Are HDB flats really affordable? - Part 1 #hdb #bto #singapore #publichousing

Key Concepts:

1. Affordability vs. Price of Housing

The core argument is that affordability is not synonymous with low price ("cheap"). It's about the ability to pay the price.
Even if housing prices are increasing, affordability can still be maintained if household income grows at a faster rate.
The speaker argues that BTO flats in Singapore are arguably still affordable because household income growth outpaces BTO flat price increases.

2. Changing Aspirations and BTO Flat Preferences

Historically, young households might have been content with a three-room HDB flat.
However, in recent years, there's a trend of first-time BTO applicants opting for four-room and five-room flats.
A contributing factor is the perception that larger flats (four-room) can yield a bigger profit upon resale compared to smaller flats (three-room).
This suggests that some buyers are treating HDB flats partly as "trading assets," influencing their choice of flat size.

3. Impact of Inflation and Cost of Living

Overall inflation and the rising cost of living can make people feel less affluent, even if their income is increasing.
Increased expenses on other items may leave less disposable income for leisure and other expenses, especially after mortgage payments.

4. Subjectivity and Objective Benchmarks of Affordability

Affordability is acknowledged as a "subjective notion," even with objective benchmarks.
HDB uses various indicators to measure housing affordability.

5. Mortgage Servicing Ratio (MSR) as an Indicator

MSR is a key international benchmark: the proportion of income used for monthly mortgage installments.
Globally, a reasonable MSR is around 30-35%.
In 2023, about 90% of HDB flat buyers who collected keys had an MSR of 25% or less, indicating relatively high affordability.

6. The Role of CPF in Housing Affordability

CPF (Central Provident Fund) is highlighted as a crucial factor in Singapore's housing affordability.
It serves as both a retirement planning mechanism and a source of housing finance.
The speaker emphasizes that many other countries lack a similar system.
CPF contributions make housing more "painless" because the money is deducted directly, reducing the perceived financial burden.

7. Conclusion

The video argues that while housing prices may be increasing, affordability in Singapore, particularly for BTO flats, is maintained by factors like income growth and the CPF system.
The changing aspirations of buyers, influenced by potential resale profits, and the impact of overall inflation are also discussed as factors affecting the perception of affordability.
The MSR is presented as a key metric demonstrating that a significant majority of new flat buyers have manageable mortgage burdens.