Financial Consultant: Only households with monthly income of more than $7,500 can consider buying BTO project in Queenstown
December 17th, 2009 | 
Author: Written by Our Correspondent
According to Financial Consultant Mr Wu Jiawan, only households who earn at least $7,500 monthly can consider buying a 5-room flat in the new BTO Dawson project at Queenstown.
Even then, besides depleting their CPF, they still have to fork out a minimum of $600 monthly to finance the mortgage loan.
Mr Wu was referring to the two of the four BTO projects launched by HDB lately which are located in Queenstown.
Prices will range from $373,000 to $549,000 for a four-room flat and $532,000 to $664,000 for a five-room flat for both Dawson projects in Queenstown which is more expensive than some condominiums in the suburbs.
It is not known how HDB arrives at the figures, but they are pegged to the sale price of resale flats in the vicinity.
A four-room resale flat in Queenstown was sold a few months ago at a record-high price of $653,000 to an Indonesia PR.
Mr Wu made a quick calculation for Lianhe Wanbao:
“Assuming the mortgage loan is 80 per cent of the flat’s price or $528,000, after factoring the HDB interest rate of 2.6 per cent, one still has to pay $2,116 monthly for 30 years.”
Mr Wu urged first time home buyers to buy an affordable flat within their means to prevent over-stretching their finances as they still have to put aside other expenses for their children and retirement.
There is a salary cap of $8,000 for Singapore couples buying BTO flats for the first-time.
Going by Mr Wu’s calculations, couples buying these five-room flats will surely deplete their CPF for their housing loans and end up with little or no money for their retirement.
Furthermore, there is no guarantee that they will continue earning the same amount of money for the rest of their lives and they will be plunged into financial difficulties should one of them gets retrenched.
Despite escalating prices of public housing, HDB is adamant that HDB flats are within the reach of ordinary Singaporeans.
MM Lee Kuan Yew said recently that the government will try its best to keep HDB flats “affordable” for Singaporeans even as prices continue to climb.
He did not elaborate specifically on what the government will do to help Singaporeans achieve this aim.
Other ministers are nonchalant about the concerns of Singaporeans too with some even claiming that rising prices are good for Singaporeans as it helps to generate “wealth” for them.
However, they failed to realize that the asset value of HDB flats can only be unlocked when they are sold and the seller may have to fork out more cash to buy another flat in such an inflationary market.
When Singaporeans complain that they are unable to get a flat of their choice, National Development Minister Mah Bow Tan chided them for being “choosy”, saying that he cannot build the flats near the city or without second storeys.
At this rate the prices of HDB flats are going up, some property analysts even predict that flats in Queenstown may fetch over $1 million in ten years’ time.
Mr Wu felt that even if the flats are valued as such a price, there may not be any buyers as few Singaporeans can afford a flat more than $1 million and those who can will be buying condominiums.
The prices of HDB flats have sky-rocketed in recent years with resale flats hitting a record high in June this year, contributed partly by the relentless influx of foreigners into Singapore.
As the public housing market is controlled tightly by the government, its prices can be manipulated easily by increasing the demand while keeping the supply low at the same time.
The high cost of HDB flats is one of the reasons deterring young Singapore couples from having more children thereby triggering off a vicious cycle in which the government has to turn to immigration to boost the nation’s declining birth rate.
Posted in Editorial
Singaporeans are getting richer by the day
They can afford these cheap flats, no problem !!
that is why the applications of these flats far exceed the number available.. !
hi there
1. if only sinkies wear the hat that fits the head, many should live life with some comfort.
2. too bad, many sinkies are so used to spending future monies.
3. simply, no discipline too.
with the prices of flats at these levels, i have decided to stay either with the parents or in-laws after marriage. at least it will be “costless” and i can b filial to them.
I am just so sick of the greedy PAP. Really cannot tahan liao.
There is only one HDB in Singapore and they can dictate any price that they want. If the price is too high for the buyers and there is less demand, they will claim that the supply is enough and stop building new flat. Buyers got no choice when dealing with the government because the government control everything. The only choice that we have is at the GE. If the people do not exercise their right during GE, the government will continue to bring hardship to the people !!!
The government uses the foreigners to jack-up the price of realse HDB and then use this to determine the new flat price. Obviously, they are now trying their every means to suck money from the citizens and then use it to cover up their failed investment in Temasek Holding and GIC.
@streetsmart,
There’re many sinkies with small heads wearing even smaller hats out there.
Not everyone knows how to think, you want to remember that. And it’s up to you if you want to feel sorry or help them, but just watching them squeeze their heads till they die doesn’t make a good country.
As much as I appreciate Mr Wu for his fair assessment, I am also worried for my children
1) I got married and ballot for Queenstown (4rm).
2) I don’t know how much we have to pay for mortgage yet.
3) I STRONGLY agree that flats are not affordable.
4) I know I have to slave like a cow or horse or both to buy a flat that is not far from the central. Our entire extended family lives in the east side or near central. The near parents scheme is quite senseless too b’course Singapore is only this small. With most old people living in matured estate (expensive places to live in too).
5) I want to sack MBT and the PAPs!
The HDB is a riduculosity of this “city”,next to the recent
FT policy! both will only make singaporeans “mati”!
FT policy-you know why already!
HDB salary ceilings in these bad times when countless locals,including executives,are made out of job by the other
ridiculous policy,the FROEIGN IS TALENT,are simply unrealsitic
and penalise the ” the bullied innocent’ singaporeans.
if you are living in private housing and you wanna downgrade cos you have been retrenched,you simply cannot immediately apply for a subsidised flat from HDB.
Why can’t an out-of-job singaporean cut already high living
costs?How about all the past taxes he duly paid? are you going to refund them since it’s only fair since he cannot get to enjoy social benefits of subsidised housing even when he is out of job.
Mr MAH should honestly look into this issue and discuss it openly too as the high unemployment level affects many sinagporean workers and executives whose jobs the same gahmen people have extorted and given to foreigners!!!
Mr Wu jiawan is dennis ng, an independent financial consultant, he runs housingloan.sg website and has given sound advice on financial matters over the years.
i am glad that there are ppl like him around to counter the nonsense spewed by property agencies whose interest lies in higher flat prices and more transactions.
This is again to boost SG ppl net worth so as to consider our ppl very rich .
the sort of flats in Queenstown are built in many ways to be like condo units so i suppose not all too surprising that they cost nearly as much as condo units. and that location is very central. nevertheless, i wonder whether there would be any flats which are more affordable in other areas (e.g. Jurong, Seng Kang, Punggol).
can anyone tell me is setting a salary ceiling for buying a hdb flat logical?
Why should we prevent a person earning say 10k per month from buying a 3room hdb flat? He may prefer to spend his money on other things instead of spending a huge amount on a house.
Can’t we decide how we choose to spend our money? Not everybody wants to spend a huge amount of money on a house.
Looking at the trend HDB set prices for flat, we can be certain that Stat Board has commercialised themselve to make profit instead of taking care of the Singaporeans. Are civil servants suppose to make profit out of the people who paid them salaries thru taxes. No wonder private sectors businesses are going downhill and public sector are using taxpayers money to turn into business for profit. If this is not corruption what is?
What a heck. PAP better control HDB prices before it escalated out of hand & out of reach of common folks like us.
My advice to the ruling government, “Do not carry things too far or else sooner or later, u will find the whole lot of SG citizens flocking to live in JB, thereby making JB an even more prosperous place than SG.
This consultant forgot to mention:
How much do you think the price of this property would grow to in order to cover the interest due to CPF should the family decide to sell?
i.e. after 5 years, the property price must grow at a rate of 2.5% in order for the owner to get back the principal and CPF interest rate so that the owner doesn’t need to pay back the CPF.
600 K x 1.025^5 = 678K
The next buyer would have to folk out 2442 a month for 30 years and an initial investment of 67.8K.
You must be very confident that you will get to stay in your job for 30 years to afford this place.
For those without a home, buying this now is like buying a time bomb. It will explode soon or later.
I read this article, written over 4 years ago.
And I look at it now. how true! A singapore without singaporeans.
http://singaporealternatives.blogspot.com/2005/04/singapore-without-singaporeans.html
Why the fuss?
Queenstown is considered a prime location (considering its close proximity to CBD and town) – hence this set of housing prices are considered normal. Taking into account all other global metropolitan cities – this is an inevitable consequence of economic development.
If the price is too high for you – then don’t buy it. If the price is unjustified (over-priced), public demand will naturally cease and market forces will put the price index down.
It’s that simple.
One cannot carelessly make a sweeping statement over the affordability of public housing for Singaporeans+PRs. Everyone of us come from a very different income bracket with differing financial health – while 600 grand may be considered excessive to some, there are others (*assumption* i.e. the high-flyers) who view this as an acceptable price to pay and you know what….. these group of people generally can afford it.
(*note* its very unlikely that people who can cough out that amount of money, are financial dimwits — less the occasional exceptional cases)
Furthermore – the pre-requisites of home purchase differs from households-to-households, from individuals-to-individuals…
How can we apply our own personal “assumed” sense of criteria onto others?
(i.e. for some, the close proximity to city and town is an absolute must – hence the willingness to pay head-over-heels for the home)
*think about it*
Singaporeans are getting dumber by the day, just look at this ridiculously priced flats and yet its oversubscribed.
True based on what is presently know the downside risk is low since HDB has set the baseline to flat prices, it will be nearly impossible for any private condos in the same vicinity to be priced lower. However everything has a limit and once the is reached the bubble may be burst. Pushing prices so high could reach a stage where the number of buyers dwindle in time and if timed with another downturn house owners could see exposures to their loans and their hard earned money at risk.
Not a property expert but something tells me that this cannot be correct or good for singaporeans
@L:
erm… if you remove the income ceiling, chances are, the prices of HDB flats will go up even more because you are allowing people who have the ability to pay more into the market and what will they do? naturally they will pay more for what they want. i.e. demand goes up while supply remains the same more or less the same, ergo prices go up. do we really want that to happen?
Tony Pang said : “If the price is too high for you – then don’t buy it. If the price is unjustified (over-priced), public demand will naturally cease and market forces will put the price index down.”
Its absolutely nonsense. When you have one major or monopoly supplier of an essential good/service, market forces do not work at all. In the case of “low cost” housing, the HDB is the ONLY supplier of an essential good. If users don’t buy from HDB, then what? Sleep on the streets? Migrate to somewhere cheaper?
Going by Mr Wu’s calculations, couples buying these five-room flats will surely deplete their CPF for their housing loans and end up with little or no money for their retirement.
Furthermore, there is no guarantee that they will continue earning the same amount of money for the rest of their lives and they will be plunged into financial difficulties should one of them gets retrenched.
The writer, Mr Wu has sounded a advice, consider carefully what one can afford.
My advice is simple: Dont ever sympathise with our fellow Singaporeans. Somehow, somewhat they will fork out the money to buy a house and a car despite atrocious and escalating prices. Look at COE and ERP, the only system in the world. Do we see Singaporeans scaling back on buying the latest models or curtail driving altogether? No. Car population is climbing and highways are jammed even on Sunday.
Now HDB is cashing in on the wealthy Singaporeans who may earn less than $7500. It seems like this is HDB’s motto: As long as we build, Singaporeans will buy. And Dawson Road proves them right on cue. Overbooked.
But HDB overlooks one salient point. Selling all the units at the expense of putting more Singaporeans in mortgage debt is not healthy for the economy. One day when the bubble bursts, Queenstown will turn into Ghost-town.
Tony Pang, if you cannot differentiate between a perfect competition model and a monopolistic model, best is to refrain from making worthless comments.
*think about it*
thank you.
what do the detractors of pap wisdom hope the government to do? reverse the cost of home to what level? half the current price if not even lower to send more people to orgasmic delirium?
the irony is, the people who are bursting the property market are not the buyers or the government but rather those who call for the market to IMPLODE and crash to a low level so these same ppl can lap it all up in GREED.
truth be told, you people do not have the interests of 90% homeowners who formed the majority of stake holders in this country in mind.
those who constantly lament about high property prices are in effect enemies of the state and its REAL STAKE HOLDERS. and they are calling for the BUBBLE TO BURST( they say the current prices are UNREASONABLE AND OVER INFLATED SO GOVERNMENT SHOULD LOWER IT ….BY A LOT to make it so affordable, it takes less THAN 5 YEARS TO PAY OFF<<<< and why not that LOW huh??? !!! even better if it takes only 1 year to pay off your housing loan for the lower income group ).
sheesh.you might as well put housing UNDER WELFARE!!!!( and who should dictate we shouldn't go LOWER than that huh? the LOW life???)
@RR on Fri, 18th Dec 2009 11:58 am
@J on Fri, 18th Dec 2009 12:52 pm
Ok fine. You have your points. So rather than complaining and blaming others (which we, Singaporeans, are REALLY good in).
Why not come up with possible, realistic solutions? and maybe funnel them down the correct feedback channels – so that people can receive this info and rectify accordingly.
*Oh wait!*
*Its NOT our job, why should SINGAPOREANS take a stake in improving our lives in SINGAPORE?? Isn’t that what we PAID our Government to do? They should be the ones, coming up with the solutions — we WILL do our part by bitching and grumbling about their failures*
See the irony?
If you genuinely feel that current system is not working, stand up to it – come up with a BETTER alternative, pass it down to the appropriate feedback channels (i.e. REACH, grassroots leaders, MPs….. blah..blah…), let them know so that they can study and “hopefully” implement a BETTER solution.
If we are ACTIVELY doing that and there’s still NO response. Simple – do NOT vote for them in the coming elections ~ what else do you want?
right?
*for the record, have you seen the property prices (under the so-called “free market model”) in other developed – absolutely outrageous*
@ridiculous on Fri, 18th Dec 2009 6:22 pm
Am in full agreement with you, though i would not go to such extremes… “enemies of the state” – now I must say, that term’s a bit harsh.
//ridiculous
What is wrong with keeping flat prices more less constant like food?
there is a problem.
I have a lot of problems posting comments on TR.
By choosing to build flats mainly through BTO projects, rather than maintaining a stable of ready-built flats, the government has lost an important tool to effectively regulate market prices of flats.
In fact, this present policy will only lead to a situation where the government will build more flats only when demand is high, thereby resulting in the selling of those flats at a higher price because new flats prices are pegged to the market.
Why do I say this? Well…..
Prices were kept relatively stable after the onset of the Asian Financial Crisis, not only because of the poor economic situation, but largely because HDB had a buffer of 20000 units unsold. Those with immediate demand for housing were able to easily get a flat from HDB at a reasonable price and prices in the resale market was thus contained.
As those units dwindled over the last 10 years, HDB did not attempt to replenish those stocks. Without a means of satisfying the immediate requirements of some families, their only alternative would therefore be to resort solely to the resale market, thereby driving up prices. This would then drive up prices of new projects as they are priced to market.
This means the government will only increase the launch of new projects when demand is high, ie, when market prices are highest, thereby resulting in selling new projects at a higher price.
Conversely, when demand is low, they would not release many projects, and would therefore sell very few units at low prices. This will subsequently cause prices in the resale market to go up.
This is the principle of commercial entities and should not be practiced by the government.
The government should and must always maintain a buffer of ready-built flats to satisfy families with immediate requirements. Once the needs of families with immediate demand are satisfied, prices in the resale market will not skyrocket, as is the situation now, and overall prices will then be contained.
Basically these flats are catered to those with lots of under-declared income to spare. Like those illegal loan sharks and bookies, mamasans, high class GRO, rich hawkers and mistresses, etc.
Our Govt is simply just short of spare cash. Guaranteed 100% profit, so who else can they target ?
Just think carefully before you ballot.
why would anyone want an ever increasing food price ?
We could always consume less and sell the left overs since food prices keep (if that is true) going up.
Same thing: why would we want an ever increase lease?
Keep working at this, great job! This was what I needed to know. We are all experts on something!