Providing a House…Building a Home – by Tan Chuan Jin

 A number of you have forwarded to me a blog post written by netizen “Gintai”. He shares about his conversation on housing issues with two colleagues, before moving on to talk about the perceived inequities between locals and PRs in Singapore. He also asserts that he is not proud to be a Singaporean.

I will address the issue of PRs in another note. Let me just talk about the housing situation in Singapore. Is it really so dire? Is the HDB flat really so out of reach?

For a start, we need to understand why the flat pricing system works the way it does. Gintai seems unhappy that similar sized flats are not priced the same. When determining the prices of flats offered, HDB factors in the costs of building the flat as well as the prevailing market conditions at the time of the offer and the individual attributes of the flats. Therefore, a flat on the 16th floor and one on the 2nd floor would be priced differently. The price of a similar-sized flat in Jurong West and in Queenstown would differ. A flat near key amenities would be valued more than one with less.

Is there really a difference in value? Many Singaporeans who have sold their flats know that these different values would surface immediately in terms of the price their different flats can command. Should we therefore price them all the same? If they were, everyone would just wait for a flat on the top floors in a matured estate. And some would make huge capital gains compared to others when they sell.

Gintai’s colleague, “Anak Abu”, lamented about his flat loan instalment payments. While I don’t know Abu’s full details, as a first time HDB buyer, Abu’s flat’s price would include subsidies and he would be eligible for the Additional CPF Housing Grant and possibly even the Special Housing Grant. These would reduce the subsidised selling price considerably. But even with the grant, it’s striking to note that on a stated income of around $1,850, Anak Abu chose to buy a four room flat (not a smaller one), at a Sale of Balance Flat exercise (and not a mainstream BTO flat), in a mature estate (as opposed to a non-nature estate), near the top floor (rather than lower down), and next to the town centre (and not further away). 

Tanglin Halt

This is a common scenario. At my Meet-the-People Session, my residents come to see me to appeal for a bigger flat at choice locations. I understand the desire to upgrade and to live well, but there is also a need to take a hard look at personal finances as well, and to make the right choices. It would seem that Anak Abu had over-stretched himself here. For him, there will be less to set aside for other needs. It’s a decision each family has to make.

In general, even as we allow the use of CPF funds to pay for the monthly instalment for a flat, the money in the Special Account and the Medisave Accounts is not touched. Criteria for Minimum Sum is also factored in to help ensure that some money is set aside for retirement. Retirement sufficiency would be determined by an individual’s future income stream and his outlay on his home.

Eventually, when Anak Abu moves on in years, and when his children are older, he would own his Bedok flat. If he needs to supplement his retirement needs, he could decide to rent, adjust his lease via the Lease Buy-Back Scheme or sell and move to a smaller studio flat. If Anak Abu had bought a more affordable flat, he would have had more for retirement. If he had chosen not to buy the flat at all, he would have rented and would have more money in his CPF; but he would have had more cash outlay over the years and he would not have owned his own home.

Gintai also shared about another colleague, “Zaidi Blond” who was eyeing a similar unit in the same Bedok block as Anak Abu, but was now facing a selling price that is supposedly $68,000 more than what it cost a year and a half ago. He asserts that Singaporeans would feel “cheated and bitter”.

Why the differential? There is a time difference of one and a half years. The value of the flat may have shifted. HDB needs to price the flats with reference to their prevailing market value. The same rationale, as explained earlier, applies. Due to differing economic circumstances, there have been instances where flat prices dropped. When that happened, the ones who were angry were those that had bought earlier. It is human nature for all of us to want to get the best deal with the least risks.

Subsidies and grants remain in place for Singaporeans in order to keep a range of different flat types affordable for Singaporeans at different income levels.

Do buy within your means.

I know that these are emotive issues. But HDB does indeed cater to the vast majority of Singaporeans, from those in rental flats, to those who are comfortably in the middle classes. 80% of Singaporeans live in HDB flats. 90% of them own their own flats.

Would there be affordable and available options out there for you? The answer is yes. Our commitment is to ensure that for first time buyers, you will find a range of different sized flats in non-matured estates available, with subsidies, priced affordably for your respective income levels.

We will help provide you a house so that you can create a home.

Example of 2012 Fernvale Lea (in Sengkang) I had used in an earlier note

2 Rm. Typical price about $100,000. Couple earns $1,000. AHG $40,000 + SHG $20,000. 25 year HDB loan will see their monthly repayments ($182/mth) fully covered by their CPF contributions (OA). No monthly cash outlay.

3 Rm. Typical price about $170,000. Couple earns $2,500. AHG= $30,000. Cost of flat = $140,000. 25 year HDB loan will see their monthly repayments fully covered by their CPF contributions (OA). No monthly cash outlay.

4 Rm. Typical price is $280,000. Couple earning $4,500. AHG=$10,000. Cost of flat=$270,000. 25 year will see their monthly repayments being covered mostly by their CPF contributions (OA). $60 monthly cash outlay.

5 Rm. Typical price $350,000. Couple earns $6,000. 25 year will see their monthly repayments being covered mostly by their CPF contributions (OA). $50 monthly cash outlay

On average thus far, most HDB loans taken from onset is about 22 or so years. As income rises, and people choose to repay earlier, period can come down.When I last shared this a few months ago, those aged 55 who have not discharged their HDB loans are about 12+%

Fernvale Lea in Sengkang

by Tan Chuan-Jin on Thursday, April 26, 2012
Link : Providing a House…Building a Home

Related Link : 


11 responses to this post.

  1. Reblogged this on SG Hard Truth.


  2. Posted by bullshit on April 26, 2012 at 1:08 pm

    SO it’s Anak Abu’s fault for buying a big house instead of a small one. What if he has 3 children and his parents live with him? Do you expect them to squeeze in one room? OR it’s his fault again for having so many children and for asking his parents to live with him?


    • Posted by Objective on April 27, 2012 at 5:04 pm

      This might sound cruel, but in a way yes, its his fault because there are indeed cheaper options. I will agree with you if he has already opted for the cheapest option but he has not.

      No one is saying that they have to squeeze in one room. He will feel much less financially burdened if he had opted for a smaller (3BR flat) in a non-mature estate at a lower floor for example.

      Point is to live within your means. There is only so much the government can do….


    • Posted by Daniel on May 3, 2012 at 4:03 pm

      At a monthly income of $1850, with the hypothetical 3 children and parents, it is clearly his fault for buying a big house. Did you think the government owes it to you to provide for you regardless of your situation? What, then, is a meritocracy?


  3. He has missed the forest for the woods with all his technical explanations on pricing differential. The issue he should be addressing which is Gintai’s point and every Singapore’s concern is – “Why is housing in Singapore so expensive?” This is what the government should be tackling. But it seems like they are caught in a catch 22 situation. There are vested interests and conflict of interest issues. But really hope they can do something about the skyhigh prices of housing here.


    • Posted by Edward on April 27, 2012 at 11:29 am

      Ramping up the suppliess will reduce the price eventually. But not immediately.

      And who says “every Singapore’s concern is – “Why is housing in Singapore so expensive?””? Every buyer may be concern. But every seller surely rejoice.

      I am happy, the price is going up. When my MOP is up. I will sell my 5rm for a cheaper 4rm and wait for the price to come down before upgrading back to a 5rm again.


  4. @bullshit – quote “SO it’s Anak Abu’s fault for buying a big house instead of a small one”

    Well, he can buy a BIG house if he really really want (even thou he is earning $1850) but he does not need to buy it in a mature estate like Bedok.

    For a four room that he could have bought at $280K, Anak Abu chose to buy one at $368K?


    • Posted by Edward on April 27, 2012 at 11:24 am

      It’s not Anak’s fault. But it’s his choice. He made the following decision:
      buy a four room flat vs a three room flat (lower price)
      at a Sale of Balance Flat exercise vs BTO (cheaper)
      in a mature estate vs a non-nature estate (lower price)
      near the top floor vs lower floor (cheaper)
      next to the town centre vs further away (lower price).

      These are the mechanism of how a flat is price. Anak pays for the best of it. He could have choosen a cheaper one. The choice is his to make.


  5. Too many points in the original article by Gintai that I find skewed, will just pick out following:

    1) “”Anak Abu kept complaining that he had to use up all his monthly CPF contributions to service his 25 yrs housing loan after paying for his medisave.””

    – 25 yrs loan? Most of us need to take the max of 30 years. How did Anak Abu achieve only 25 yrs with his mthly income of only $1850? Maybe his wife is earning much more? Or maybe he has settled a big chunk of the $368K? In any way, he’s richer than me, I’m sure.

    2) “There is no saving in his CPF account even if he retires…”

    – see MG Tan’s note above – 3rd paragraph to be exact.

    3) “”He is one grade below me. He has reached his maximum pay ceiling “”

    – Ever heard of upgrading? The Govt even pays you to upgrade, google & u’ll find it.

    4) “”another recently married Malay colleague Train Officer ‘Zaidi Blond’ wanted to buy a HDB flat in the same block ….They like to get their flats around Bedok area cuz it’s near to our working place at Tanah Merah station”

    – Sengkang is not too far away actually.

    5) “”That colleague could not afford it due to insufficient CPF for the 20% downpayment””

    – Downpayment with loan from HDB is only 10%, where got 20%?

    6) “”Will you support this government since you are so bitter and sore? “”

    – First of all,I AM NOT bitter and sore. Any bitterness is my own doing,, why blame anyone else?

    – Does voting against this government cure you your bitterness? Temporarily, maybe. You feel shiok. Then, what next? Is any of the current opposition party competent enough to handle Singapore? Deep down inside, many know there’s not a single chance.


  6. […] if you had read gintai‘s piece, i really really really strongly recommend that you read MINISTER OF STATE FOR NATIONAL DEVELOPMENT TAN CHUAN JIN’s RESPONSE. […]


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