Thursday, April 28, 2011

Just Look At The Scary Numbers

The graphic was supposed to illustrate how affordable Mah Bow Tan has priced HDB housing. In the first place, note that "hardly any cash outlay" in the title head is misleading. Besides the extra $36 in the example needed to top up the monthly mortgage, cash is required for the town council charges, season parking, utility bills, and servicing of the miscellaneous loans for renovation and furnishing. Even if you skimp on the airconditioning, electric fans are not packaged with the flats. Planning on getting married and raising kids? Even if CPF were allowed for that (it's not), the housing loan has eaten up all the funds.

The real killer is that all 23% in the Ordinary Account is tied up for 30 long years. After ORD, and 4 years to save up for the down payment, the ordinary Singaporean male will all likelihood be staring at a zero balance in his CPF account at age 55. And that's assuming a smooth career path through 3 decades, immune to vicissitudes at the work place and/or economic upheavals. There's no welfare system in Singapore, the CPF was supposed to be the safety net for retirement at twilight years. Oh, we forgot, the powers that be have decreed that retirement is no longer an option.

Based on the Numbeo ( largest free Internet database about cost of living worldwide) 2011 House Price to Income Ratio rankings, Singapore ranks below major cities like Tokyo, Barcelona, Milan, Dublin, Toronto, New York City, Geneva, Oslo, Rotterdam, San Francisco, Sydney, Vienna, Stockholm, Amsterdam, Zurich, Copenhagen and Berlin.

House Price to Income Ratio is the basic affordability measure for housing in a given area. It is generally the ratio of median house prices to median familial disposable incomes, expressed as years of income.  According to Numbeo, the statistic for Singapore should be 17.13 years (It's 6.69 for Kuala Lumpur, Malaysia, 4.69 for Perth, Australia). Which means 30 years for a HDB flat is just too damn long.

It's not like Mah does not know that there's a whole lot of senior people who are going be broke at retirement time. But his solution is guaranteed to make your blood boil: "Move into your children's flat and rent out your old one."


  1. Mah is playing with fire. How long can the "concessionary rate" of 2.6% last? We are in the middle of one-in-a-generation low interest rate environment. When the rate rises to a more typical 5.2%, the monthly mortgage will top $2,000! Unless he plans to double the medium household income, the average family will not be able to afford a four-room flat.

    Further, if income stagnates, the price of HDB flat will have to fall. And his "asset enhancement" scheme will become known as the Great Singapore Madoff Scheme.

  2. a matter of time, "The Great Singapore Mah Scheme" will vindicate Madoff, that he's just a petty smalltime conman.

  3. I believe many people will be damn shocked at how fast and how high inflation will be over the next 2-3 years. The US will be stopping their QE and massive buying of US Treasuries soon. When that happens, their interest rates will shoot up to 6% and beyond. Singapore banks and MAS, which follow US closely, will raise our interest rates. Home loan rates will hit 4.5% in 2 years time. Heck, even 3% a lot of existing property buyers will up the lorry liao.

  4. The calculation for HDB should be

    278000 divide by annual income (4200 x 12)

    ie 5.5x, the 17x number on numbeo includes condo

    I wrote two posts on this topic:

  5. He is assuming that the income stream is stable. If income of the family falls for whatever reason, the repayment will eat into the cash reserve of the family.

    More often than not, the cash 'that can be kept for' reserve for such a family is very low, based on the income level and cost of living.

    Whoever at HDB created this table is not in touch with the ground.


  6. The 2.6% is tied to the CPF OA rate. Simply put,

    HDB rate = CPF OA rate + 0.1%.

    This fact may be also related to why CPF rates have been kept relatively constant at 2.5% even when there have been suggestions from the government to tie CPF rates to long term government bond rates.

    But just the installment payments alone will deplete CPF savings and the power of compounding will be lost. The minimum sum will also be a problem as it is set to rise with inflation.

  7. a more realistic calculation would be to have the wage increase at a high of 2% per year for the next 30 years.
    however, even at that each individual would only end up with around 120K odd without calculating the interest per year.
    that would fall short of the minimum sum required as well as the fact if it is even substainable for them to achieve a 2% pay increase per year..

  8. What is everybody missing? MEDIAN INCOME

    If you think it is not affordable to the applicants who earn a median income of $4200,
    what about the 50% of applicants who earn below this amount?

    The average of the bottom 10% earns 1400
    The average of the bottom 20% earns 2681

  9. I think many ppl are SUFFERING from the nightmares on ERP and the CTE and the
    RIDICULOUS price of our HDBs!!!!!!

  10. Walking a tight rope.

    If any family member gets retrenched, falls ill, or takes a pay cut, there is no buffer at all!!!!!!!!!!!!!!!!!!!!!!

  11. 1 glaring mistake in the calculations illustrated?

    100% - 5% DP - 90% loan = 5% Cash?

    Why was that omitted?

  12. This is true "Asset Enhancement"!!

    HDB earns 2.6% from your loan repayments
    CPF earns by NOT paying you 2.5% interest on your balance OA.

    Net gain for CPF & HDB = "Asset Enhancement"

    If this was my idea, of course I'd be damn proud of myself!!


  13. that fella living in his $10+ million bungalow along holland road has lost his mind

  14. Is this really the calculation presented? Who is paying for the other 5% of the downpayment????

  15. House Price to Income Ratio is basically a good solution for the applicants who are new and young.

  16. Honestly, as they always say, "figures say it all." The premise of affordability????? There needs to be more than accounting for it. Saying that the loan period is not the issue is basically just brushing things under the carpet.

  17. Our so called public housing, is not public housing at all. Just to cite a real life example. There was a retrenchment problem with my household and now, I have been told to pay them double in monthly instalments, which amounted up to more than what private condo owners are paying. So, how is this public housing, when there is no allowances given for bad patches? How is this affordable public housing?

  18. Scarier Numbers5/06/2011 5:22 PM

    look at these scarier numbers :

    Top 30 highest paid politicians in the world and they are all from Singapore (All amounts exclude bonuses):
    1. Elected President SR Nathan - S$3.9 million.
    2. Prime Minister Lee Hsien Loong - S$3.8 million.
    3. Minister Mentor Lee Kuan Yew - S$3.5 million.
    4. Senior Minister Goh Chok Thong - S$3.5 million.
    5. Senior Minister Prof Jayakumar - S$3.2 million.
    6. DPM & Home Affairs Minister Wong Kan Seng - S$2.9 million.
    7. DPM & Defence Minister Teo Chee Hean - $2.9 million.
    8. Foreign Affairs Minister George Yeo - S$2.8 million.
    9. National Development Minister Mah Bow Tan - S$2.7 million.
    10. PMO Minister Lim Boon Heng - S$2.7 million.
    11. Trade and Industry Minister Lim Hng Kiang - S$2.7 million.
    12. PMO Minister Lim Swee Say - S$2.6 million.
    13. Environment Minister & Muslim Affairs Minister Dr Yaccob Ibrahim - S$2.6million.
    14. Health Minister Khaw Boon Wan - S$2.6 million.
    15. Finance Minister S Tharman - S$2.6 million.
    16. Education Minister & 2nd Minister for Defence Dr Ng Eng Hen - S$2.6 million.
    17. Community Development Youth and Sports Minister - Dr Vivian Balakrishnan - S$2.5 million.
    18. Transport Minister & 2nd Minister for Foreign Affairs Raymond Lim Siang Kiat - S$2.5 million.
    19. Law Minister & 2nd Minister for Home Affairs K Shanmugam - S$2.4million.
    20. Manpower Minister Gan Kim Yong - S$2.2 million.
    21. PMO Minister Lim Hwee Hwa - S$2.2 million.
    22. Acting ICA Minister - Lui Tuck Yew - S$2.0 million.
    23 to 30 = Senior Ministers of State and Ministers of State - each getting between S$1.8 million to S$1.5 million.

    Compared to other Countries' Leaders:
    Donald Tsang Yum-Kuen - Hong Kong (S$716k)
    Barack Obama - United States (S$555k)
    Nicolas Sarkozy - France (S$441k)
    Angela Merkel - Germany (S$420k)
    Gordon Brown - UK (S$387k)
    Taro Aso - Japan (S$337k)

    No wonder PAP has a different perception of the Singapore we live in. If i were earning 3m, education, medical, etc will be cheap, cheap.

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