Gov considers raising income ceiling for BTO flats

I need to brush up on the differences between BTO/EC/DBSS.

BTO  are just the regular 3rm/4rm/5rm/Exec HDB with their present income ceiling of $8k. Some 3rm have an income ceiling of $5K (non-mature estates), MOP (minimum occupation period 5yrs)
DBSS : Income ceiling $10K with a $30k CPF grant. MOP 5 yrs
EC:  Income ceiling $10K, with a $30K CPF grant.  MOP 5 yrs. Restrictions lifted after 10 years. Comes with condo-like facilities (EC projects here)

At the end of the day, how will it effect the private market? It is only those who have  joined the DBSS and EC queue who might think about switching to smaller, cheaper BTO flats in ulu places.  They are where they are because they cannot afford the even higher priced low-end mass market properties. The sandwich class; too rich for HDB, too poor for private. The queue for DBSS/EC will shorten, it might  become less viable or disappear altogether. The BTO queue will get even longer, and the HDB will have to start churning out new flats at an even faster rate to satisfy demand.

All boats rise in the tide.
I doubt if all three schemes will remain at the same $10k income ceiling,  there would be no purpose to it - perhaps Mr Mah will raise the income ceiling of DBSS & EC by 2K too!  That would mean the developers could bid higher for the GLS sites  and charge more for their new units. Private land, without multitudinous HDB restrictions, might see an increase in interest and price as a result? 

Or perhaps we will see the DBSS and/or EC scheme being scrapped altogether.  Go back to simpler times; the choice between HDB or Private - with no unsatisfactory hybrid in-betweens. 

My opinion is that HDB has long lost the plot, forgotten it's mission, it's reason d'etre with Minister Mah at the helm.

I found an old article related to this.....

Time to raise income ceiling?

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.

his 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.

This article was first published by The New Paper on Jan 29, 2008.