The line I've been hearing most often when faced with any complaints is that Singaporeans can always use their CPF to pay for their HDB.
This is what happened when CPF was liberalised for use in housing:
Source from singaporemind.blogspot.comAnd yes, housing is still affordable...according to the Government.
... a paper presented by National University of Singapore (NUS) social work graduate Ng Kok Hoe, which highlighted that a Singaporean would draw between 8 per cent and 26 per cent of his last drawn salary from the CPF at age 65.
Mr Ng, who is pursuing his doctorate in social policy at the London School of Economics, questioned if this was enough, as other countries seemed to hit 50 per cent or more through their pension schemes.
Mr Ng's paper showed that 68 per cent of annual CPF contribution is spent on housing, while health took up 18 per cent and pensions 14 per cent.
WHAT?? A mere 14% for pension?!!!
So what happens when you find out that 14% is, after all, not really enough?
An enlightening quote, again from the article, provides the answer.
As to whether the payout was enough, he[Dr. Balakrishnan] said one should not discount the equity tied up in housing. There are schemes which allow Singaporeans to sublet their homes or downsize for cash, letting them 'extract liquidity out of equity', he said.
So basically, from what I can gather, the government has already very kindly done all the financial planning for you!! This is how you can achieve your financial freedom:
If you are young and find housing too expensive, use your CPF to pay for the house.
Once you have retired and you discovered that your CPF is not enough for your retirement, sell your house. Or, to put it more delicately, “extract liquidity out of equity”.
Conclusion: Housing is affordable and CPF is adequate. A nice circular argument that supports both points. Masterful.
Next, perhaps we can use another more conventional tool to measure house affordability—the price to income ratio.
This is the US housing price-to-income ratio at the height of the real estate bubble. As you can see, the highest it went up to is around 7.7.
Now, back to our beloved Singapore. From salary.sg, it appears that median income for taxpayers for YA2008 is $52,350.
Since the data is derived from IRAS, please note that this is discounting the non-taxpayers.
(Note: 500k may not be the median hdb price. This is just a rough gauge.)
Price-to-income ratio: 500, 000 / 52, 350 = 9.55
In other words, even if you do not need food, water or any basic necessities, spending 100% of your income to pay for your house, you will still need around 10 years to pay it off. Even if you spend 50%, you will still need 20 years to pay it off.
If we were to take the median income of all employed residents (including non-taxpayers presumably), the picture becomes even worse.
...the median income for all employed residents dipped by 1.2% from $2,450 in 2008 to $2,420 in 2009...
http://www.mom.gov.sg/Home/Pages/Press_Release/20091130-Singapore_Workforce__2009.html
Annual median income: 2, 420 x 12 = 29, 040
Price-to-income ratio: 500, 000 / 29, 040 = 17.22
Even if you spend 100% of your income to pay for your house, you will need 17 years to pay it off.
Oh, by the way, about this pigeonhole you are so interested in? Please note that you aren't actually BUYING it. To be more accurate, you are simply LEASING it...
I predict that the next step to make housing more “affordable”is to introduce 40-50 year mortgages as the new norm...
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