Singapore’s Second Minister for Finance Lawrence Wong said in a Bloomberg TV interview that the government hasn’t “made any movement in the budget” to relax the property cooling measures because “demand remains very resilient” and “property volume in terms of transactions have increased and not decreased”.
Sacrificing housing affordability for foreign investment
Singapore private property prices have fallen only 3 percent in 2016 and a total of 11.2 percent from the last peak in the third quarter of 2013, after a surge of 92 percent since the bottom of 2003.
But compared with our counterpart in Hong Kong, home prices there have risen more than 150 percent since 2009 and 370 percent from the SARS period in 2003.
According to a recent study by Oxford Economics, Hong Kong has the most unaffordable housing in the world, followed by Mumbai, Beijing, Shanghai and London. Singapore takes the 7th place after Tokyo.
With strict criteria and a long waiting time of over 8 years for public housing, Hong Kong people are forced to go after private properties.
However, only people have a monthly income of at least HK$40,000 to HK$50,000 (S$7,000 to S$9,000) can afford to buy a private home. A median income family needs 35 years of annual income (and without spending any of the income) to buy a 970 sq ft property. The duration is 30 years for Mumbai, Beijing and Shanghai.
Chinese buyers have long been blamed for pushing up property prices in Hong Kong. CNBC recently comes up with an article on “Hong Kong and Singapore property: One is winning on Chinese investors” (CNBC, Feb 17)
Obviously, investors from China are more interested in Hong Kong than Singapore properties. Last year, Chinese buyers invested $5.2 billion in Hong Kong’s real estate market, compared to only $600 million in Singapore, according to figures from Real Capital Analytics.
“In Hong Kong, Chinese developers and financial institutions have mainly purchased office property, while individual investors have mainly purchased residential property,” commented the Asia Pacific CEO at Colliers International.
Fortunately, since the Singapore government imposed 15 percent Additional Buyer Stamp Duty (ABSD) on foreign buyers, foreigners who bought homes on the city fringe were only 5.5 percent for the fourth quarter last year, down significantly from 17.5 percent before ABSD was introduced.
Widened wealth gap amid rising property prices
A 2014 study done by NUS Department of Economics on “Income inequality in Singapore: Do housing prices play a role?” tried to spot the link between income inequality and housing prices. The results show a small but statistically significant effect of rising private residential property prices on labor income.
There are social implications when property prices are going through the roof.
Those who sit on properties acquired when they are still cheap are laughing all the way to the bank. On the other hand, those who are late to the game are faced with increasingly unaffordable housing.
High property prices widens the wealth gap between the ‘haves’ and the ‘don’t haves’.
The ‘haves’ can now leverage the increased property prices to upgrade their home or acquire more properties. On the other hand, the ‘don’t haves’ find themselves unable to afford a roof over their head.
There is a scene in a Hong Kong TV drama about two lovers saving to buy their first matrimonial home.
One day the guy happily shared the good news with his fiancée.
“Guess what I did today? I just put down the deposit for our home. Our dream has finally come true after all these years … Remember I told you my schoolmate who works in a bank? He helps us to get very good terms for the 35-year loan …”
“I’m afraid that I can’t be the co-owner of the new flat,” The fiancée interrupts him. “In fact, I have to marry another guy. My fiancé has just bought a seaside house for us.”
She continued. “I’m sorry for my change of heart. I am getting tired of this kind of life – For years we hardly eat out. We can only meet at places that don’t cost anything. We never go for holidays. I can’t go shopping to avoid spending money unnecessarily – all for the sake of saving every cent for the down payment of the most affordable flat.”
“Yet housing prices are climbing much faster than the rate we save and whatever increment we get from our salary. We have no choice but to save even harder. Yet I still feel that the more and longer we save, the more unreachable our goal …”
“By the way, the new house doesn’t come with a mortgage. He pays up in cash.”
Shouldn’t we be grateful that the Singapore government has cooling measures in place to keep private home prices in check? And for those who can’t afford private properties, aren’t we lucky to have HDB flats at different price levels affordable to buyers?
Buying a home first or getting married first?
In Singapore, more are delaying their marriage to save up for the high cost of wedding, housing and having children. Young people need to spend time to build their career and be financial stable before settling down.
Three years back, the then National Development Minister Khaw Boon Wan told the media that the mentality of the new generation has changed. The sequence is to buy a home first, then get married before starting a family.
In an interview on marriage and parenthood last October, Senior Minister of State Josephine Teo urged young people to look for love and settle down early. She also warned women to have babies early to avoid infertility problems if they try it too late.
In Hong Kong, more than 70 percent of people feel that they should buy a home first before getting married. Over 60 percent of women put buying their own flat a first priority over marriage.
Recently, a Hong Kong TV show “The Place We Call Home” (有楼万事足) interviewed individuals to see how far they can go in order to buy their own home. We all understand how these kind of reality TV shows like to exaggerate things to attract viewers.
An attractive 22-year-old girl put down ‘having his own property’ a must-have criterion in looking for her future husband. She says guys shouldn’t fish in muddled water if they don’t own any property.
Her dream home is a 2,000 sq ft apartment in a prestigious district. The reason? Women can only have sense of security if the property is their own. Women must feel safe and comfortable before they can come and conceive naturally.
Can someone go tell our Minister Mrs Teo that millennial women are looking much more than “a very small space to have sex” for reproduction?
We should ask Josephine Teo how big is her home.
Good one!
Hi Vina
Your chart, Oxford Economics, Numbeo is not representative of Singapore housing. In fact, it does not even represent our private housing situation. The bar shows Singapore homes cost an average of 20+ times of our annual income?
80% of Singaporeans stay in HDB flats and only 20% stay in private properties( both condos, apartments and landed). Therefore it is important to involve HDB. Amongst all types of HDB flats, the 4-room flat is the most common type. A BTO 4-room in the OCR ranges between $250k to $350k without grant.
Just publish by Singapore Statistic Dept( Singstat), our medium household monthly income is $8846 or $106,152 per annum. Assuming it averages $300k for a BTO 4-room flat, it would take a young millennium Singaporean couple less than 3 years of income to have their nest.
Including all the grants, they could have further discount of another $50k and could have gotten their nest within 3 years from application if they apply for any suburb area. Our new 4-room is of 980 sq ft with 3 bedrooms, a reasonable size kitchen and a living room.
Remember, unlike Hong Kong, the unit space calculation is tilted in favour of Singapore and unlike the Singapore’s private counterpart, each HDB unit has only two square meters for aircon ledges. Singapore has many crazy developers who build as much as 6-8 sq meters of aircon ledges for each private apartment.
Also in Singstat! It says of our lowest income deciles, 14% own cars, 10.9% have maids, 6.5% live in private property!
So our Minister Josephine Teo’s call do not sense. Singaporeans, both of high and low income, have lots of space…..if they want.
thank you for clarification..consider Singapore is a small island, Singapore gov already had done enough imho and an incredible job for lowering housing price and making it extremely affordable (after all not everyone can always live in their dream house.. just like not everyone can make as much money as they like sometimes,,,its reality of life)…what else more you could ask for??
on a side note, 有楼万事足 is a pure fake make up reality TV, the comment which the young lady in the show made is nothing more then a JOKE, beside HK housing market is completely different to Singapore anyway.
Hong Kong media is very competitive. Reality shows on TV must be controversial to attract viewers (and corporate sponsors). The editing of her interview to just to conclusions was quite obvious. But it did serve the purpose to arouse strong reactions and discussions in the social media.
I am open to people with different values … at least now I know some in the younger generation have different expectations. I like reading overseas research reports and watching shows/documentaries not covered by the Singapore media. They show me different perspectives and set me thinking.
Hi, I watched that drama too, it may be fiction but it truly and ironically depicts how the middle (sandwiched) class are coping poorly with living standards because of the wide income disparity. In my opinion, the financial markets are heading for storms, Most stubborn sellers still hoping to reap gains are going to be caught off guard. Sometimes, stop loss could be wise strategies in the long run, i.e it is silly to hold on and hope for big gains in a property market that is heading south. I am glad I cashed out,
Yes, we are very lucky in Singapore where the poorest don’t have to sleep in the streets. For other countries, even in developed countries like US and UK, this is not the case.
I also sold off my investment properties quite some time back. I think people hold onto their properties for different reasons. They may be long-term investment or rare gems that are hard to buy back again. We are facing big uncertainties ahead and nobody knows what’s going to happen in the market. Only time can tell.
The Oxford Econs study is quite accurate if you’re talking about RCR condos, which I suspect is the type of residential property they are using across the various cities to compare. So you’re looking at a 2 or 3-bedroom RCR condo with price tag of about $2M which is about 20X median household income of around $100K per annum.
If you want to bring in HDB (BTO & resale) with various CPF grants & non-CPF grants, then cannot compare with any other country liao. In other countries, public housing is on rental basis, not for buying. For most other developed countries, the bottom 20% of households are usually channeled towards public housing rental or subsidized private housing rental. LKY & old guards purposely changed the convention for public housing in 1965.
You are absolutely right here. The study is not about comparing the proportion of residents staying in public or private housing, but the affordability of private homes across different countries.