11 October 2005

What the Straits Times Doesn't Understand About Home Ownership For Poor Singaporeans

ST Oct 11, 2005
9 in 10 of S'pore's poor own homes
More than half own four-room flats or bigger, survey finds
By Daryl Loo

THEY are among the poorest in Singapore but nearly nine in 10 of the bottom 20 per cent of HDB families own the roof over their head.

Even more notable is the size of the homes they own: more than half own four-room or bigger flats.

Duh. Well, of course. Quite some time ago, the government already decided to stop building three-room flats, remember? You wouldn't be able to get a new 3-room flat if you wanted to. And that's the problem. Poor families are forced to purchase 4-room flats even if it would be a much smarter financial decision for them to get a smaller, cheaper one.
And if these 87 per cent of lower-income families sell their flats at current valuation, most will have quite a handsome sum in hand even after settling their HDB loan.
At least the Straits Times understands that these poor families still have a HDB loan to settle. Which means that along with struggling to pay for their rice, water and electricity bills, they also struggle each month to pay their loan interest to the HDB.

The more obvious point is that if these families sell their homes, they will be homeless. Gee, how come the Straits Times didn't think of that? So clever.
Technically known as home equity, calculations by the Department of Statistics estimate it to be an average $138,000.

But even more telling is when these figures are compared to the national average, which shows that 93 per cent of all HDB dwellers own their flats and that their home equity is $154,000.
Wow, such respectable sums. Now if the Singapore government allowed you and your family to camp out in the HDB void decks or on Changi Beach in a tent, that would be nice. However, neither option is available, which you would know if you have been keeping up with the news.
Experts said they point essentially to two things:

The national policy of home ownership, started in 1964, has worked well enough to reach the poor

When needed, the average HDB family can sell its property and have a tidy sum.
The average HDB family can then set up camp and live in the forested areas around MacRitchie Reservoir. That is, until the park rangers chase them away.
Nanyang Technological University Associate Professor Tan Khee Giap said the success of the home ownership policy, 'means it is now extremely critical for the Government to make sure the prices of HDB's cheaper flats do not dip'.
Maybe it's more critical for the Government to set up some new camping grounds.


singaporean said...

99 year lease is not ownership. When it expires, the flat is only worth scraps, not unlike a car when the COE expires.

And the value of the flat can collapse well before the 99 years are up, depending on what the rules of home loans on minimum lease stand. The government is obviously watching this closely to avoid the embarassment of flats too old to qualify for loans selling at ridiculously low rates, which will create to a death spiral in the value of all hdb flats.

Obviously, it is not in the interest of the government for this to happen, and we can be sure the government will continue to rejig home loan rules to accomodate ageing flats, while selectively tearing down some old flats to build new ones and allow old flat owners to cheaply "upgrade" to a new flat with long lease (SERS), or refurbishing existing flats with an accompanying extension to the lease (MUP).

The long term value of your flat depends very much on political patronage, ie. how you vote.

And lastly, the use of CPF money for leasing property is a discrimination against business owners and strangles entrepreneurship. With the absence of alternative immediate use of CPF monies, salaried employees frivolously bid up the value of the tiny flats. I say, Singaporeans should pay up half their home loans in cash: only then can the cost of property get more realistic (and there will be no need to police cashback deals). But that wouldnt happen, of course, because the political fallout will be impossible to contain. The government, choosing to stay in power, would rather build casinos to keep overvalued properties propped up than actually creating a genuinely affordable housing market for both leasees and tenants.

Anthony said...

Hear hear.

merf said...

Is our government running out of stuff to boast about? hmm...

Recruit Ong said...

wah Singaporean, u sibei tok kong!

Paperman said...

Home ownership also means you're stuck with the flat if you're a low income family, as Mr. Wang pointedly observes. Yupz. Not much to boast about...

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