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 regard 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 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.
