Tuesday, June 21, 2011

Concentrate on the households earning between 8,000 to 12,000

I hope that the Minister of National Development is not serious in increasing the $8,000 household income limit for HDB flats. The reason is very simple. Now the demand is already far higher than the supply of HDB flats. Imagine what will happen if you increase the household limit now. The demand will increase exponentially.

Based on the statistics that he highlighted, more than half of the first-timers applying under the Fiance-Fiancee Scheme have a median age of 27, while the other married first-timers have a median age of 34. Based on the first-timers median age of 27, you can also see that there may be quite a few couples that could only afford a HDB flat when they are around 27 years old. A BTO flat usually takes about 3-4 years before it is built, which will result in a median marrying age of 30-31 years old.

If the objective of the government is for couples to marry younger, then the household income ceiling should still remain at $8,000. Instead, the supply of the HDB flats should be ramped up until the first-timers median age drop below 27 years old. I feel that the median age of first timers is a good indicator of affordability for the general population.

To address the other market group being priced out due to the amount of COV required, I would suggest that the government ramp up other types of flats to tame the market prices. I suggest the following:
  1. Start building executive flats again and increase the household income ceiling for these flats to $10,000. This will in a way help tame the prices of DBSS.
  2. Increase the number of DBSS flats.
  3. Increase the household income ceiling for EC flats to $12,000 and increase the number of such flats.

The above will help address the other market group who is more affluent and able to afford more than the typical Singaporeans. Policies can also be created in other areas to tame the demand of HDB flats, which I have written in a post here.

The key is to isolate and address the concerns of that particular group, and not rock the other groups in the process. I personally believe the median age of the unmarried first-timers is a good gauge of how affordable HDB flats are. I feel that increasing the household income ceiling will only worsen the problem.

I hope they can look more deeply into this problem.

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