Reality check on housing dreams in Singapore

On the question of whether homes cost too much in Singapore, a gap seems to exist between what the numbers show and what many young couples feel. What gives?

Feb 10, 2023

WHEN Xie Jiawei and Hazel Wang set out to buy their first home in early 2020, they naturally started by applying for Singapore’s version of a golden ticket – also known as securing a new Build-To-Order (BTO) public housing flat in a mature estate through the Housing and Development Board’s (HDB) sales exercise.

After trying and failing six times, the couple turned to the resale market, where they found themselves constantly getting outbid by other buyers.

“Our offer was not very far – like S$10,000 below asking – but we still lost. It’s really a very tough market for us,” said the 30-year-old, who works in the real estate sector.

In April last year, after almost a year of getting battered in the resale market, they finally closed on a S$770,000 four-room resale flat in Telok Blangah, a unit that Xie said was not their “first choice”.

Many others share Xie’s home-hunting frustration, property agents tell The Business Times. Though the numbers seem to suggest that public housing is affordable for most Singaporeans, a gap has emerged between the data and sentiment on the ground, complicating attempts to achieve progress in the debate.

The data

If discussions were to go strictly by the numbers available, one would arrive quite quickly at the conclusion that public housing in Singapore is, indeed, affordable.

In a Parliamentary debate about public housing prices on Monday (Feb 6), Minister for National Development Desmond Lee tried to assure members of the House that new flats continue to be affordable for most Singaporeans, even as he pledged to build more BTO flats with shorter waiting times while looking into whether more support could be given to those buying their first homes, including from the resale market.

He added that close to 70 per cent of BTO flats launched in 2022 are affordable for the median Singaporean household income of S$8,400 at a mortgage servicing ratio (MSR) of 25 per cent or less.

The MSR refers to the portion of a borrower’s monthly income that goes towards mortgage payments. It is currently capped at 30 per cent for HDB properties.

Another commonly used metric in Singapore is the ratio of median home price to median annual income, also known as the price-to-income ratio. A ratio of five is typically cited as the threshold for affordability, above which homes are deemed to be too costly.

The Demographia International Housing Affordability survey considers price-to-income ratios of between 4.1 and 5.0 as seriously unaffordable, and a ratio 5.1 and above as severely unaffordable. But real estate professor Sing Tien Foo, at the National University of Singapore (NUS), said such a tight benchmark is hard to achieve for cities such as Singapore.

In 2021, the median price across the island of a four-room resale flat was S$470,000, while that of a five-room resale flat was S$570,000, said property agency ERA.

The median monthly income, including employers’ contributions to the national Central Provident Fund (CPF) retirement savings scheme, for Singaporeans aged between 25 and 29 was S$4,095 that year, the latest year for which income by age group is available. This means that the price-to-income ratio for this age group was less than five times for four-room flats – that is, affordable – but above five for five-room flats – unaffordable.

For those between 30 and 34 years old – whose median monthly income was S$5,222 – both the four and five-room resale flats had price-to-income ratios below five.



According to HDB’s resale price statistics for four-room flats in the fourth quarter of 2021, only popular public housing estates in the Clementi, Queenstown, Bukit Merah, Central and Kallang/Whampoa regions had a price-to-income ratio above five for 30-to-34-year-olds – which suggests that the majority of resale flats are within reach for young Singaporean couples.


According to HDB’s resale price statistics for four-room flats in the fourth quarter of 2021, only popular public housing estates in the Clementi, Queenstown, Bukit Merah, Central and Kallang/Whampoa regions had a price-to-income ratio above five for 30-to-34-year-olds . PHOTO: BT GRAPHICS

If resale flats are affordable, it goes without saying that so too are BTO flats, which are subsidised upfront by the government.

The squeeze

Even though prices are affordable by definition, they are still higher than before, which might be one reason for the perception-data disconnect. In other words, it matters less to young homebuyers that home prices are affordable than the fact that they’re paying close to historical highs.

Between 2015 and 2021, the price-to-income ratio of four-room and bigger HDB resale flats for 25-to-29-year-olds hovered between 4.50 and 5.29, with the ratios being on a steady incline since 2019, showed data provided by Prof Sing.

It was below four for those aged between 30 and 34, until it hit 4.15 in 2021.



Resale prices have risen 22.4 per cent over the past two years. Compared to the previous peak almost 10 years ago, the resale price index is now 15.1 per cent higher than in the second quarter of 2013.

The squeeze is especially felt by those who, like Xie, have had to abandon hopes of a BTO flat because they could not wait that long. For them, the reality of homebuying on the resale or private market has meant making painful trade-offs on size, location or age.

Property agent William Chui said many young couples on the house hunt are in a dilemma having to choose “the best (unit) of all evils”.

“It might not be the best choice in their life, but they are locked down for many years and become slaves to the mortgage loan,” he said.

Another agent, Shaik Amar, said one client had to settle for a relatively old second-storey unit in Hougang, even though its remaining lease could not cover his spouse to the age of 95. Another client bought an older resale flat in Yishun after three failed attempts to get a BTO.

Out of close to 30 buyers he serviced over the last six months, Shaik said that most of them felt that they are paying too high a price for the flat they got.

“With what’s happening in the resale market right now, a lot of buyers are forced to exhaust all their CPF savings to afford a decent home,” said Shaik. “That is a very slippery slope.”

This also means that there is little wiggle room for couples who bought a HDB resale to accommodate major life events that may cause them to reduce or lose their income.

And agents said many of these clients are not from the low-income segment of the population, but are earning adequately at a combined income of S$8,000 or more.

Even Xie, who is earning a comfortable sum of about S$10,000 in total with his partner, is feeling anxious about having to pay off a 25-year housing mortgage.

“It’s very long … If I were to compare with my parents’ generation, their loans don’t take 25 years. They take 10-year, or 15-year loans,” he shared. “When I told my parents my loan is 25 years, they were kind of shocked. They wondered if housing has become so unaffordable.”


Xie Jiawei (right) and his partner, Hazel Wang, in their HDB resale at Telok Blangah. While the couple earn a comfortable combined income of about S$10,000, Xie is anxious about having to service a 25-year mortgage. PHOTO: JANICE LIM, BT

The perception

In Prof Sing’s view, a simple way to bridge this perception gap is for homebuyers to adjust their expectations.

While many middle-income young Singaporeans have aspirations for upward social mobility, they may want to consider taking one step at a time to reach their ideal home, he said – instead of trying to take one big jump to reach the top of the pyramid.

More balanced coverage of the market might help as well. For example, a number of analysts cited the popularity of news about million-dollar HDB resale flats even though those represented less than 2 per cent of transactions in 2022.

Property news is biased towards high-value transactions, said Walter Theseira, economics professor at the Singapore University of Social Sciences. Even though such deals may not be relevant to the majority of homebuyers, it fosters a perception that housing is getting expensive.

The large quantum of property prices also contributes to a sense of unease, pointed out Nicholas Mak, head of research and consultancy at ERA. Just a 1 per cent increase in the price of a S$500,000 flat, for instance, means an additional S$5,000, easily a month’s salary for many.

The measurement

But it is not enough to only look at the homebuyers’ role in the perception gap. The data and how it is measured can be better.

Simple price-to-income ratios are unable to capture buyers’ preferences and expectations, and social and psychological factors, which are difficult to quantify, said NUS’ Sing.

The median housing price tells us what homebuyers paid for, but not what they aspired to get.

“We cannot stop people from wanting to stay near parents and near the city. There is always a mismatch … but we cannot always have more supply to meet the demand,” Sing said.

“At the end of the day, there are some available ones – but are people willing to move there, to either smaller flats or those further away?”

Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, called for more granular data that separates mature estates from non-mature estates, and various flat types, instead of using just one benchmark to measure housing affordability.

She also suggested factoring in interest accrued over 25 years for a more accurate picture of how much a homeowner is actually paying.

Chui, the property agent, raised the example of a S$375,000 loan on a S$500,000 home that charges an annual interest rate of 3.5 per cent over 25 years. Interest paid on that mortgage could add up to S$188,000, potentially raising the total spent on the property close to S$700,000.

“If you talk about the whole idea of affordability, it’s not only about current affordability, but the long-term baggage as well,” he said.

Using a single metric also does not reflect the uneven distribution of amenities, or access to commercial or employment centres, although these are often the main reasons for high-price HDB locations.

The need

There is one other way to reduce homeowners’ perception of dashed dreams when they have to sacrifice some of their desired attributes for a more affordable unit in their second-choice neighbourhood: The government can work at decentralising Singapore and improving connectivity, Theseira said.

This could involve moving good schools into less attractive locations, enhancing its transport network and building more malls. Getting employers to continue some degree of working from home could also help, pointed out Sun.

Realistically, however, there might always be some distance between the numbers and ground sentiment.

Sing noted that building amenities takes time – and even then, there will always be inefficiencies in the housing market given that there is no perfect information of all the available units out there with their varied attributes.

“Expectation is something very difficult to meet, because housing is considered a subsidised public good,” he said.

“It’s always not enough. Everybody will want more. That’s always the constraint.”

In the meantime, there appears to be greater recognition within the Singapore government that simply trotting out the statistics to demonstrate affordability may not be enough to address public anxiety about the cost of housing.

On Wednesday, Prime Minister Lee Hsien Loong acknowledged market trends and concerns about housing affordability through a Facebook post.

“Covid-19 greatly disrupted the supply of flats. BTO waiting times have gone up, and so have resale prices. Families have had to adjust their life plans. They are concerned and often anxious about when they can get their flats, and whether they can afford them,” Lee wrote.

But, he added, the government is working hard on the problem and is confident of solving it. “Rest assured that Singaporeans, now or in generations to come, will not have to worry about having an affordable home to call their own,” he wrote.

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