Date: 31st Dec 2010, Friday
Public Housing In Singapore
Public housing in Singapore as such is not generally considered as a sign of poverty or lower standards of living as compared to public housing in other countries. Although they are generally about three times cheaper than privately-built homes in Singapore. The Housing and Development Board (HDB), established in 1960, is currently managing public housing in Singapore.
HDB first five years development plans were to built 51,000 dwelling units for $194million (or about $3,800 per unit) between July 1960 to June 1965. HDB was able to keep to the building programme and by 1965, 20% of 2 millions population were housed in 60,000 HDB flats.
50 years later, as on 2015 around 80% of Singaporeans lives in these housing developments. In December 2010, HDB marks the completion of its one million flats.
And from 1964, HDB introduces the "Home Ownership for the People" scheme. A three-room flat has two bedrooms and a living room in about 55 m2 (600 sq. ft.) of floor area. Each unit in an HDB block usually share a common corridor which may run across the length of slab blocks. Each of these units cost about $6,200 in 1964. By 2015, 95% of the HDB flats are sold to home owners.
Historical: Median Combined Household Monthly Income : Cost of New 3 Room Flat ~ Housing cost x of annual salary
1960 : $200 : $6,000 ~ 2.5x
1970 : $400 : $10,000 ~ 2.0x
1980 : $1,000 : $50,000 ~ 4.1x *rise due HDB land-based pricing approach
1990 : $2,000 : $120,000 ~ 5.0x *sharp rise from 1993 to 1997
2000 : $3,500 : $100,000 ~ 2.5x *correction due to economy downturn
2010 : $5,000 : $200,000 ~ 3.3x
A young person's perspective:
Singapore, in 1970:
A plate of chicken rice is $1.
A fresh polytechnic graduate pay is $400 pm.
A 3 room HDB flat (600 sq ft) is $10,000
35 year on, in 2005:
similar plate of chicken rice is now $2.50 (cost 2.5 times more)
polytechnic graduate pay is $2,000 pm (cost 5 times more)
similar new HDB flat is $100,000. (cost 10 times more)
Getting The Home
Getting A Loan and Paying Off
The average price of new 3 Room HDB BTO (Build-To-Order) Flat is about $200,000. Therefore, the 5% down payment required is $10,000. For those who earn about $5,000, the Government housing grant is $5,000. So still need to cash top-up of $5,000.
Since the CPF Ordinary Account (OA) contribution rate is 23 per cent (age below 35), the monthly OA is about $1,000 from a monthly income of $4,500.
Bank loan can give a max loan of only 80% ($160,000). 15% ($30,000) cpf and 5% ($10,000) must be cash. OA starts to decline from age 35 to 21 per cent, and gradually to 11.5 and 1 per cent after 55. Which meant that the cash component will go up.
According to HDB website, the interest rate was set at 2.6% per year. For 15 years loan, the total interest to be paid is $33,393.97. Also, there are stamp duty, conveyancing fee, etc... approximately $6,000 (2% to 3%). The total cost of the new flat is $240,000.
15 Years Mortgage for $160,000 = $$1,100/month (or CPF $1,000 + Cash $100).
Clearly, new HDB BTO Flats are still affordable. But for HDB resale units and Private Housing are in an un-affordability price range.
For Second Hand HDB in the resale market, the similar size home (remaining lease, say 88 years) could cost about $300,000 in 2010. 6 times Median Combined Household Income.
For Private Housing, the similar size home (99 years lease) could cost about $600,000 in 2010. 11 times Median Combined Household Income.
Financial Planning Rule Of Thumb: The purchase price of a home should be less than 5 years (5x) of the combined family income.
This article was written in Dec 2010. As of writing, the cost home prices are still trending upwards and supplies are limited.
Mar 2010 Update: 85% of Singaporeans live in HDB flats, Minister Mentor Lee Kuan Yew strives to make home ownership the most valuable possession for Singaporeans. He said "We intend to keep the values of these homes up. It will never go down!" The MP for Tanjong Pagar said that home renewal and refurbishing programmes in Singapore ensure that the value of housing here will continue rising.
August 2013 Update: Newly-minted Singapore permanent residents will now have to wait three years (September 2016) before buying a resale HDB public flat. There were 51,000 Housing Board flats fully owned by permanent residents as of end June, representing 6 per cent of all HDB flats - 130 flats were sold by PRs within three years of their purchase, while 320 were sold within four years of purchase, and 490 within five years.
Updated On: 18.09.27