can continue to receive large salaries.
for a country that prides itself as having people as their only “resource”, they don’t seem to do a very good job of taking care of them – from employment “guidelines” to “housing subsidies”.
this is such a joke.
as a “corporation”, singapore INC is doing a poor job of retaining and engaging its people. we’re only here for utilitarian purposes.
Being a Singapore citizen, I strongly felt that Singaporeans are betrayed by the PAP. As a citizen, since we were a child, we had been taught to love Singapore and defend the country because this is our home.
As Singaporeans, we have to serve NS and attend ICT every year and pay for income tax and GST to fulfill our duties and responsibilities as Singapore citizen.
For single Singapore citizen who reach 35, they are not allowed to buy a new flat. If their pay is more than $3k, they are also not allowed to take a HDB grant and loan. If they were to take up a bank loan to purchase a resale flat, they have to pay 5% of the flat in cash, other than the COV. So, if they do not have enough cash, how to purchase a resale flat?
Even if Singaporeans were to get married to be eligible for the HDB loan and grant, they also need cash to pay for the wedding expenses, dinner, house renovation, etc. Again, no cash how to get married? So, without a house and a family, where is the home we were taught to defend since we were a child?
With the influx of foreign talents and PRs pushing up the HDB resale market and pressing down the salary range, Singapore is not worth defending anymore, because Singapore is no longer the home of Singaporeans. Hence, what’s the purpose of wasting the time of Singaporeans serving NS to defend a Singapore that has been ‘colonised’ by foreign talents and PRs, who are taking away the houses and jobs of Singaporeans? Why should Singaporeans lay down their lives to defend a Singapore that is a home to foreign talents and PRs?
they say they are building about 8000 flats to meet demand. so of course HDB would want to make as much profit as possible. what better way than to have resale HDB prices go higher and higher? can we get international valuers please?
“We subsidised you when you buy and we increased the value of your flat when you live in it and… facilitate you to monetise it when you grow old. This is the best form of investment and welfare for the people”
Yes, the banks / HDB will also help you to monetise your flat should you be unable to service the mortage.
Can someone tell me whats the difference btw a discount and a subsidy? Is the hdb making a profit or not? Is there any transparency? If there is no difference btw a subsidy and a discount, are not all the departmental stores and supermarkets all over the world giving subsidies as well?
Of course HDB is making a huge profit. The construction cost of a flat is S$100-150 psf. Hence a 4-room 90sqm (969 sqf) would cost S$100k-$150k (round up) to build. The latest Punggol Spectra BTO 4-room flats are going for S$234k to S$293k. HDB claims there is a generous “market subsidy” given to ensure your affordability.
Land Cost = free (SLA)
Min. Gross Profit = 56%!!
IRR = infinite
Zero market risk.
Excellent business model.
I think Mah is totally out of touch with us singaporeans. I do not take him as one of us . Which ever ministry pap put him in he will always do his best to earn revenue for that ministry. he should be sincere with his relationship with the masses and not paint ideal pictures to con us with his ever so friendly smile . he better take more time and play his mahjong games. yes.
@jolly
he is famously high in his ivory tower, since the years implementing ERP, he probably don’t know how ppl hate him
Online Petition to urge govt. to lower HDB prices and increase new flat supply.
http://www.thepetitionsite.com/1/lower-hdb-valuations-or-build-more-affordable-hdb-housing-for-singaporeans
Frankly speaking, no joke, jokes aside, I seriously think that he is joking.
what MBT is saying is crap.
Buying back lease at lower price than market helps them.
1, they pay less.
2, they reduce sellers
3, they are waiting for these old folks to die which they expect to be around 85.
4, they can eat up the remaining sum in CPF life. Of course not hdb, but CPF. But the govt has 2 mouths right?
he is a million paid sinister who cares a hack of you guy and living in good class bungalow. so ppl like us peasants…resign to our fate othewise vote wisely in coming election.
“We subsidised you when you buy and we increased the value of your flat when you live in it and… facilitate you to monetise it when you grow old. This is the best form of investment and welfare for the people”, he added.
Seriously guys, this is not a bubble. It is a form of investment and welfare for the people from the government. You don’t buy now you’ll miss the boat. Don’t bother with anything else, just buy the most expensive flat that your bank / hdb willing to lend you!
I am voting for the opposition next time!
Talk Cock sing song