HDB says property portal based its claim on a 'simplistic analysis of incomplete data'
by Sumita Sreedharan, TODAY, 24 Mar 2012
by Sumita Sreedharan, TODAY, 24 Mar 2012
The Housing and Development Board (HDB) has slammed an article published on property portal PropertyGuru, which claimed that private property is more affordable than HDB resale flats, as "misleading".
The article, which was posted on PropertyGuru's website on Thursday, had used what it said was a "globally-recognised" formula of the Median Multiple - derived from dividing the median house price by the annual median household income - in calculating housing affordability. HDB resale flats are said to be "severely unaffordable", said the article titled, HDBs more unaffordable than private homes.
In response to Today's queries, a HDB spokesperson said yesterday that PropertyGuru's report was based on "a simplistic analysis of incomplete data" and had "missed out some important details".
It said that PropertyGuru relied only on the market prices of HDB resale flats. "This is not an appropriate parameter for computing the affordability of public housing, as most Singaporeans buy their new flats directly from HDB via the Build-To-Order (BTO) programme. These flats are deliberately priced considerably lower than comparable resale flats, to ensure affordability," said the HDB.
The HDB also pointed out that PropertyGuru had not factored in the "substantial housing grants", which make up "a significant portion of the purchase price", received by Singaporeans when they buy their homes, either directly from the HDB or even through the resale market.
The HDB said the Government "is committed to make HDB flats affordable to Singaporeans" by offering a wide range of new flats, pricing new HDB flats affordably and offering housing loans at "reasonable" interest rates. "With careful pricing and generous housing grants, all homebuyers who make prudent choices will find new HDB flats within easy reach," said the HDB.
Last year, households buying new flats used an average of 24 per cent of their monthly income to pay for their housing loans - "well below the international benchmark for housing affordability of 30 to 35 per cent", said the HDB. "And with CPF (Central Provident Fund), the majority of the household can pay their monthly instalments entirely using their CPF contribution, with zero or minimum cash outlay."
PropertyGuru's article said it had contacted HDB "for an official statement but were unable to issue any comment prior to publication".
The HDB said yesterday that it regrets that PropertyGuru "was not prepared to wait for HDB's response, in order to present readers with a balanced picture".
"Cross-country comparison of data is often fraught with challenges, as countries differ greatly in their policies, state of development, and physical context," said the HDB. "In housing, for example, the extent of our public housing programme and the use of CPF for housing make us quite special. As a result, our rate of home ownership, at above 90 per cent, is the highest globally."
When contacted yesterday, PropNex Realty chief executive Mohamed Ismail felt that the median multiple should be calculated using HDB BTO flat prices against the median income to derive the affordability. "One cannot deny the fact that in the last five years, income has not increased at the same rate as property prices," he said. "However, all property prices are subject to cycles and a correction is likely when the affordability ratio widens."
The HDB felt the rise in HDB resale and private property prices in recent years "is not sustainable". "That is why the Government has been intervening with both supply and demand measures, in order to correct the imbalance," said the HDB. "The market has moderated considerably."
With all newly-wed first-timers "largely assured" of access to a new flat, the HDB said it would focus on helping second-timers this year. "As we assist second-timers in getting a new HDB flat, the impact will be felt in the HDB resale market," added the HDB. "Meanwhile, URA (Urban Redevelopment Authority) will continue to push out land supply for new private property development, to match the demand. The affordability of housing in Singapore should further improve in the months ahead."
HDB responds to PropertyGuru article on public housing affordability
Mar 24, 2012 - PropertyGuru.com.sg
By Romesh Navaratnarajah
Mar 24, 2012 - PropertyGuru.com.sg
By Romesh Navaratnarajah
On Thursday, PropertyGuru published an article ("HDB flats are more unaffordable than private homes"). The Housing and Development Board (HDB) has since issued a response. HDB's letter is published in full below.
HDB wishes to stress that the PropertyGuru report, "HDBs more unaffordable than private homes", is misleading, as it is based on a simplistic analysis of incomplete data. We regret that PropertyGuru was not prepared to wait for HDB's response, in order to present readers with a balanced picture.
Cross-country comparison of data is often fraught with challenges, as countries differ greatly in their policies, state of development, and physical context. In housing, for example, the extent of our public housing programme (one of the largest in the world) and the use of CPF for housing (unique in the world) make us quite special. As a result, our rate of homeownership, at above 90 percent, is the highest globally.
PropertyGuru used the House-Price to Income (HPI) ratio to compare Singapore with other countries and cities. But the report missed out some important details.
First, PropertyGuru relied only on the market prices of HDB resale flats. This is not an appropriate parameter for computing the affordability of public housing, as most Singaporeans buy their new flats directly from HDB via the Build-To-Order (BTO) programme. These new flats are deliberately priced considerably lower than comparable resale flats, to ensure affordability.
Second, PropertyGuru did not factor in the substantial housing grants received by Singaporeans when they buy their homes, either directly from HDB or even through the resale market. These grants make up a significant portion of the purchase price.
The Government is committed to make HDB flats affordable to Singaporeans. We do this through a three-pronged strategy:
i. By offering a wide range of new flats, with different flat types (from 2-room to 5-room flats), in different locations (including both non-mature to mature estates), to cater to the different income groups.
ii. By pricing new HDB flats affordably, and offering various forms of housing grants to help lower income families own a home.
iii. By offering housing loans at reasonable interest rates.
With careful pricing and generous housing grants, all home buyers who make prudent choices will find new HDB flats within easy reach. Households buying new flats in 2011 used an average of 24 percent of their monthly income to pay for their housing loans. This is well below the international benchmark for housing affordability of 30-35 percent. And with CPF, the majority of the household can pay their monthly instalments entirely using their CPF contribution, with zero or minimum cash outlay:
Notes:
1. Selling prices are based on flats in non-mature estates offered in 2011.
2. The median income is based on first-timer applicants in 2011 in non-mature estates.
3. Monthly mortgage instalments computed based on 90% of the selling price, at HDB current concessionary interest rate of 2.6% over 30 years.
4. The Additional CPF Housing Grant and Special CPF Housing Grant are used to offset the 90% maximum loan where applicable, assuming that buyers have sufficient saving for the 10% downpayment.
At the same time, the rise in HDB resale and private property prices in recent years is not sustainable. That is why the Government has been intervening with both supply and demand measures, in order to correct the imbalance. The market has moderated considerably. For all newly-wed first-timers, their access to a new and affordable HDB flat is now largely assured. This year, HDB will focus on second-timers. As we assist second-timers in getting a new HDB flat, the impact will be felt in the HDB resale market. Meanwhile, URA will continue to push out land supply for new private property development, to match the demand. The affordability of housing in Singapore should further improve in the months ahead.
Regards
Housing & Development Board
Housing & Development Board
Housing and Development Board (HDB) resale homes in Singapore are more unaffordable than private homes, PropertyGuru can exclusively reveal. They are also classed as being ‘severely unaffordable’.
Using a globally-recognised formula where the Median Multiple (median house price divided by the annual median household income) is used to calculate housing affordability, HDB resale flatsare also classed as being severely unaffordable using a scale which was most recently published in the 8th Annual Demographia International Housing Affordability Survey.
Housing affordability is evaluated based on the quotient deduced from the given formula, where a result of 3.0 and below would imply that houses are affordable, 3.1 to 4.0 (moderately unaffordable), 4.1 to 5.0 (seriously unaffordable), and 5.1 and over (severely unaffordable).
Given that the international report centred on the mid-end market, PropertyGuru focused its attention on private apartments and condominiums within the Outside Central Region (OCR) and Rest of Central Region (RCR), as these areas are home to most of the mid- to high-end properties.
The median multiple is based on calculations using the median household income from Singstat’s Key Household Characteristics and Household Income Trends, 2011, and the median price for all types of resale HDBs, ranging from one- to five-room and executive flats, according to data from the HDB andPropertyGuru.
The median multiple for private properties is 6.03 which means they are ‘severely unaffordable’ but for HDB resale flats, the result is arguably shocking. The median multiple was found to be at a high of around 6.7, which lies within the ‘severely unaffordable’ bracket – and even more unaffordable than private properties.
While private properties and HDB resale flats hit the ‘severely unaffordable’ mark, it has to be noted that the monthly household income for HDB dwellers is considerably lower than that of private homeowners.
Tejaswi Chunduri, Regional Analyst at PropertyGuru, offered her insights on the findings. She said: “The data is reflective of the housing affordability issues the country has been facing the past few years. In the last five years the median household income in Singapore has increased by 42 percent whereas HDB resale prices have shot up by 84 percent according to the HDB price index. Private property has risen 58 percent when we look at the private property price index.”
She added: “This is a great contradiction to HDB's role which is to offer affordable housing to the masses,” however she was quick to add that homes in Singapore are more affordable than Hong Kong which earned a rating of 12.6.
Despite the high prices, private home sales in Singapore continue to skyrocket, rising 29 percent in February from the previous month. “It is yet to be seen if the multiple rounds of cooling measures and other policies introduced by the government will prove effective in making home prices more affordable,” added Chunduri.
The HDB was contacted for an official statement but were unable to issue any comment prior to publication.
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PropertyGuru tells its side of the story
TODAY, 27 Mar 2012
Last week, PropertyGuru published the report "HDB flats are more unaffordable than private homes" online and in print. The Housing and Development Board (HDB) issued a response and claimed that our report was "misleading" and based on a "simplistic analysis" (March 24).
Our report, which used data from the HDB and the Department of Statistics, focused solely on the affordability of resale homes here; it did not factor Build-to-Order (BTO) flats, which are priced significantly lower.
PropertyGuru did not include the housing grants available to Singaporeans in the BTO and resale market, as it was not the article's core focus.
PropertyGuru contacted the HDB on March 20 for a response but did not receive an official comment prior to publication.
As a responsibility to our readers, we had to keep with the deadlines and went ahead on March 22 with the publication.
The HDB's response focussed on the affordability of BTO units, which PropertyGuru does not dispute. We recognise the HDB's efforts to make public housing affordable and available to all Singaporeans.
In this year to date, we have published more than 20 articles in print and online, highlighting the work being done by the HDB.
We look forward to continuing to work closely with the HDB and to ensure that its news is read by the widest possible readership.
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