Based on the latest reports, the current property prices are approximately 19 times the average annual income of every household.
Based on the average household income of $5,500 and the common household size of 3.5 persons, four- to five-room flat of about 1,200 square foot will cost an average price of $1.2 million.
This will take up a ratio of 19 times the average income of every household each year. Even if the average monthly household income is $8,000, wage limit, which prevents one from buying an HDB apartment, of the total ratio is around 12.5 times.
Assuming there is zero interest and 100 percent mortgage financing, the ratio will be 36 times and 52 times, respectively, if 35 percent of the household’s income will be utilised for housing mortgage, the percentage which the prudent financial planning has suggested.
The property sector is needed to have structural changes. The four propositions are as follows:
First, in order for property developers to plan with certainty the supply, the Urban Redevelopment Authority (URA) must continuously release land for sales based on the population census and the projections of economic activities. The developers must also be mandated by the URA to develop a project within the specified period of time.
Second, a property gains tax must also be introduced by the Inland Revenue Authority of Singapore (IRAS), imposing higher taxes to those developers with higher profits. With the exception of the owner-occupied properties, the Iras have the right to tax property gains.
Third, although the HDB must continue to sell subsidised flats to beginner Singaporean applicants, they must relax all the rules that govern transferability and ownership such that the private property market functions in a similar way as the public housing market.