HDB RESALE FLATS MORE UNAFFORDABLE WITH SPECIAL HOUSING GRANT

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I refer to CNA article “More housing grants introduced” link and “New measures to cool HDB resale market” link

Of late, the HDB seems very confused. On the one hand, it wants to make flats more affordable by extending the Special CPF Housing Grant (SCHG) of $20,000 to assist middle-income Singaporeans. On the other hand, it contradicts its own policy by making it even more unaffordable with its new measures to cool the HDB resale market.

The SCHG will in a small way reduce the huge monthly installment, no thanks to the relentless increase in HDB prices over the last 5 years. However, this has been more than offset by the much higher monthly installment required due to a shorter loan tenure.

The HDB resale index was 126.2 in 2008 and is currently at 206.6, an increase of about 64 per cent. A 3 room flat costing $375,000 today would have cost only $230,000 in 2008. At $20,000, the SCHG is peanuts compared to the increase of $145,000.

The increase in a 3 room HDB flat translates into an increase monthly installment of about $650 over a 25 year period. The PAP recommends using a $20,000 band aid on a $145,000 wound which requires 100 stitches.

In an earlier article I wrote, Diploma holders marrying cannot hope to buy 3 room resale HDB, I highlighted the COV, 5 % cash component and minor renovations already renders a 3 room resale flat out of reach.

Assuming there are some who manage to cough up such a huge amount of cash, the average loan amount for a 3 room HDB is still about $300,000 with the SCHG.

(Assumption – husband and wife combined income $5,000, AHG of $5,000 and SCHG of $5,000 based on income bracket, combined monthly CPF for loan – $1,150, loan quantum $290,000)
With a 30-year loan previously, the monthly installment is $1,160. Under the new ruling of maximum 25-year loan, the monthly installment works out to be $1315. hdb loan calculator (up to only 25 years) property guru loan calculator (up to 40 years)

The HDB keeps tweaking and tweaking its rules until it has now in a daze. A 3-room resale HDB flat (other than those in central areas) was already out of reach for a typical newly wed couple with a diploma and some years of working experience. With the new ruling in the example above, the cash component for the loan has gone up from $10 (1160 minus 1150) to $165 ($1315 minus $1150).

Using a $3000 income bracket, the resale flat buyer qualifies for $40,000 worth of taxpayers’ funding. However, the monthly installment works out to be $1,179 which is way above his monthly CPF contribution of $690!

Whichever income bracket below $5000 is selected, very few Singaporeans can afford a basic 3 room flat. For families dependent on a dual income, the home would be gone the moment one spouser is unable to work due to unforeseen circumstances.

(Even across the causeway, Malaysians who cannot afford central areas still have a choice to move to the suburbs. Pasir Ris, Woodlands and even Jurong are already at extreme ends of our island, comparable to the suburbs of Malaysian cities. But as a first world country, the HDB dictates to citizens where we should be located, often unsuitable estates due to bad planning.)

By increasing the monthly cash component of a mortgage, the HDB expects Singaporeans to accept blindly that flats have become more affordable. If this is some kind of HDB joke, I believe many are not amused. Perhaps the HDB should re sit PSLE Maths.

Phillip Ang
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