Source : The Straits Times, Apr 16, 2008
WITH regard to the recent sale of Design, Build and Sell Scheme (DBSS) HDB flats in Boon Keng, I propose the Housing Board set different income limits for flats valued at more than $500,000. This makes more sense in terms of financial planning and affordability issues.
There were 3,500 who balloted for 714 DBSS flats in Boon Keng, but only 460 were sold. My nephew was one of those and was allocated a flat but failed the $8,000 income requirement to buy a new HDB flat. At a price of $727,000, it would be unwise for someone with a combined income of less than $8,000 to commit to a flat.
Simple calculation:
Cost of flat: $727,000
Stamp and legal fees: +$18,100
Current CPF: -$100,000
Loan: $645,100 @ 2.5% over 30 years = $2,583 per month
Combined income of $8,000, CPF-OA contribution: -$1,840 per month
Cash top-up: $743 per month
Based on these figures, a couple would have over-committed to a 30-year housing loan. In the event that one of them is unable to work or needs to take care of children, the burden of the loan will be too heavy for the other party. They would not have surplus to save for retirement or other needs.
As a financial planner, my advice is that one should not commit more than 20 per cent of monthly income to a housing loan, and the full loan amount must be insured by both parties. A couple earning $8,000 combined should not commit to a new HDB flat valued at more than $500,000.
Thus, I hope the HDB will set a higher income ceiling for flats over $500,000.
Song Yee Soon
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HDB Income Ceiling: Many Housing Options Available
The Straits Times, Apr 28, 2008
I REFER to the letters, 'Raise income ceiling on HDB flats over $500k' by Mr Song Yee Soon (April 16), and 'Variety needed in HDB income ceiling rule' by Mr Ng Ya Keng (last Thursday).
The Design, Build and Sell Scheme (DBSS) was launched to give choice to flat buyers who are prepared to pay for variety in housing designs and fittings.
In pricing new DBSS flats, private developers take into account the purchasing power of flat buyers within the income ceiling of $8,000 per month. If HDB raised the income ceiling, as suggested by Mr Song, developers could correspondingly set higher prices for DBSS flats.
HDB would like to remind buyers there is a wide variety of flats available, of different sizes, finishes and prices. DBSS is only one of many public housing options, including new HDB flats and resale flats.
On Mr Ng's suggestion to raise the income ceiling, we would like to explain that about eight in 10 Singaporean families are currently eligible to buy subsidised public housing at the prevailing household income ceiling of $8,000. Households with incomes exceeding the income ceiling have many other housing options, including resale flats.
Mr Ng may wish to know only households with income not more than $2,000 and $3,000 are eligible to buy new two- and three-room HDB flats respectively. Eligible households earning below $4,000 per month may receive additional housing grants of up to $30,000 for flat purchases. This is to recognise the extra help needed by the lower-income group to own HDB flats.
HDB agrees with Mr Song that flat buyers should exercise financial prudence when buying an HDB flat. Currently, flat buyers taking HDB loans are required to undergo credit assessment and obtain a home loan eligibility letter from HDB, before they can commit to buy a new or resale HDB flat.
We thank Mr Song and Mr Ng for their feedback.
Lily Chan-Wong Jee Choo (Mrs)
Acting Deputy Director (Policy & Property)
for Director (Estate Administration & Property)
Housing & Development Board
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