There has been a recent spate of news and articles to the Straits Times forum regarding the current state of property prices in Singapore. While the government has acknowledged that private property prices are starting to show signs of a bubble by a series of changes announced last week, they have maintained that public housing remains affordable by and large to the general population.
The criteria that they used as affordability is that a household should not spend more than 30% of their income on their property.
I would actually argue that housing has actually become less affordable (even if the above definition is met) compared to 30 years ago. While housing prices has increased more than 5-10 fold over the last 30 years, that certainly cannot be said of our income levels.
If the public housing today is affordable, then they would be super affordable 30 years ago. 🙂
Furthermore, the current cash over valuation (COV) demanded by sellers of the HDB resale market is at astronomical levels, thus making them unaffordable to those without a sum of cash on hand. Not forgetting the fact that the base valuation is already quite high to begin with. This has impeded the family starting plans of some people.
So much so that an online petition has been started by a group of Singaporeans to petition the government to make public housing more affordable. So far, it has been signed by over 800 people with fairly strong comments.
When I see prices of resale units going at an average of $400-500k (for units that were purchased for a way lesser amount a few years ago), I wonder what the future has in store for all of us.
After all, these units were bought for a 99-year leasehold and prices simply cannot go up indefinitely as the number of years on the lease gets shorter and shorter.
And if you really spend 30% of your income paying for your home for 30 years, you will most definitely retire with insufficient savings in your CPF account. And when that time comes, you will have to downgrade to a smaller property in order to monetize the cash from your property. But what about those who are already staying in a small property to begin with?
The purchase of a property is one of the biggest expenditure you will ever make in your life. So, please do your sums and research carefully before you commit to any purchase.
A useful website for those who are buying or selling private properties would be this newly setup Singapore real estate portal. The interface isn’t too good but it does provide useful historical prices of transactions and other information that would be essential to a property buyer or seller.