ST : Housing in S'pore still affordable

Feb 27, 2010
HDB'S 50TH ANNIVERSARY

Housing in S'pore still affordable
By Tu Yong & Yu Shi Ming, For The Straits Times

HOUSING is a perennial hot topic of discussion, especially in Singapore where it touches almost every segment of society - from the low to middle income in public housing to the middle and higher income aspiring to upgrade to private property.

The recent spikes in both public and private housing prices have added fuel to the debate on affordability. Analysts and experts have attributed the price increase to a rise in demand, especially from foreigners and permanent residents.

What is clear is that housing demand changes constantly, which means that government policies seeking to offer decent and affordable homes have to keep changing too.

The International Housing Conference last month, organised by the Housing and Development Board (HDB) to mark its 50th anniversary, gave the housing authorities a platform to share ideas and strategies.

Even with the best of intentions, it is often hard to give people equal access to affordable housing because of uncertainty about the number who need it as well as an inelastic housing supply.

This commentary aims to compare the housing situation in Singapore, Hong Kong, London and Sydney.

As with most countries, Singapore's housing provision system is rooted in its historical and political background. During the initial years of independence, the Government adopted a subsidised rent system to resolve an urgent housing shortage.

However, by 1964, it was decided that home ownership was a better strategy as it was thought that citizens would be more likely to sink their roots in the country if they owned a stake in it. This marks the first deviation from public housing systems in countries with a strong welfare focus, such as the United Kingdom and the Netherlands. By the late 1970s, when many welfare countries were starting to revamp their public housing systems due to economic reasons, public home ownership was thriving in Singapore because of the development of the resale market for public housing.

Over the last few decades, the HDB has become the dominant housing provider, accounting for the homes of 82 per cent of the population. Table 1 shows the key differences between the housing systems in four major cities, including Singapore. It provides a broad picture of the composition of public and private housing and the proportion of rental and ownership for each category.

Table 1 makes two key points: One, these cities differ from Singapore in that most of their housing is provided by the private sector. This is also the case in most countries.

Two, only Singapore has a significant proportion of ownership when it comes to public sector housing. In fact, public housing in London and Sydney is solely rental, while Hong Kong has 35 per cent public housing ownership as compared with more than 95 per cent here.

Clearly, housing systems in different countries are shaped by their respective history, economy and the cultural and social needs of their people. Each system has its own merits and limitations; what matters is whether it can offer decent and affordable housing. We assess these two criteria in terms of living space, ratio of income to housing price as well as housing options. Table 2 compares the population density, ratio of median housing price to median annual household income and the average living space per person in Singapore, Hong Kong and London.

Table 2 shows that it is not meaningful to rate housing systems based on one factor alone. Take population density, for example. While Singapore scores the highest of the three, much of Hong Kong's land area is unbuildable because of the terrain, which means that the living space per person in the territory is less than half of that in Singapore. In fact, living space per person in Singapore compares favourably to that in London, where land supply is not a constraint.

In terms of affordability, Singapore has achieved a lower housing price to income ratio. On the whole, the figures reveal that the housing system here does deliver comfortable and affordable housing to the majority of Singaporeans.

As for housing options, some countries offer greater diversity. In London, for example, if a family is unable to buy or rent a good home from the open market, a range of affordable options is available, including public housing from the local authorities at a subsidised rent. There is also the possibility of buying a home through shared ownership, a part-buy, part-rent scheme from one of the independent, non-profit associations providing low-cost housing.

In Singapore, the HDB has diversified its housing types over the years through design, construction and technology. For example, besides the bulk of build-to-order flats, it also engages private developers to build public housing under the Design, Build and Sell Scheme.

While housing systems vary from country to country, what is important is the ease with which people can live in quality homes, defined as housing with water, sewerage and electricity.

In Singapore, all this - together with estate maintenance and neighbourhood amenities - has been achieved by the HDB over a relatively short history of 50 years.

Perhaps the success has also raised expectations. Each spike in house prices - fluctuations in prices will likely increase, given Singapore's open economy and rapidly changing global economic climate - will heighten the anxiety of potential buyers, despite the empirical evidence that housing in Singapore is still very much affordable by any standard.

The writers are from the Department of Real Estate, National University of Singapore.


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In terms of affordability, Singapore has achieved a lower housing price to income ratio. On the whole, the figures reveal that the housing system here does deliver comfortable and affordable housing to the majority of Singaporeans.