reporter2
15-02-22, 09:54
Consider raising the income cap to allow more to buy HDB BTO flats
This means more citizens can go on to have kids or start businesses, thus contributing to the national good
Feb 15, 2022
MEET the eligibility criteria and one has the chance to participate tangibly in the Singapore dream by being able to buy a build-to-order (BTO) Housing Development Board (HDB) flat at a subsidised price.
For some young adults, the chance to jointly own a BTO flat is an incentive to get hitched. And for those who are rapidly climbing the career ladder, do tie the knot sooner.
To be eligible to buy a BTO flat, a couple comprising a Singapore citizen and another citizen or a permanent resident cannot have average monthly household income that exceeds S$14,000.
Being eligible to buy flats directly from the HDB also means being able to buy flats in prime areas that are being built under the prime location public housing (PLH) model.
Could the income ceiling be raised soon? Perhaps this is timely as home prices have been rising faster than income recently.
The income ceiling for the purchase of flats from the HDB was raised 3 times in the last decade - in 2011, 2015 and 2019. Prior to 2011, the income ceiling was kept unchanged for over a decade.
In September 2019, the income ceiling for families rose from S$12,000 to S$14,000 per month.
Based on recent precedents, perhaps the income ceiling will next be raised in 2023, being 4 years from 2019, and will rise by S$2,000 to S$16,000.
Assessment of meeting the income ceiling is based on average gross monthly household income that excludes bonuses and income earned from ad hoc overtime work, but includes allowances received on a regular basis.
The prevailing income ceiling of S$14,000 is estimated to cover more than 8 in 10 resident households.
Rising home prices
Buying a first home for a couple who bust the BTO income ceiling has gotten harder over the last two and a half years. Private home prices rose 13.6 per cent between the third quarter of 2019 and Q4 2021 based on the Urban Redevelopment Authority's index. Over the same period, the HDB Resale Price Index rose 18.9 per cent.
Take a couple with total annual income of S$200,000, comprising a combined regular monthly income of S$15,000 and an annual bonus equal to 11 per cent of the regular income. The price of a new private home in the suburbs of about 900 to 1,000 square feet would be around S$1.7 million - which, at 8.5 times of the annual income, may be a stretch financially for some.
More affordable options exist such as resale private flats in the suburbs or executive condominium units. Also, the said couple can pay around a million dollars for a resale HDB flat in the city area, which would be 5 times of their annual income.
The resale flat in the city area costs much more than a 4-room BTO unit sold under the PLH model at River Peaks I and II located in the Rochor area where the price range was S$582,000-S$688,000.
Amid digitalisation and the rise of artificial intelligence, the world of work is being disrupted. Some higher-income households may seek to buy a BTO flat rather than take up large multi-year loans to fund a more pricey home purchase because of fears over job insecurity or rising home loan rates.
Some may also seek to have greater financial flexibility or keep expenditure in-check amid rising inflation.
Generous income ceiling
People here are marrying later - the median age at first marriage for grooms and brides rose from 30.0 years to 30.4 and from 27.7 years to 28.8 respectively between 2010 and 2020.
By marrying at an older age when incomes may be higher, some couples could struggle to meet the existing income cap to buy BTO flats. Allowing more couples to buy BTO flats so they are less stretched financially may encourage couples to have kids.
In setting the eligibility criteria for couples to buy flats from HDB, perhaps err on the side of generosity - let more couples including higher-earning ones be eligible. If there is a need to manage the gains made by BTO flat owners when they sell their units, policies such as that of clawing back some of the sales proceeds of resale units, as is the case with flats sold under the PLH model, can be put in place.
Public housing here serves a social purpose of building diverse and inclusive communities, where people from different walks of life can live together, interact, and foster strong social ties. Thus, it can be beneficial for as many people as possible to experience HDB living.
Household income alone does not fully reflect the purchasing power of a couple. Lower-income couples, who have generous and well-off parents, may be able to comfortably buy private homes. In contrast, higher-income couples, who need to support family members, may find it hard to fund a private or resale HDB home purchase.
However, it may be inopportune to raise the income ceiling this year given the high subscription rates for recent BTO exercises.
Sure, the HDB is building more new flats to meet demand. But allowing more people to buy BTO flats could add to the difficulty faced by BTO applicants in securing a unit.
Invariably, the timing on when to raise the income ceiling for BTO flats is tricky. Also, should the income ceiling rise by more than S$2,000?
What may be worth considering is to adjust the income ceiling at fixed intervals based on a prescribed formula. For example, the income ceiling can be set at the 10th- or 12th- or 15th-highest percentile of household income of resident employed households, and revised annually based on the change in income.
Raising the income ceiling on a more frequent basis in the last decade has given more couples a chance to own a public housing flat at an affordable price.
As the HDB boldly builds new flats in prime areas and keeps them within reach of some of the less well-off with the PLH model, perhaps the government could let more citizens have the privilege of buying BTO flats.
Some of the well-off, who may benefit from spending less to buy a BTO home than a HDB resale or private home, could hopefully then go on to have more kids or start businesses - with such efforts contributing to the national good.
This means more citizens can go on to have kids or start businesses, thus contributing to the national good
Feb 15, 2022
MEET the eligibility criteria and one has the chance to participate tangibly in the Singapore dream by being able to buy a build-to-order (BTO) Housing Development Board (HDB) flat at a subsidised price.
For some young adults, the chance to jointly own a BTO flat is an incentive to get hitched. And for those who are rapidly climbing the career ladder, do tie the knot sooner.
To be eligible to buy a BTO flat, a couple comprising a Singapore citizen and another citizen or a permanent resident cannot have average monthly household income that exceeds S$14,000.
Being eligible to buy flats directly from the HDB also means being able to buy flats in prime areas that are being built under the prime location public housing (PLH) model.
Could the income ceiling be raised soon? Perhaps this is timely as home prices have been rising faster than income recently.
The income ceiling for the purchase of flats from the HDB was raised 3 times in the last decade - in 2011, 2015 and 2019. Prior to 2011, the income ceiling was kept unchanged for over a decade.
In September 2019, the income ceiling for families rose from S$12,000 to S$14,000 per month.
Based on recent precedents, perhaps the income ceiling will next be raised in 2023, being 4 years from 2019, and will rise by S$2,000 to S$16,000.
Assessment of meeting the income ceiling is based on average gross monthly household income that excludes bonuses and income earned from ad hoc overtime work, but includes allowances received on a regular basis.
The prevailing income ceiling of S$14,000 is estimated to cover more than 8 in 10 resident households.
Rising home prices
Buying a first home for a couple who bust the BTO income ceiling has gotten harder over the last two and a half years. Private home prices rose 13.6 per cent between the third quarter of 2019 and Q4 2021 based on the Urban Redevelopment Authority's index. Over the same period, the HDB Resale Price Index rose 18.9 per cent.
Take a couple with total annual income of S$200,000, comprising a combined regular monthly income of S$15,000 and an annual bonus equal to 11 per cent of the regular income. The price of a new private home in the suburbs of about 900 to 1,000 square feet would be around S$1.7 million - which, at 8.5 times of the annual income, may be a stretch financially for some.
More affordable options exist such as resale private flats in the suburbs or executive condominium units. Also, the said couple can pay around a million dollars for a resale HDB flat in the city area, which would be 5 times of their annual income.
The resale flat in the city area costs much more than a 4-room BTO unit sold under the PLH model at River Peaks I and II located in the Rochor area where the price range was S$582,000-S$688,000.
Amid digitalisation and the rise of artificial intelligence, the world of work is being disrupted. Some higher-income households may seek to buy a BTO flat rather than take up large multi-year loans to fund a more pricey home purchase because of fears over job insecurity or rising home loan rates.
Some may also seek to have greater financial flexibility or keep expenditure in-check amid rising inflation.
Generous income ceiling
People here are marrying later - the median age at first marriage for grooms and brides rose from 30.0 years to 30.4 and from 27.7 years to 28.8 respectively between 2010 and 2020.
By marrying at an older age when incomes may be higher, some couples could struggle to meet the existing income cap to buy BTO flats. Allowing more couples to buy BTO flats so they are less stretched financially may encourage couples to have kids.
In setting the eligibility criteria for couples to buy flats from HDB, perhaps err on the side of generosity - let more couples including higher-earning ones be eligible. If there is a need to manage the gains made by BTO flat owners when they sell their units, policies such as that of clawing back some of the sales proceeds of resale units, as is the case with flats sold under the PLH model, can be put in place.
Public housing here serves a social purpose of building diverse and inclusive communities, where people from different walks of life can live together, interact, and foster strong social ties. Thus, it can be beneficial for as many people as possible to experience HDB living.
Household income alone does not fully reflect the purchasing power of a couple. Lower-income couples, who have generous and well-off parents, may be able to comfortably buy private homes. In contrast, higher-income couples, who need to support family members, may find it hard to fund a private or resale HDB home purchase.
However, it may be inopportune to raise the income ceiling this year given the high subscription rates for recent BTO exercises.
Sure, the HDB is building more new flats to meet demand. But allowing more people to buy BTO flats could add to the difficulty faced by BTO applicants in securing a unit.
Invariably, the timing on when to raise the income ceiling for BTO flats is tricky. Also, should the income ceiling rise by more than S$2,000?
What may be worth considering is to adjust the income ceiling at fixed intervals based on a prescribed formula. For example, the income ceiling can be set at the 10th- or 12th- or 15th-highest percentile of household income of resident employed households, and revised annually based on the change in income.
Raising the income ceiling on a more frequent basis in the last decade has given more couples a chance to own a public housing flat at an affordable price.
As the HDB boldly builds new flats in prime areas and keeps them within reach of some of the less well-off with the PLH model, perhaps the government could let more citizens have the privilege of buying BTO flats.
Some of the well-off, who may benefit from spending less to buy a BTO home than a HDB resale or private home, could hopefully then go on to have more kids or start businesses - with such efforts contributing to the national good.