HDB should keep on with a demanding challenge of addressing affordability while serving populations with somewhat different purchasing power

Serving more than the lower- to middle-income range promotes social cohesiveness.

Sep 2, 2024

Policymaking may be difficult. Give certain Housing and Development Board (HDB) flat purchasers more subsidies; resale flat owners might raise prices, therefore offsetting the impact of the increased payments.

Some purchasers may make a beeline for older HDB properties in sought-after areas, which have less limitations, while others sell new HDB Build-To-Order (BTO) flats in preferred sites with stricter limits to limit the extent of windfall profits.

The issue of home affordability follows next. While younger Singaporeans worry about how far they can or should stretch their money to become homeowners, many elderly residents question whether the young can afford to buy their houses.

Still, from many angles, house affordability here seems to be good. Many young Singaporeans who marry in their 20s or 30s may become homeowners around the time of marriage, unlike their counterparts in other big cities. In 2023, almost 90% of resident households will be owner-occupied dwellings.

After the COVID-pandemic, HDB resale flat prices surged significantly. Still, around eight in 10 first-time households who gathered the keys to their resale flats in 2023 used 25% or less of their monthly household income to service their HDB housing loan – hence monthly loan instalments can be serviced by monthly CPF contributions with little to no cash outlay.



On the other hand, worries about house affordability might result from job uncertainty among changing employment market disruptions. To be able to purchase a house, do couples have to rely on two salaries from always working for, say, 25 years?

Different degrees of affordability

Crucially, affordability might vary greatly among flat purchasers because HDB covers a sizable portion of the population. Of the resident households, around 78% live in HDB homes.

Basically, HDB flats might serve families ranging from those in the lowest decile with average monthly household income from employment, excluding employer CPF payments, of S$2,129, to those in the eighth decile with average income of S$17,442.

Indeed, to purchase a BTO residence, a local couple must satisfy the monthly household income limit of S$14,000. Some residents who break the stated ceiling, however, may and do purchase certain kinds of HDB resale homes where no income limit applies to purchasers.

Invest in HDB resale properties for more than a million Singapore dollars each. Although these kinds of transactions account for a tiny portion of all resale flat agreements, rumours of such sales may cause great stress among prospective homeowners.

Still, some HDB purchasers would find spending S$1 million or perhaps S$1.5 million to be really reasonable.

Without bank financing, an elderly couple in their 50s or 60s who sells a private house for more than S$3 million may purchase a large HDB resale house for S$1.5 million, therefore freeing a significant amount of money to guarantee retirement viability.

A young high-flying couple whose combined yearly salary is S$220,000 might choose to buy a HDB resale property for S$1.1 million – five times their annual income instead of a BTO house or new executive condominium unit where the relevant monthly family income limit is S$16,000.

In comparison, a leasehold resale condominium nearby may cost more than 50% more than a resale HDB four-room or five-room home in a suitable location. And typically speaking, running a HDB house has less ongoing expenses than running a condominium.

Moreover, depending on the availability of financial help from parents, young couples with generally equal salary levels might have different home affordability.

While some BTO purchasers might stress finding a fairly cost house, others could find it reasonable to spend extra for a spacious flat in a prime area. Although this entails increased selling prices, some purchasers may prefer HDB to pay more to provide well-designed apartments with premium finishings.

Attending to the masses

If the HDB limited itself to provide houses for around half of the resident families, which normally represent lower- to middle-income, might its task be made much easier if it stopped constructing homes for a significant number of residents?

Which was S$10,869 in 2023 if HDB BTO and resale flat prices were essentially within specific multiples of annualised median monthly household income from employment, including employer CPF payments among resident working households? A BTO house valued at five times S$10,869 would run around S$652,000.

Should HDB decide to service fewer families, private developers may increase their home building activity. Local developers could then have their hands full creating houses at home instead of attempting to expand by travelling abroad.

On thought, however, there is much to value about HDB housing the great majority of people.

A major asset of Singapore is its social cohesiveness in a world when many civilisations are breaking apart. Common experiences given by the HDB living, national service, and local school system foster social cohesiveness.

HDB towns rightfully hope to be places where several races, age groups, and socioeconomic levels coexist peacefully close by one another.

A highly significant step towards ensuring that many of the desirable sites islandwide provide varied housing alternatives is the construction of additional BTO dwellings in strategic areas. These kinds of dwellings might be Prime or Plus apartments drawing more subsidies.

Still, BTO Plus or Prime apartments might be much more expensive than Standard ones. Therefore, providing lower-income first-time households with more housing allowances would assist to level the playing field for such purchasers, so Plus and Prime BTO projects will entice households of various income levels.

HDB rules would inevitably have to change to satisfy the various requirements of a large pool of purchasers. Some changes could have unexpected negative effects. A lot of regulations controlling HDB homes may also leave some homeowners confused and cause unhappiness among those unable to satisfy certain qualifying requirements.

In the end, HDB should continue to serve many individuals with greatly different affordability and make HDB towns suitable homes for different populations even if public housing policies here receive criticism from certain sectors.