Time To Raise $8,000 Ceiling?

Source : The Electric New Paper, January 30, 2008

More families exceed income limit set 14 years ago. Households earning $8,000 or more a month

If your household earns more than $8,000 a month, it's...
# No new HDB flats
# No subsidised housing loans
# No maximum $40,000 grant to buy resale flats

IT'S been 14 years since the HDB last raised its income ceiling for new flats from $7,000 to $8,000.

Many things have changed since 1994 - isn't it time for the ceiling to shift too?

Data from the General Household Survey shows that the proportion of resident households earning $8,000 and above every month has nearly doubled from 10.85 per cent in 1995 to 19.9 per cent in 2005.

This means that the proportion of households qualifying to buy new flats shrank by roughly 9 percentage points.

Flat values have also jumped since then.

Consider this. Back then, a new four-room HDB flat in Woodlands would cost you about $96,000, compared to $183,000 for a new four-room unit at nearby Yishun today.

Home-buyer Seline Wee, 29, wants the ceiling to be raised.

SANDWICH CLASS

Ms Wee, a teacher, is getting married to her auditor boyfriend next year.

She said: 'Our combined income is just slightly above the $8,000 ceiling and we feel we're being penalised for it.

'Now we can't buy a new flat and we've to dig deep for either a high-priced resale place or condo, which means possibly spending beyond our means.

'The income ceiling rule has not been changed for so long but income levels and property prices have increased since then.'

A household earning above $8,000 a month also cannot get subsidised housing loans and housing grants of up to $40,000 to buy resale flats.

Knight Frank's research director Nicholas Mak thinks the policy should be reviewed regularly because of inflation, the increase in income and property prices.

He explained: 'This ceiling has to be reviewed regularly or otherwise you're cutting out a certain proportion of the population who can make use of the subsidy.

'On one hand, the Government is restricting the amount of CPF you can spend on housing. On the other hand, they're keeping the income ceiling low, and preventing some in the sandwich class who don't want to over-invest in property from buying new flats.'

Mr Sing Tien Foo, deputy head of the NUS' department of real estate, said that the income ceiling is an eligibility measure to make sure Singaporeans can afford public housing.

To lift this cap, the Government has to look at market conditions and see whether public housing has gone beyond the affordability of Singaporeans.

He said: 'A solution would be a discreet review. If income levels have gone up, is it only applicable to certain groups? And is this change in income cyclical or a permanent structural change?'

Lifting the cap may have widespread effects, he added.

'How big is this sandwich class? By lifting the ceiling, the demand for new flats may surge and their prices may be adjusted higher.

'The resale market will also be affected. Is that the best solution?' he asked.

While some may argue that executive condos (EC) fulfil this niche with its $10,000 ceiling, Mr Mak said that these sites tend to be fewer in number.

HDB announced that there would be a supply of 7,000 new flats available from last November to June this year.

And another 3,200 flats will be built under the Design, Build and Sell Scheme (DBSS) and EC schemes.

Mr Eric Cheng, executive director of HSR Property group, thinks that $8,000 is a fair gauge because those earning more than that can easily afford private property.

Based on a couple's combined income of $8,000, they can easily buy a $700,000 private property on a 35-year loan.

He calculated that the monthly instalment of around $2,300 would be quite affordable.

'If you bring the ceiling higher, there'll be increased demand for new flats and the resale market will be affected. Now, the resale market is quite balanced,' he said.

The Housing Board said it has no plans to raise the income ceiling now as the vast majority of Singaporean families qualify for subsidised public housing.

Said a HDB spokesman: 'At the current $8,000 income ceiling, about 8 in 10 Singaporean families are eligible to buy subsidised public housing.

'Given our limited public housing budget, it is important that we target our housing subsidies to those who need it most.'

HDB said that higher income households exceeding the income ceiling have other housing options, including the purchase of resale HDB flats, which are not subject to any income ceiling.

And first-timer families with household incomes of up to $10,000 can also consider buying new EC units with a housing grant of $30,000.