Singapore Election 2011

Latest news and updates about Singapore's 14th GE

Mah Bow Tan: Longer housing loan helps people to ‘pay less’

Posted by singaporege2011 on May 1, 2011

Despite widespread public unhappiness at the sky-rocketing prices of HDB flats, PAP candidate for Tampines GRC Mah Bow Tan continues to insist that they remain ‘affordable’ to the majority of Singaporeans.

Under Mr Mah’s watch, the prices of HDB flats have nearly doubled since 2006, thereby pricing many ordinary Singaporeans, especially young couples from the public housing market.

In a rebuttal to the opposition’s criticisms that Singaporeans are ‘stuck’ with a thirty year bank loan for their HDB flats, Mr Mah wrote that “it is not the length of the loan but the percentage of monthly income repayable to the housing loan that matters. ”

He said the length of the loan is up to the home buyer and suggests young people take up a loan which is 30 to 35 percent of their monthly income to ensure that the length of the tenure, the interest rates and loan repayment are within their means. 

“But if people are not happy with the 30-year loan for whatever reason, they can always take a smaller loan,” he added.

Mr Mah also said a longer loan actually helps people to ‘pay less’:

“Most people who do that, for cash flow reasons (and) never really go the whole 30 years. After 10 years, 15 years, they sell off, and that’s it. They make a profit … keep the profit, and then they use that to upgrade.”

It is strange that Mr Mah uses the percentage of monthly income to assess housing affordability while a different benchmark – the median multiple is used in the rest of the world.

The Demographia International Housing Affordability Survey uses the “Median Multiple” (median house price divided by median annual household income) to assess housing affordability.

The Median Multiple is widely used for evaluating urban markets, for example being recommended by the World Bank and the United Nation. It is an easily understood indicator of the structural health of residential markets and facilitates meaningful housing affordability comparisons.

In recent decades, the Median Multiple has been remarkably similar among the nations surveyed, with median house prices generally being 3.0 or less times median household incomes where demand and supply are balanced.

Using the Median Multiple as a benchmark, all HDB flats including BTO flats will command a median multiple of more than 3.0, meaning that they are unaffordable to ordinary Singaporeans. (read more here)

Though Mr Mah admitted that he is likely to lose ‘some votes’ over the housing issue, PAP de facto leader Lee Kuan Yew proclaimed Tampines GRC a ‘safe’ seat during a recent visit there.

“Tampines voters must be DAFT to cast a protest vote against Mah Bow Tan,” Lee had told the state media during a press conference in April last year.

With Lee Kuan Yew promising to import another 900,000 foreign workers on work permits and perhaps many more on S and E passes into Singapore, Singaporeans should brace another price hike in HDB flats which show no signs of abating in spite of a series of ‘cooling measures’ introduced.

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