“That is why we continue to build and sell new HDB flats at prices below the market as they come with significant subsidies.”
Mr Lee pointed out that the average price for a new 4-room flat in a non-mature estate has remained “relatively stable” at S$341,000 in 2019 and $348,000 in the first three quarters of 2022.
To keep new flats affordable, market subsidies have also been increased, Mr Lee said.
“For new flats in prime, central locations, we have introduced the Prime Location Public Housing Model which provides additional subsidies on top of the substantial subsidies already provided for BTO flats. This is to keep flats in such locations affordable for a wide range of Singaporeans,” Mr Lee added.
Mr Yip had also asked if affordability of HDB flats should be pegged to median household incomes or other indicators, given that salaries within the 30th percentile and below are significantly less compared with the median percentile on the salary scale.
“Our affordability benchmarks do not only consider median incomes, as we provide a wide range of BTO flats for first-time homebuyers with different housing needs and budgets,” said Mr Lee.
EXAMPLE OF HOUSEHOLD EARNING S$5,000
He gave the example of a first-timer household earning about S$5,000, slightly less than the 30th percentile of resident household incomes.
“They may buy a 4-room flat in any of the three non-mature estate projects in the recent August 2022 BTO exercise, namely in Jurong East, Woodlands, and Choa Chu Kang. These projects come with typical prices comparable to or lower than the average price of BTO flats in non-mature estates at about $348,000,” explained Mr Lee.
“After factoring in the $45,000 in grants they would receive, they will need to use about 23 per cent of their monthly income for their housing loan, which means they will be able to service their mortgages from their monthly CPF contributions with no cash outlay.”
This would work out to a home price-to-income ratio of about five for the family, which is to say that the price of their home is about five times their annual household income.
Mr Lee noted that the ratio of the median home price to the median household income in other “comparable” cities such as London, Los Angeles and Sydney was at about eight to 15 times, and more than 20 times in Hong Kong.