In the Sunday Times yesterday, National Development Minister Mah Bow Tan said that the recently introduced cooling measures by the government was working.
In the resale Housing Board market, median cash over valuation (COV) payments in October fell to $25,000, from $30,000 in the previous quarter.
Unfortunately, even though COV is dropping, the current formula of pegging prices of new HDB flats to transacted prices (less subsidy) means that valuations of HDB units will continue to go up as prices chase the COV in a never-ending spiral…
Mr Mah also pointed out that in the private property market, prices are still rising but the increases have moderated.
According to the Urban Redevelopment Authority (URA), private residential prices rose 2.9 per cent in the third quarter of this year. This represented a step-down from the previous quarter, when prices jumped 5.3 per cent.
Seriously, I don’t think this kind of growth is sustainable. 2.9% a quarter or almost 12% a year. Are our incomes even growing at 12% a year? Perhaps so for just a small select group of people.
Which leads me to introduce this affordability ratio:
Property value/annual disposable income
Where annual disposable income is your income net of tax
At the peak of the massive Japanese bubble, the ratio was at nine times in Tokyo. It is already 14 times in Beijing with the rest of China having a national average of about 8.
How affordable really is Singapore property?