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Singapore’s Housing Is “Seriously Unaffordable” According To A Survey, Is It True?

Will mortgage payments be the new contraceptives for young women?

The 12th Annual Demographia International Housing Affordability Survey have recently been published and Singapore has been categorized as a Seriously Unaffordable place for housing. Is this true and how much depth did the survey cover?

Australia’s Senator, Bob Day, joked that high mortgages are the new contraceptives for young women, as they are required to work hard in order to afford to pay for outrageous property prices. Gone were the days where a household can rely on a single breadwinner to bring home sufficient food, shelter, education and entertainment with the spouse managing the house.

He also mentioned that the easiest way to reduce poverty and increase birth rate of chronic low birth-rate countries is to reduce property prices. Property developers will be hoping that politicians, upright enough, will not read too much into this survey.

Read Also: Which HDB Type Can You Buy From Your Monthly Wage?

Where does Singapore stand in this survey?

On the outset, this survey’s main indicator is the “Median Multiple”, which calculates how many times of a household’s income it would take to purchase a house. For instance, a 5.0x would mean the average family in that market (a.k.a city/state) would have to pay 5.0x their median annual income to purchase a house.

Amongst the 9 nations, Singapore is ranked the 5th country to have the most affordable housing. That means we are right in the middle.

Of the 367 markets, Singapore beat over 260 cities/markets to be ranked 270th most affordable.

Amongst the 87 major markets (population over 1,000,000) Singapore is 61st.

Exhibit 1: Housing Affordability Ratings by Nation: All Markets

Exhibit 1

Source: 12th Annual Demographia International Housing Affordability Survey

If you are constantly reading articles rambling about just how expensive homes are in Singapore, this survey may have caught you off guard. Yes, homes in Singapore are not cheap, but it appears that we are not the only developed nation in the world having this problem.

Is Singapore in that a bad shape?

The survey only took into account the gross annual wage of a household. But failed to recognize taxation that would impact the median and dispensable income. Nonetheless, let us look at what the survey provides.

Exhibit 2: Major Markets Ranked By Unaffordability

Exhibit 2

Note: have converted median price and household income to Singapore dollars for the pleasure of our beloved readers

Source: 12th Annual Demographia International Housing Affordability Survey

We realized that Singapore’s Median Multiple is at 5.0x, which puts us into the category of being “Seriously Unaffordable”. However, due to Singapore’s low income tax, the household that earns the median of $81,900 would only have to pay $1,233 in income tax and have higher dispensable income to service their mortgage.

Let us look at what happens once we add in taxation.

Exhibit 3: Major Markets By Unaffordability (After-Tax)

Exhibit 3

Note: have converted median price and household income to Singapore dollars for the pleasure of our beloved readers

Source: 12th Annual Demographia International Housing Affordability Survey

Singapore’s Median Multiple only increased by 0.1x, while other countries Median Multiple increased by 1.2x on average. This means that the people in other countries would have to pay an additional 1.2x of after-tax annual income in order to purchase their houses. This would make Singapore’s housing much more affordable relative to the rest of the world.

Is Singapore really at the 5.0x Median Multiple?

We are pretty sure that this survey has not taken into account that our employers have to contribute another 17% of our income into our CPF. Of which 62% of it can be used to pay for our mortgages (for those 35 and younger).

If we were to consider our additional 17% CPF contribution by our employers, then the Median Multiple would be 4.3x.

With a Median Multiple of 4.3x, we will be ranked almost at the middle alongside Tokyo and Yokohama.

Singapore’s Housing Is “Seriously Unaffordable” According To A Survey, Is This True?

The survey even mentioned that resale home prices would rise slower or even fall in the future due to government’s intervention. They also praised our Median Multiple figure, indicating that the number is managed when we take into consideration the fact that we are the most land scarce market in the entire 367 markets that they have surveyed.

As much as we hate high housing prices, we have to understand that Singapore does not have much land and that prices would definitely rise. Therefore, instead of dreaming of buying our Nassim Hill bungalow and ION Orchard Condominium and feeling like we can never afford those, why not think of our 3-room HDB flat at Sembawang instead. We would definitely live happier life.

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