A Singaporean by the name of Kang Choon Tian has written to the Straits Times Forum expressing the fears, concerns and worries of some Singaporeans on increasing HDB flat prices – that they may not have enough money left in their CPF to spend for their retirement.
Mr. Kang disclosed that he took an $80,000 loan about 20 years ago and after he had finished paying for his flat, the interest came up to $70,000.
“The Government should look into this or Singapore may end up with many retirees with little in their CPF account, assuming an average household income of $3,000 to $4,000. Since HDB flat buyers may use 30 per cent of their household income, they may be able to service their loans, but little is left for retirement. Besides, along the way, the husband or wife may lose their jobs,” he said, expressing concerns about some Singaporeans ending up with little in their CPF accounts due to sky-rocketing prices of HDB flats.
He added that although some Singaporeans may not encounter much problems in paying for their flats now, their ability to do so may decrease as they grow older.
“Buyers are allowed to take up to a 30-year loan. By then, their earning power may also diminish when they reach 60, assuming they bought their flat in their early 30s,” he said.
Over 85 percent of the population in Singapore resides in public housing units built by the HDB.
While Singaporeans could easily afford HDB flats in the 1980s, prices have increased in recent years which were caused partly by rising demand spurred by the influx of foreigners in the country, as well as by a limited supply of new flats.
Prices of HDB resale flats increased by 8.2 percent and hit an all-time high in 2009. Median Cash-over-Valuation (COVs) doubled from $12,000 to $24,000.
In contrast, the average salary of Singaporeans per month remains the same at around $2,600.
National Development Minister Mr. Mah Bow Tan and other officials at HDB continue to insist that HDB flats remain “affordable” to ordinary Singaporeans, despite a growing worry over rising public housing prices.
He even reprimanded first time homebuyers for being “choosy” and said, “The onus is on Singaporeans to play their part by buying a home within their means.”
Quoting the 30 percent affordability benchmark to show that HDB flats remain affordable to ordinary Singaporeans, Mr. Mah cited that a family with a monthly income of $3,000 could purchase a $250,000 flat and spend only 30 percent of their monthly income on the mortgage.
“Similarly, a family with a monthly income of $4,000 can afford to buy a new flat worth up to $333,000 without spending more than 30 per cent a month on the mortgage. This means they can comfortably buy any of the flats offered in the latest BTO projects this month,” he added.
However, he doesn’t take into account the bank interest rates and inflation over the years, which will cost a family to spend more than 30 percent of their monthly income.
In addition, after consuming their entire CPF for these over-priced HDB flats with a lease period of 99 years, they will have little or no savings left for their retirement.
At the end of his letter, Mr. Kang encouraged financial experts to give their opinion on the issue.
“Since there are many in this income bracket, I hope some financial experts will be able give their take on this important issue or Singapore may end up with many retirees with little to live on. Many buyers are not aware of the final price of their flat, including the interest over 30 years.”