“The measures that were announced by the Singapore government on February 19 do not address the root cause of the problem yet. The root cause of the problem is a short-term supply crunch at the lower end of the market, but it definitely helps mitigate the risk of bubbles being formed in the future.” (Channel NewsAsia, 2 Mar 2010, Asian property prices expected to continue to rise despite govt measures, Karamjit Singh)
We read Mr. Karamjit Singh’s comments and we did a bit more research. So here is what we found.
Singapore’s population according to the Singapore Department of Statistics are: -
Table 1: Singapore's Population 2000-2012
| Total Population ('000) | Resident Population (Citizen + PR) ('000) | Annual Increase in Resident Population + Local Citizens ('000) | Annual Increase in Total Population ('000) | |
2000
|
4,027.9
|
3,273.4
| ||
2001
|
4,138.0
|
3,325.9
|
52.5
| 110.1 |
2002
|
4,176.0
|
3,382.9
|
57.0
| 38.0 |
2003
|
4,114.8
|
3,366.9
|
-16.0
| -61.2 |
2004
|
4,166.7
|
3,413.3
|
46.4
| 51.9 |
2005
|
4,265.8
|
3,467.8
|
54.5
| 99.1 |
2006
|
4,401.4
|
3,525.9
|
58.1
| 135.6 |
2007
|
4,588.6
|
3,583.1
|
57.2
| 187.2 |
2008
|
4,839.4
|
3,642.7
|
59.6
| 250.8 |
2009
|
4,987.6
|
3,733.9
|
91.2
| 148.2 |
2010
|
5,076.7
|
3,771.7
|
37.8
| 89.1 |
2011
|
5,183.7
|
3,789.3
|
17.6
| 107.0 |
2012
|
5,312.4
|
3,818.2
|
28.9
| 128.7 |
Figure 1: Detailed Statistical Table (Singstat)
There is a nice table at
http://tankinlian.blogspot.com/2010/01/hdb-flats-and-population-growth.html
which shows the relative growth rates of HDB.
We are not against importing talent, but we think Singapore had been over-doing it, without studying the strain the additional populace will make on the country's basic infrastructure like transportation and housing. The miscalculation by the Government resulted in an inadequate supply of HDB flats to meet demand. This, we believe, is one of the causes of Singapore's escalating property prices.
Table 2 shows the number of new HDB flats (Source: HDB Press Release) rolled out each year from 2006 -2012 and the estimated housing demand in those years.
Based on the latest Census of Population 2010, the average household size stands at 3.5 people (Source: Department of Statistics), we divide the Annual Increase in Total Population by 3.5 to obtain the Estimated Housing Demand, the latent demand (rental + purchase)
Since 80% of the Singapore's population lives in HDB flats, we estimate that the Estimated HDB Housing Demand from foreigners to follow the same trend as 80% of total demand.
Table 2: Singapore's Estimated Housing Demand and HDB Housing Supply
| Estimated Housing Demand (Annual Increase in Total Population / 3.5 per household) | Estimated HDB Housing Demand at 80% of Total Demand | HDB Supply of New Flats (estimated) | |
2006
|
38,743
|
30,994
|
2,733
|
2007
|
53,486
|
42,789
|
5,063
|
2008
|
71,657
|
57,326
|
7,793
|
2009
|
42,343
|
33,874
| 13,500 |
2010
|
25,457
|
20,366
| 17,713 |
2011
|
30,571
|
24,457
| 25,200 |
2012
|
36,771
|
29,417
|
34,237
|
Total
|
293,600
|
106,239
|
This is the total latent demand as all foreigners arriving into Singapore will need to have a place to stay. In other words, these form largely the total demand (Rental + Purchase).
ACTUAL DEMAND IMPACT ON HDB
Now let’s take a look at the number of immigrants eligible for HDB purchase. Only Singapore citizens can buy HDB flats directly from HDB. Permanent Residents (PRs) are allowed to buy HDB flats only from the resale market.
Figure 2: Singstat, popinbrief2012a.pdf
Annual increase in population based on Table 1 (in 000s), is 54.5 in 2005, 58.1 in 2006 and 57.2 in 2007, 59.6 in 2008, 91.2 in 2009 and 37.8 in 2010, 17.6 in 2011, 28.9 in 2012.
Using Table 1, 3,818,200 (2012) – 3,467,800 (2005), the total population increase is 350,400.
As can be seen, a large part of these increases are due to NEW Permanent Residents and new Singaporeans (naturalised citizens) (Figure 2) with a small part contributed from local born Singaporeans.
Assumption of HDB demand caused by population increase
The increase in population is largely due to New Permanent Residents and New Citizens (Figure 2), with a small part contributed by increase in local born Singaporeans.Assumption 1: 80% of the 350,400 population increase buys HDB.
Let’s assume that 80% of these new population increase buys HDB, that is a total of 280,320 people.Assumption 2: 3.5 people to a household
Let’s assume that there will be 3.5 people to a household. 280,320 / 3.5 = 80,091 units of HDB demand arising from Permanent Residents and new Singaporeans.- 80,091 HDB units of NEW Demand of HDBs from 2005 to 2012!!!
LOCAL HDB Demand
There is also the annual household formation of 19,000 to 22,000 per year. Assume that 80% of these households would want to buy HDBs. So let’s say 80% of 20,000 would buy HDB, that would equate to 16,000 a year. 2005 to 2012, there would be a 128,000 of demand of HDB units.- 128,000 HDB units of Local Demand of HDBs from 2006 to 2012!!!
And HDB has only built or announced to build 106,239 units. There is an estimated shortage of over 100,000 units.
MASS MARKET HDB BEING PROPPED UP
Many of these new supplies were “Built-to-order” flats which can take 3 to 4 years to complete adding to acute shortages of HDB flats, further adding to the demand.Demand from household formation (marriages) comes in at a range of 19,761 to 22,840.
These newly married couples surely need somewhere to stay.
Why didn’t HDB anticipate the demand?
Marriage rates is something which is very easy to estimate and very consistent over the years. Why didn’t HDB anticipate the demand?
WHAT IS THE LIKELY EFFECT OF MASSIVE IMMIGRATION?
Rental rates are being pushed up.HDB property prices are being pushed up.
Faced with a lack of choices, Singaporeans will be forced to choose HDB flats in previously less desirable locations such as Punggol or Sengkang which has excess units. Not only that, some Singaporeans may choose not to wait and instead buy private housing directly if they can afford to.
For HDB flat owners whose property valuations have risen, they may consider selling their flats. After the sale, they will find buying another HDB flat too expensive; hence they may opt for private housing instead.
There is currently no shortage of total private properties in pipeline, which stands at 83,975 (Source: URA Release of 3rd Quarter 2012 Real Estate Statistics). This is easily 7 to 8 years of supply based on the average consumption trend.
The end effect is that a greater proportion of people will end up living in condominiums and private apartments. This will gradually deplete supplies and bring smiles to property developers in Singapore.
The Singapore government on the other hand will be happy that prices of land will rise and reach the land’s minimum reserve price to trigger a bidding process. More land sales equal more revenues for the government. And more developers bidding for land means higher prices. These higher prices are then translated into higher priced condominiums. Singaporeans will have to work even harder and hopefully earn more to pay for such private apartments or condominiums of which the major price component is the land price.
PERFECTING THE ART OF MICRO MANAGEMENT
Although it is a market driven economy, various policy levers which the government has access to means that it is not a 100% market driven economy. Though many countries are also similar.Singapore has perfected the art of micro-management.
At $10,000 household income, HDB income ceiling, you cannot buy HDB flats.
At $12,000 you reach the Executive Condominium ceiling, you are not eligible to buy Executive condominium anymore.
At a household income of $12,000 onwards, the Singapore government strongly encourage you to move upwards in consumption.
Consumptions helps increase tax revenues (annual property tax, stamp duty, transaction fees for property agents which translate into taxes, sale of furniture, construction, work for lawyers, etc.), and helps the economy in creating jobs.
WHAT THIS MEANS FOR THE SINGAPORE PROPERTY BUYERS AND THEIR HOUSING LOANS?
If you are a Singapore Property Buyer, you have to be mindful that there is a gradual shift in Singapore Government policy in play. The government is the largest land-owner, it can regulate supply to influence prices. Being an honest and efficient Singapore government bent on maximising land productivity, hence the Singapore government is now releasing a lot of HDB land with these elevated prices to maximize revenues. If you already own land, good for you, if you do not own any property, you could be price out.These subtle or not so subtle policy directions will either enrich or impoverish you. And when you consider your Singapore home loans, you ought also to take care to choose the right structure to capitalize on these unwritten government policies or mis-calculations.
We do not support or reject any government policies, we only highlight such policies to the attention of our readers so that they can find ways to benefit from these policies or outcomes of government’s miscalculations.
Read more articles at
PropertyBuyer.com.sg/articles
SingaporeHomeLoan.net/blog/
iCompareLoan.com/resources/category/faq/
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