Good stocks to invest – On HDB Housing Related Thoughts. Again

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So I saw one of my Facebook friend shared out this article titled Stark Reality: Singaporeans Waking from the Housing Dream.

It was written in Jun 2017. And it is long.

This article provides:

  1. History of the role of public housing
  2. Narratives by various parties on this issue over the years
  3. Questions from the public regarding the mix signals they are receiving on this leasehold condo-rum
  4. Not being inclusive due to the stringent rules
  5. Housing affordability versus other countries, with our higher cost of living and large contribution to social security
  6. An attack on my friend 15 Hour Work Week and his Wife
  7. Housing size have shrunk
  8. Where the profits from land sales is going and its accounting and reporting by the government
  9. CPF and Housing
  10. The social, economic and political implication of the HDB

The article have a negative slant against the incumbent government, but I do acknowledge its good to read through the various data points that I might have missed out previously.

I think its too long and like Roy Nerng’s article previously, tries to tie everything to the concept of HDB flats (or perhaps everything is tied to HDB flat…..)


There were some reinforcements and some new things that I picked up.

I will definitely missed out something, as I won’t identify with everything that was written. (you can leave a comment for those portion that you identify with)

Let me go through them.

The freaking confusion whether the leasehold HDB is an asset that will appreciate or will be zero in value in the end

There are so much conflicting narratives among the incumbent government over whether the home is an asset:

  1. Mr Goh Chok Tong, Mah Bow Tan, Lee Hsien Loong have in the past use the appreciating value, or potential of appreciating value in our leasehold homes as evidence of Singapore Success
  2. Mr Lawrence Ng and Khaw Boon Wan, both being ministers in control of the housing board, have sought to caution against linking price appreciation, growth of asset value of HDB for leasehold flats

My conclusion is that people cannot accept the fact that their flat’s value can be rather volatile. And it has become such an important part of our lives.

My understanding of this situation is this:

  1. It starts of as subsidizing housing so that many people can get homes
  2. It as always meant to be a leasehold with an expiry date and value
  3. Somewhere down the line, there are embedded goals to the home ownership. And thus the home prices are linked to private property value, and the demand and supply levers are systematically controlled
  4. Then somewhere down the line, the mismatched between, home value, cost of living, and social sentiments become too much. So they have to manage this situation if not there will be greater social problems then the wealth created
  5. However, at this point, the narrative of home as an ever growing asset that you can monetize safely without much efforts is sold too far that people’s net worth are so concentrated in one asset class that changes cannot happen easily
  6. The right way is to do what a lot of the opposition have said all along. Link the prices to either a percentage above cost, median income and treat home ownership as a form of survival. In this way, the money will flow into other areas and the people won’t be so concentrated in one asset class. But this train have gone down too far and drastic turns will just crash it

Using HDB as a Controlling Factor

An old narrative by the late Mr Lee Kuan Yew may provide the insight of the secondary role of home ownership in Singapore:

2000: He said: “My primary preoccupation was to give every citizen a stake in the country and its future. I wanted a home-owning society. I […] was convinced that if every family owned its home, the country would be more stable.”

The late Lee continued: “I had seen how voters in capital cities always tended to vote against the government of the day and was determined that our householders should become homeowners, otherwise we would not have political stability.”

But the late Lee continued: “My other important motive was to give all parents whose sons would have to do national service a stake in the Singapore their sons had to defend. If the soldier’s family did not own their home, he would soon conclude he would be fighting to protect the properties of the wealthy. I believed this sense of ownership was vital for our new society which had no deep roots in a common historical experience.”

People are Inherently Suspicous Can Pay Off Your HDB Flat in 10 years

The article managed to pick out my good friends, the couple at My 15 Hour Work Week’s interview in Straits Times.

And the comments felt that this article is politically motivated!

The Straits Times reported, “freelance tutor Thomas Zhuo and project manager Jasmine Ong “lived like students” in their 20s, putting aside more than half of their take-home pay so that they could get their own home by the age of 27.”

It added: “At 27, they got the keys to their Built-To-Order five-room Housing Board (HDB) flat in Punggol. They have enough savings to pay off their 30-year housing loan of S$230,000 today, should they need to.”

In order to do so, they “would spend S$30 a week on food, [… and] cut down on movie dates and went on one or two holidays a year. […] They used to spend S$10,000 a year on holidays, but have cut that down by half to save for the renovation.”

On The Straits Times Facebook page, where the article was shared, at the time of writing there were more than 2,300 reactions and 1,384 shares, with many of the 392 comments lambasting the paper.

Ron Ng said: “[Please] report something that [the] majority of us are facing rather than the rare ones. Face it la[h], living in [Singapore] is [expensive], [I am] not complaining but stating the fact.”

“This article is just another [government] propaganda,” Paul Tham also commented. “The numbers don’t add up and it’s beyond belief to survive on just $30 a week.”

In a comment that has received 367 reactions, Vincent Tay did his own calculations and estimated that to be able to save S$230,000 in 4 years, the couple would have to save S$57,500 a year or S$4,791 a month. He said: “they must have high income[s] and no commitment. If your income is [S$5,000] then why not[?] How many people take back [S$5,000] per month[?]”

Debbie Takumi also did her own calculations and estimated that, the couple would need to “save approximately [S$2,400] each a month in order to pay off their loan in 4 years. That’s more than what an average [S]ingaporean earns… even by working [l]ong retail or shift hours, the average pay is around [S$2,000] excluding commissions. So that’s fairly hard for the average citizen to achieve that kind of monthly savings.”

Of course, the S$230,000 figure accounts for only the housing loan. Where the couple would have needed to pay between 10 percent and 40 percent in down payment, the flat would cost them between S$250,000 and S$390,000.

But as Tay opined, “how many people take back S$5,000 (US$3,620) per month?” In fact, the median wage in Singapore was only S$3,467 (US$2,500) in 2015. Worse still, there were still 8 percent of Singaporeans earning less than S$1,000 (US$720).

Firstly, if you get interview by Straits Times (or other publications), do be aware that it might not be the way you want it to turned out. So these reactions are pretty normal.

I think there is a mistake that they live on $30/week food. I know the 2 of them eat a lot to fill up their big stomach.

Like my friend Chris from TreeOfProsperity says’ some Gen Xers’ have a suspicion how people can do so well in life.

And you can see, what we are all afraid of is perhaps not whether this article is genuine but whether they can live up to this expectation in their life.

The stories of those folks owning many properties are good for them, because these folks are so far off that they belong to another class of people, the elites. This is the people they aspire to reach.

Thus Me and My Money did a good service by getting so many property owners and business owners to share their experience to be inspired.

Now those people that are closer to you, you feel threatened.

You cannot fathom how come given the same situation, they end up so far off and not having that sum of money to pay off.

So they must have some form of privilege.

And in my opinion, they DO have privilege.

That does not mean you do not have that same privilege.

I am sure they are not the one who:

  1. did well in school to get 2 good jobs
  2. don’t have student loan debts (I am not sure if they have)
  3. manage to get a BTO Flat

The difference is that they decide to save more (and note, its not like they are making some ridiculous amount of money) and live like university students. And the good thing is some folks actually worked out the amount to save.

Is it possible to save $55,000/yr, $24,000/yr each? As bloggers we have shown that young adults in various industry are able to do that.

If you cannot, it means that you need a longer period of time to save that amount.

Why compare to the 15HWW?

You just want to measure where you are. So you have your answer. You have not saved enough period because either you have not earned enough, have not optimized expenses enough.

We cannot hide the fact that this Singapore society currently is bias towards being well educated, and those stacked with valuable competency. This will create a bigger divide and the middle class will be split up.

 

Some of my peers do not earn so much.

My working environment are the ones trying to fight hard. But I always tell them, if your wages grow at 3%, and you only get 1 month of bonus, the couple in 10 years will have $950,000.

You need to think about what you wish to do with that sum of money. Don’t tell me you cannot prioritize clearing the mortgage in 10 years.

I have seen people not able to save money, but once their CPF gets dump into their HDB, the monthly payment becomes $300/mth each on their CPF contribution only.

If you get a large BTO flat, and you say the home is expensive, you have to realize you chose to do that due to your circumstances and are willing to take a step down.

When my parents moved into a 3 room Yishun flat in 1980 for $29,000, it is because they cannot afford a bigger place, they cannot afford a place closer to the East side, where all the relatives are. It must be a struggle for my mom back then.

Now how similar is this to a lot of people’s situation? It hasn’t changed much in 37 years. There are some decisions you need to make in life.

What kills most of us is that the government cannot give us a 5 room flat, that is affordable even for those earning below the middle income, that is close to our parents and near amenities.

Summary

While I am aware that it is rather slanted, its good to see the narrative pieced together. The writer did revisit some of the old comments such as the ones made by S. Rajarathnam on money.

There are some good points on the transparency on the earnings from land sales but there are also something misleading on HDB grants and accrual interest on CPF.

I think if you treat CPF as a danger zone, anything that is tied to CPF is going to be something negative.

As a Singaporean, I hold a balance view.

You watch out for your family and yourself, equipped well, don’t get into a state where you depend on the establishment for help or have so much stuff tied to the establishment.

Build a life that has some levers to pull in case some policies don’t work out perfectly.

I find it possible that policies would change, most likely after these old guards are gone. Singapore might look a different place in that scenario.

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