A forum letter to the Straits Times highlighted a different way to measure affordability.
Based on Numbeo’s “house price to income ratio”, Singapore ranks below major cities like Tokyo, Barcelona, Milan, Dublin, Toronto, New York City, Geneva, Oslo, Rotterdam, San Francisco, Sydney, Vienna, Stockholm, Amsterdam, Zurich, Copenhagen and Berlin.
This means: if we use all our annual income to pay for our mortgages, we need more years than these other cities.
Our houses are less affordable.
Contrast the above with HDB’s explanation that our houses are very affordable:
“On average, first-time households used 21 per cent and 25 per cent of their monthly income to service their loans on new and resale HDB flats respectively in non-mature estates. These figures are well below the international affordability benchmark of 30 per cent.” (Straits Times, 31 Aug 2009)
First, note that HDB specifically refers to “non-mature” estates. Is there a special reason? What about mature estates? Do they breach the international affordability benchmark?
Next, HDB doesn’t take into account the Cash Over Valuation (COV), which is over and above the 10% minimum downpayment needed to buy a HDB flat. And we all know that COV has been rising to unaffordable levels recently.
Remember HDB’s “market-based pricing approach“? This time, is HDB trying to humour us again?