SINGAPORE — In an interview with The Straits Times last Monday (20 Mar), National Development Minister Desmond Lee said that all BTO flats should continue to be affordable and accessible to Singaporeans within the BTO eligibility band. But he also said that location and other attributes must also be taken into account when prices are set.
Naturally, those in mature estates or flats in areas that have better attributes will be priced higher, he said and added, “I think Singaporeans accept that.”
Mr Lee said that the eligibility band for BTO flats is “very broad”, covering low-income families all the way to upper-middle families earning up to S$14,000 – around the 70th percentile of household incomes.
So, if an upper-middle couple is earning S$14,000 at the maximum income ceiling and bought, say, a 5-room BTO flat in a mature estate like Ang Mo Kio for $800,000, the price to annual income ratio (HPI) would work out to be about 4.8 for the couple.
But Senior Minister of State for National Development Sim Ann said last December that the government has kept BTO flats affordable for Singaporeans. She added that for most Singaporeans, the home price to annual income 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.
On surface, it might look “affordable”, but according to the Demographia International Housing Affordability Survey 2022, published by the Urban Reform Institute and Frontier Centre for Public Policy, any HPI 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 while 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.
Hence, at an HPI of 4.8, it is still “seriously unaffordable” for a Singaporean couple earning S$14,000 to buy an S$800,000 5-room BTO flat in a mature estate like Ang Mo Kio. And we are talking about a couple already earning at the highest end of the income ceiling set by HDB.
Of course, one can argue that perhaps the couple should buy a cheaper 4-room or even 3-room BTO flat instead, but let’s not forget that previous generations of upper-middle families can buy their 5-room new flats at a much lower HPI ratio of less than 3.
Furthermore, if one of the working couple were to be retrenched and had to drive Grab, their monthly household income would suddenly become a lot less than S$14,000, and they would find themselves struggling to service the mortgage loan they took to buy that S$800,000 5-room BTO flat.
Netizens commenting on the Straits Times’ Facebook post of the report questioned the definition of affordability by Mr Desmond Lee, arguing that being able to afford does not mean that the price is affordable.
Some also question if the high wages of the ministers make them unable to understand the issues citizens face regarding expenses.