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Thread: New HDB flats still affordable: Mah

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    Default New HDB flats still affordable: Mah

    http://www.straitstimes.com/Singapor...ry_519529.html

    Apr 27, 2010

    parliament

    New HDB flats still affordable: Mah

    Prices within the means of the various income groups

    By Sue-Ann Chia


    THE hot issue of high property prices received another airing in Parliament yesterday, with the Government releasing fresh figures to show new flats are affordable to all first-time buyers.

    In giving the numbers, National Development Minister Mah Bow Tan also addressed the issue of how findings can change when different base years are used to look at the HDB resale price index and household incomes.

    He was replying to Mr Lim Biow Chuan (Marine Parade GRC) who had asked for housing affordability data based on how the median household income has risen in comparison to the HDB resale price index. Mr Lim also wanted to know if resale prices had risen faster than the growth of median household income in the last decade when different base years are used.

    The issue of the relative pace of price and income increases first came under scrutiny early this month when Mr Mah released the two sets of figures in a Straits Times interview.

    They showed that HDB home prices are not beyond reach. This is because the resale price index has risen by an average of 3.2 per cent annually from 1999 to last year, lower than the 3.9 per cent increase in median household income.

    But opposition Reform Party member Hazel Poa later wrote in a blog post that the results would be different if the base year is changed from 1999, to say 2001 or 2006.

    Mr Mah did not refer to Ms Poa, but said in his reply to Mr Lim: 'It is possible that prices of resale flats have risen faster than incomes when indexed against different years.'

    Using more recent years like 2004 to index the growth, he said the an-nual growth in the resale price index exceeded income growth, owing to strong demand and the quick economic recovery (see chart).

    But he also pointed out that if 1995 was used as the base year, it would yield a different result as resale flat prices rose by 2.8 per cent, lower than income growth of 3.2 per cent.

    'Ultimately, what matters is whether at all times, first-time home buyers are able to afford HDB flats,' he said.

    To that, the answer is 'yes', he said, as the Government has done two things to ensure new flats are not priced out of reach. One, new flats of different sizes and in different locations for different income groups are always available. Two, setting these flat prices so that they are well within the means of buyers in various income ceiling groups.

    Elaborating on how new flats are affordable, he referred to a formula called the debt service ratio (DSR). It compares the monthly mortgage instalment to the monthly household income. The average DSR for new flats launched in the last six months when property prices surged ranged from 17 per cent to 25 per cent (see table). This applies to new flats in non-mature estates. For those in more central locations and mature estates, the DSR is around 30 per cent.

    These figures are within the international benchmark for housing affordability, which ranges from 30 per cent to 35 per cent, he said.

    But Nominated MP Paulin Straughan pointed out that the majority of flat owners seem to be using most of their Central Provident Fund (CPF) savings to pay for their home loans, with those living in three- and four-room flats having to top them up with cash. Will this lead to insufficient retirement savings, she asked.

    Mr Mah said: 'I have to emphasise that buying an HDB flat is not an expenditure, it is an investment...because when you buy an HDB flat, at the end of the tenure of the flat or towards your retirement, that HDB flat is a very significant store of value.'

    Citing a Department of Statistics survey, he said on average a Singaporean family has more than $100,000 in asset value in their flat. If that asset is monetised, they need not fear using up their CPF savings to pay for it.

    'This is another vindication of our home ownership policy because if we were to use that same amount of money - 25 per cent of income - to rent rather than to buy a place, then at the end of 20 or 30 years, you will not be having this asset which you can use for retirement income,' said Mr Mah.

    On whether the $8,000 household income ceiling for new flat buyers will be raised, he said the answer is still 'no'.

    'We've a finite housing budget... and at the household income ceiling of $8,000 today, we're actually subsidising about 80 per cent of the population,' he said.

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    http://www.straitstimes.com/Singapor...ry_519530.html

    Apr 27, 2010

    parliament

    Up to market to set prices of resale flats

    By Esther Teo


    NATIONAL Development Minister Mah Bow Tan said the Government has no intention of trying to fine-tune HDB policy for first-time buyers, preferring to leave it to the market.

    His comments to Parliament yesterday also included the release of sales figures for the past two years that give a snapshot of how the markets for new and resale flats are faring.

    He told MPs that about 8,000 first-time buyers bought resale HDB flats in each of the past two calendar years. This is out of about an average of 18,000 flats sold in each of those years.

    Of the resale buyers, at least 6,800 had a monthly household income of less than $8,000, meaning they qualified for the CPF housing grant.

    The new/resale ratio has fluctuated over the years. When resale prices were lower, such flats comprised as much as 70 per cent of total sales, but the proportion is coming down now as resale prices head north, he said.

    Mr Mah was responding to a question from MP Lim Wee Kiak (Sembawang GRC), who asked if the Government will take steps to encourage more first-time resale buyers to allow for 'the renewing of estates'.

    Dr Lim also asked if the Government would consider increasing the CPF housing grant or introducing another form of financing for the cash-over-valuation (COV) as a way of increasing the incentive for buying a resale flat.

    Mr Mah reiterated that as the Government did not have a particular view on the new/resale ratio, there was no need to introduce incentives.

    'The most important point is whether we have enough flats overall for first-timers to purchase, whether new or resale... I don't think we want to skew the decision either way; we will let the market take care of it.'

    While build-to-order flats were priced lower due to subsidies, they required a longer waiting time and were mostly in non-mature estates, which might not suit some buyers, he said.

    The minister also addressed MP Ho Geok Choo's (West Coast GRC) suggestion that the valuation process be reviewed to address high COVs.

    Mr Mah said: 'The resale flat prices must be set by the market and the COV is part and parcel of the resale flat price.'

    He added that there was nothing unusual about having a COV in the HDB resale market. 'Just last year, we had COVs which were either zero or negative, which reflected the market situation at that time. I dare say that as the market cools down and as supply catches up with demand, the COV prices will start to moderate as well.'

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