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Why Can’t We Agree on Whether Housing in Singapore is “Affordable”?

Ryan Ong

Ryan Ong

Last updated 17 May, 2017

It's not uncommon for Singaporeans to have passionate debates about whether housing is affordable, even with government subsidies. Why can't we seem to agree?

Money Mysteries is a column by Ryan Ong that explores the odd world of money. Where does it all go when you give it to a bank? Why does a potato sometimes cost S$200, or shipping a sofa sometimes cost S$1.99? Why is art so expensive, and how do people (legally) rip off casinos? Every week we unveil a new Money Mystery.

Affordable housing is an ongoing debate, which probably goes as far back as the moment public housing was invented. It’s not uncommon, especially in Singapore, for the affordability of homes to be a hot topic.

You may be wondering why we can never come to an agreement on whether or not housing in Singapore is affordable. Here’s why:

Is Housing in Singapore Affordable?

There is no way to answer this question in a way that satisfies everyone. There’s always a deep divide in opinions; from the ones who will point out the homeownership rates (over 90%), and the ones who will point out how much of our CPF our flats take up.

You see, the problem is that we can’t even get a consensual definition of what “affordable housing” means. There isn’t a single number or statistic that can define it for everybody, and here’s why:

  • Acceptable housing and affordable housing
  • “Affordable” is a relative concept
  • Politics may play a bigger role than the actual numbers
  • A conflict between wanting appreciation and affordability

Acceptable Housing and Affordable Housing

Although they’re separate issues, many people conflate acceptable housing (i.e. homes that fit their standard of a reasonable quality of life) with affordable housing. For example:

Let's say the government builds flats that cost only S$50,000 per family before grants. Almost every Singaporean can afford this, and we’d probably pay it off in five years or less. However, the public housing at this cost is a single room. It’s cramped, hot, and involves a bathroom shared by three or four families on every floor. Note that this type of housing is a reality in some cities, like Hong Kong.

For flats with reasonable breathing room, the cost is much like it is today - between S$250,000 and S$600,000.

Now is that affordable housing?

For some people, the answer is yes. While it may mean a hellish existence in a tiny cube, you still have a place to live, at a price you can afford. For many other people, the answer is no - it’s irrelevant that there are houses they can pay for, because the homes they can afford don’t provide a reasonable standard of living. This is the relationship between acceptable housing and merely affordable housing.

But here’s where it gets complicated, because people don’t agree on what’s “acceptable”. To some people, “acceptable” housing is a 900 square foot flat with a kitchen. To others, it’s a 1,400 square foot flat with a kitchen, that’s less than 15 minutes from work. There are many subjective definitions.

And quite often, when people argue that housing isn’t affordable, what they mean is they cannot find an acceptable level of housing for their budget.

If you feel a family needs a minimum of 4,000 square feet and a back yard, and your budget is S$250,000, you’re going to find housing in Singapore is unaffordable.

But if you want to thump your chest and take pride in monastic conditions, anyone who claims a two-room flat is insufficient is “just a whiner”. Housing in Singapore is totally affordable because you can find a two-room flat for under S$200,000 (after grants).

Neither side is right or wrong in that debate. How could they be? Personal standards of acceptable housing are just that: personal.

But as a result of that, we never quite agree on whether housing in Singapore is affordable. This debate is also not unique to Singapore; it’s a concern in almost every major city, where property prices tend to be high.

“Affordable” is a Relative Concept

What exactly does affordable housing mean?

Some people trust an exact formula. For example, the old rule of thumb that houses should not cost more than five times the residents’ annual household income; or that the expenses of the house (e.g. maintenance, taxes, and mortgage repayments) should not exceed 40% of monthly income.

Some people gauge affordability by how much it impacts their quality of life. For example, they may feel that, because flats are mainly paid via their CPF monies - which they don’t have immediate access to anyway - housing is quite affordable.

A more far-sighted group may look at how much they’ll have at retirement, given the cost of their flat. They may feel that, even though they have no immediate problems paying for it, housing is still unaffordable as they cannot meet the desired replacement income (i.e. they spend too much on the flat, that they could invest elsewhere).

Because we have different definitions of what’s affordable, we’ll always have debates on whether housing prices are in the right range.

Politics May Play a Bigger Role Than the Actual Numbers

Political factors trump numerical factors in the housing affordability debate.

In just about every country, political forces that are in power (and their supporters) will want to argue housing prices are more affordable than ever. At the same time, the political resistance will always argue that public housing prices could be lower. This debate is seldom about actual numbers, and both sides tend to selectively present data to “support” their argument.

Regardless, the point is that housing issues are a political battlefield. The issue is almost always dredged up during elections, and it will be mired with many tangential topics (e.g. the income divide that’s highlighted by private versus public housing). Yet another reason it’s hard to come to a common consensus.

A Conflict Between Appreciation and Affordability

Is housing affordable? Many existing homeowners will say yes, because the last thing they want is for the government to force down home prices (such as the current cooling measures).

People who already own property generally want capital gains. They want property prices to rise, so they can sell their house for a profit. They’re disinclined to support arguments that home prices are too high.

At the same time, many people who have yet to buy their house will claim the opposite. Aspiring home owners will want the government to intervene, and keep house prices low - that’s because they want to spend less on their flat. This group is more inclined to say houses aren’t affordable.

As a whole, this makes us a bundle of contradictions - we’re always caught between wanting prices to go up, and wanting them to stay down. “Affordability” then depends on individual perspective.

It’s Best to Focus on How Much You Need

Whichever side of the argument you’re on, it’s best to focus your energies on accumulating what you need. It’s simpler than hammering out a treatise on “how housing should be”, and trying to get the country to agree.

Just focus on saving and investing right, so you’re ready for that first home. You can complain about the price, or be glad for it later on. Start by following this tips to saving for a down payment before your 35th birthday. Prefer to buy a resale flat? You can save a lot of money by finding a resale flat without an agent.

Read This Next:

5 Money Concerns for Singaporeans Choosing a BTO Site

Why Do HDB Home Loans Have Higher Interest Rates Thank Bank Loans?

Ryan has been writing about finance for the last 10 years. He also has his fingers in a lot of other pies, having written for publications such as Men’s Health, Her World, Esquire, and Yahoo! Finance.


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