SINGAPORE — Senior Minister of State for National Development Sim Ann posted on her Facebook page on Sunday (11 Dec) rebutting Non-constituency Member of Parliament, Leong Mun Wai, who recently made a social media post with regards to the pricing of Build-To-Order (BTO) flats by the Housing Development Board (HDB).
Ms Sim said Mr Leong continues to question if the HDB subsidies are sufficient to make BTOs affordable. “Essentially, Mr Leong wants the Government to price BTOs much lower, disregarding land costs if necessary,” she said.
Ms Sim assured everyone that the government has kept BTOs affordable for Singaporeans and will continue to do so. She said that for most Singaporeans, the home price to annual income (HPI) ratio is only about 4 to 5 times.
“In comparison, in global cities HPIs range from 8 times to well over 20 times,” she said.
Ms Sim said that the government has been increasing subsidies and grants where necessary to keep BTO prices affordable to Singaporeans. “This is clear from the relatively stable prices of BTO flats – the average price of a 4-Room BTO flat in non-mature estates was S$341,000 in 2019 and S$348,000 in 2022 – despite the Resale Price Index rising much faster by 28% over this period,” she pointed out.
It is true that under the Enhanced Housing Grant (EHG) scheme, Singaporean families can enjoy up to S$80,000 of grant subsidies. However, the amount of subsidies granted will depend on the applicant’s household income.
For example, the government won’t give any EHG subsidies to families whose household income is more than S$9,000 (household income ceiling for buying HDB flats is S$14,000).
And based on the figures from the Department of Statistics, the median monthly household income among the resident-employed households in Singapore was S$9,520 in 2021.
That is to say, on average, most middle-income families will be getting little or no EHG grants for buying BTO flats.
“Seriously unaffordable”
According to the Demographia International Housing Affordability Survey 2022 published by the Urban Reform Institute and Frontier Centre for Public Policy, any housing price-to-income ratio of more than three is considered unaffordable.
The Urban Reform Institute is a think tank based in the US focusing on the study of cities as generators of upward mobility. At the same time, the Frontier Centre for Public Policy is an independent Canadian public policy think tank whose mission is to explore options for the future by undertaking research and education that supports economic growth and opportunities.
The Demographia International Housing Affordability Survey rates middle-income housing affordability using the “Median Multiple”, which is the median housing price divided by the median household income. The Median Multiple is widely used for evaluating housing markets and has been recommended as an affordability indicator by the World Bank and the United Nations.
In particular, the survey also ranked Singapore 53rd in terms of affordability out of 92 markets.
In any case, based on the home price to annual income ratio of 4 to 5 times, as disclosed by Ms Sim, as well as Demographia’s affordability recommendation, Singapore’s BTO flats are considered “seriously unaffordable”.
And using the average prices of S$341,000 in 2019 and S$348,000 in 2022 of a 4-Room BTO flat, also disclosed by Ms Sim, and assuming their home price to annual income ratio is, on average, 4.5 (taking the middle of 4 and 5), the 4-Room BTO flat should then be priced at S$227,333 and S$232,000 respectively in order to meet the minimum affordability ratio of 3.
Sim Ann’s Mendacious Twaddle Cannot Disguise the Toxic Link Between HDB (Over)Pricing and Bailing Out Our Sovereign Wealth Funds
State media dutifully reported on Sim Ann’s Facebook post on Monday in which she supported the Government”s motion “asking Parliament to affirm the importance of keeping public housing affordable and accessible, while protecting the interests of both current and future generations of Singaporeans”.
The PAP, like the colonial British administration who gifted Singapore to LKY and which it so closely resembles, dumbs things down for Singaporeans in paternalist fashion. The story they want Singaporeans to swallow is that despite land prices having risen enormously since independence as a result of economic and population growth (much of which is due to Government policy of importing low skilled labour and subsidising foreign PMETs over Singaporeans), a benevolent Government continues to provide high quality public housing priced affordably. Because land forms part of Past Reserves (that riddle wrapped in a mystery inside an enigma that like the PM’s wife’s salary must remain secret lest Singapore collapse and be swallowed up by the sea), the PAP maintain that it can never be spent as that would be unfair to future generations. So HDB must pay the full market price for the land even though they expropriated it fifty years ago from Singaporean landowners, many of whom were not wealthy, for a tiny fraction of its true market value even then. Never mind that it seems hypocritical for the PAP to claim to be worried about future generations when the support provided to families with children is derisory. As I will continue to say, “market” price is meaningless when the PAP Government has a monopoly of land and can restrict supply to extract the maximum revenue.
This is exactly what the Government does by making HDB pay an excessive price for the land even though if HDB was not a Government statutory board but a private sector company it could use its position as a monopoly buyer, or monopsonist, to lower prices. No one should doubt that prices for land are artificially high since prices collapsed when the Government miscalculated and HDB built too many flats. To offset artificially high prices, the Government then goes through an elaborate charade of keeping housing “affordable” by providing a grant to HDB ($4.4 billion in 2022) from the Budget to cover the manufactured loss that HDB makes. HDB’s accounts do not provide a breakdown of its cost of sales between land and construction costs and this has always been a closely guarded secret but its cost of sales were about $5.5 billion in 2022. The Government also subsidises homeowners with CPF housing grants (though these have to be repaid with interest if the flat is sold) to make it possible for Singaporeans to pay these exorbitant monopoly prices.
As I pointed out in my recent blog, “The Mystery of Why the Government Wants HDB To Make a Loss Solved” it would be far easier for the Government to price the land element at cost or at least at a level that meant that HDB would not make a loss. The PAP insists that not paying the “market price” would be unfair to future generations but it has used its monopoly to manipulate the price much higher than it should be in an open market. HDB resale prices keep going up despite the length of the average lease remaining decreasing which suggests that the Government closely watches the build-up of CPF balances and the maximum Singaporeans can be made to pay for smaller and smaller units as part of a coordinated strategy. The ever rising prices paid by HDB to the Government for land are met through the allocations to Ministry of National Development in the Budget out of current revenues. These allocations can then be channelled to GIC and Temasek. With no transparency on the returns achieved we cannot be sure that the performance figures given have not been goosed by regular injections of funds to cover losses despite the Government’s assurances that this is not the case. As I have pointed out the Budget is an exercise in diverting money away from current spending and from providing tangible easily affordable help to Singaporeans. Whether it is subsidising HDB into overpaying for land or mysteriously ever rising allocations to MOH, to the point where healthcare expenditures per Singaporean resident appear on a par or even greater than those per UK resident who receive most healthcare free, while concealing revenues collected from Singaporeans and foreign visitors in a private holding company, or Net Investment Return Contributions (NIRC) that disappear into long term funds and endowments, the whole Budget is an elaborate shell game designed to hide money from Singaporeans and make it appear as if the Government needs to raise taxes.
Singaporeans need to wise up to what Sim Ann and other PAP Ministers really mean when they talk about the Government’s commitment to “affordable” housing. It has much less to do with giving you a good deal than it has in pulling the wool over your eyes and making more and more of your money disappear into secret and unaccountable entities where, like a Madoff fund, it will appear to be earning good or even excellent long term returns, as former Finance Minister Tharman memorably said, but no real money will ever come out.
https://kenjeyaretnam.com/2023/02/03/sim-anns-mendacious-twaddle-cannot-disguise-the-toxic-link-between-hdb-overpricing-and-bailing-out-our-sovereign-wealth-funds/
Miss "Pattern More Than Badminton" should just go jiak sai, period.