This post is for my friend Crystal at Expat Bostonians, who requested that I write about the housing situation in Singapore, particularly government housing. So here’s a little guide to HDB flats in Singapore, for those who don’t already know! For those who do know, please comment if I make any mistake, or if you would like to add anything.
Just some background from my “extensive research” (i.e. Wikipedia):
The Housing Development Board (HDB) was set up after Singapore was granted self-governance (and before we gained independence) to resettle residents into low-cost housing. Many of these residents were living in kampongs (villages) at the time. Some might have been a bit slum-like (I don’t really know because I wasn’t alive), and others were probably on land that the government wanted to use for other development. The idea was to provide state-built cheap housing that would allow a large number of Singaporeans to own their own home, and therefore have some sort of security.
At the moment, about 80% of the nation’s population live in HDB housing.
One of the biggest and most worrying issues in Singapore right now is that of the cost of housing. Property prices have sky-rocketed, and HDB flats are no different.
To give you an idea of how insane things are: when my grandparents bought their 5-room flat in the 70s, they paid about S$35,000. Today, the flat could probably fetch S$600,000 – S$700,000. Even if you factor in inflation, it’s still an astounding jump.
Generally speaking, there are two types of HDB flats that you can buy:
- Built-To-Order (BTO) flats, which are new
- Resale flats, which have had previous owners
Resale flats are generally much more expensive, but are open to a wider range of people, such as singles over 35, PRs, or if your monthly household income exceeds the limits set for those who can buy BTO, etc. There are a number of eligibility schemes for buying resale flats.
If you look at the Resale Price Index, which charts the price movement of the public residential market across the country, you will clearly see how the property prices have just shot straight up, and seem to be still increasing:
It doesn’t help that when you buy a resale flat there is also the Cash-Over-Valuation (COV), which is the difference between the market value of the flat and the resale price. The COV can be discussed or negotiated between the seller and the buyer, but at the moment it’s generally around the S$20,000-mark. You can’t use your CPF to pay the COV, so you have to fork it over in cash. This is a problem for many of the lower-income families who are not eligible for BTO (or cannot wait for the amount of time it’ll take to get one), or for the Public Rental Scheme (that only helps families with monthly household income of S$1500 or less) – they simply do not have that amount of cash on hand. (If they did, they wouldn’t be “lower-income families”, would they?)
BTO flats don’t require a COV, but here is the process of getting a BTO flat:
As you can see, it takes quite some time. The average waiting period is about 3.5 years. So if you are wanting to have your own home first before having your first child, you have to apply for a BTO about 4 years in advance. That, or live with your parents for 4 years until you get your flat.
Still, the prices of BTO are – for some weird reason – pegged to the market rate of the properties around it, instead of cost price. This means that if you are buying a flat in a popular area where property prices are high, be prepared to fork out a substantial amount for your BTO. It can go up to around S$126,000 for a 2-room, S$237,000 for a 3-room, S$380,000 for a 4-room, S$496,000 for a 5-room, etc.
Also, as I mentioned, there are all sorts of criteria on who can or cannot buy a BTO flat, such as matrimonial status, household income, etc. You can see the list of eligibility here.
Many families who buy HDB flats find themselves having to take out long loans, to be paid out over a period of up to 30 years. This might be especially dangerous if your income decreases during the 30 years, or if you lose your job completely. In fact, that’s how a significant number of people have become homeless in Singapore.
In this year’s Budget (announced yesterday), the government said that they would do more to help lower-income families own a home. I guess we shall just have to wait and see how that works out. If the prices keep going up and up, a grant might not actually be solving the problem.
The Ethnic Integration Policy (EIP)
In 1989, the government introduced an ethnic quota on HDB estates to ensure that the different racial groups of Singapore mixed together, so that there wouldn’t be any sort of sectarianism. The EIP is still in place today, amid more and more discussion of it’s relevance in a society where the races are already living side-by-side pretty well, and where mixed-race families are on the rise.
Personally, I think that the EIP is out-dated and can be done away with. With Singapore being such a small island, and everyone being incredibly mobile within it (I travel from West to East and back every day just to go to work), it hardly seems like we’re in any danger of forming racial enclaves that will cut us off from each other. And now that we’re already pretty well “mixed” together, I find it unlikely that people will rush to congregate with their own race the minute the policy is abolished. There are other considerations when it comes to flat-hunting than the ethnicity of your neighbour, surely.
Also, as mentioned in the article ‘Race Issues in Singapore: Is the HDB Ethnic Quota becoming a farce?‘, the policy has also contributed towards the skewing of property prices.
The 99-Year Lease
HDB flats come with a 99-year lease, instead of being freehold. This means that after 99 years the property reverts back to the government. However, seeing that HDB was only set up in the 60s, we haven’t had any lease hit 99 years yet. It’s unlikely that any of the flats will, anyway, because it is far more likely that your block will be slated for en-bloc under the Selective En Bloc Redevelopment Scheme (SERS) before the 99 years is up, and everyone is moved away and the old block torn down/rebuilt/redeveloped.
In a way it’s a little sad that we cannot have family homes that get handed down over generations, unlike some other countries, but this something that Singaporeans have had to come to accept.
So that’s about it from me about public housing in Singapore! Hope it was useful to anyone reading it, and please feel free to correct me if I’ve got anything wrong! I’ve gathered most of this information from the HDB website, Wikipedia, news articles and asking people. Although I find the skyrocketing housing prices a very important issue that needs to be urgently addressed, before this blog entry I haven’t really done that much to find out about public housing costs and policies, because I’ve pretty much assumed that I am never going to get one in my lifetime. I’m not sure that I would ever be able to afford it. And I certainly don’t want a 30-year loan!