Part 4 WILL RAISING OF HDB INCOME CEILINGS TO AFFECT HOME PRICES?

WILL RAISING OF HDB INCOME CEILINGS TO AFFECT HOME PRICES?

Part four

WHAT IS THE IMPLICATION OF HDB CEILING INCREASE

By increasing the income ceiling from $8,000 monthly household income to $10,000, this will mean that more people will be competing to buy New HDB flats when the supply is still fairly constricted.

IMPORTANT NOTE:


At $8,000 income ceiling, the maximum loan quantum is estimated at $890,000. At $10,000 income ceiling, the maximum loan quantum that a Singapore bank will lend is estimated at $1,113,000. Home loan calculators can be found here.


This means that DBSS can price their flats $223,000 more potentially. ($1,113,000 - $890,000) = $223,000. Initially, those developers will make more money. And these developers would bid for land more aggressively, hence bidding up land prices. Expensive land prices end up as a form of “UPFRONT PERSONAL TAX” by the government on the new HDB property buyer.



The government’s stance has been that people are marrying later and hence will likely have more income when they get married. By consequence, increasing the income ceiling from $8000 to $10,000 will allow them to be eligible. This will cause them to compete with existing property buyers to add to the pool of new HDB flat buyers.


To revisit the Centrale 8 (in Tampines) furor, having more people eligible via higher income ceiling will allow DBSS developers to make more profit due to the higher number of demand that will find their pricing “Affordable”. Higher levels of income will allow the developer to price it based on home loan affordability and push it to the limit. (People will pay through their noses for their HDB flats and any changes in home loan interest rates will hurt them really hard)

When DBSS developers feel confident of making more money, then they will bid higher prices for the land, eventually it means that more money flows to either the HDB or through the statutory boards holding the land and eventually as revenues to the government.

NOTE: At the time of publishing, we still have not found out who are the agencies that are responsible for the land sale, is it Singapore land authority (SLA) or is it HDB.

When DBSS price rises, this will create headroom for BTO prices to rise. Eventually, this will mean more expensive HDB flats. This in turn means that there is a minimum price on the land, forming the base support level for all other types of housing further up on the food chain.

The root cause is, a mis-managed supply and demand situation by MND which we strongly belief the government of Singapore had all the data at hand to solve, but did not do a good job.

Eventual victims are: Singaporeans who are newly wedded or singles who just become eligible to buy HDBs.

Continue on Part 5 - Summary and Proposals for Singapore Government

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Continue on Part 5
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