Are HDB flats today as affordable as they used to be? The answer really depends on who you ask.
If you ask the government, the answer is yes. In fact, a recent Urban Land Institute (ULI) report showed that the price-to-income ratio of an HDB flat in 2024 was 4.3. Out of 41 major cities in Asia Pacific, only Singapore, Melbourne and Kuala Lumpur had homes priced at five times or less of the median income.
But if you ask a young couple trying to buy their first flat, you will probably hear a different story. Older Singaporeans often remind us how “cheap” flats used to be. My parents, for example, bought their first 4-room HDB flat in Ang Mo Kio for just $24,500 in the 70s.
Of course, comparing prices across generations can be misleading. Salaries have gone up a lot since the 70s. My parents’ first pay cheque was about $300 a month. Today, a fresh graduate can expect closer to $3,000. So in some sense, it’s natural that homes cost more now.
The issue is that many people have is that home prices haven’t just gone up, but that they have gone up much faster than salaries. While starting pay may have risen around ten times, HDB flat prices have climbed by even more. That’s why many Singaporeans feel that “affordability” on paper doesn’t match the reality of heavier financial commitments young buyers face today.
Are Flat Prices Really More Expensive Today Relative To Income?
To start, we need to recognise a simple truth: home prices, including HDB flats, would increase as income levels rise in Singapore. It wouldn’t make sense for us to expect to earn in today’s salaries, but to buy homes at the same prices our parents paid for 40 years ago.
The real question then isn’t whether flats cost more today, that part is obvious. But whether prices have climbed faster than incomes, and if that gap is what makes homes feel less affordable for younger buyers today.
In his 2023 May Day Rally speech, then Deputy Prime Minister Lawrence Wong shared that in 1980, a 4-room BTO flat in a new town cost about $40,000 and that back then, the median household income was around $900. This meant a typical household would spend roughly a quarter of their income servicing the housing loan.
Fast forward to 2023. A 4-room flat in a non-mature estate like Bukit Batok is priced at about $350,000. That’s nearly ten times more than in 1980. But here’s the thing, median household income has also risen almost ten times, from $900 then to around $9,000. In that sense, BTO flat prices have broadly kept pace with income growth.
Flat Prices Are Not The Only Factor We Should Be Looking At
Even if you are not willing to accept this data, or think it has been cherry-picked to suit the government narratives, there are also other crucial non-price related factors that we cannot, and should not ignore.
More HDB Grants Today
Today’s buyers also enjoy multiple HDB housing grants such as the Enhanced CPF Housing Grant, the CPF Housing Grant for Resale Flats, and the Proximity Housing Grant. These grants can significantly reduce the effective cost of a flat, especially when it comes to covering the down payment.
For the Pioneer and Merdeka generations, however, such extensive housing grants didn’t exist. Even though flat prices were lower relative to income levels back then, buyers did not have the benefit of these subsidies to lighten their financial load.
Lower Interest Rates
Most of us who are HDB home owners will take an HDB loan at 2.6%. Even if we opt for a bank loan, the interest we pay is still relatively low, usually around 3% or less. This matters because most buyers need a housing loan, and lower interest rates make monthly repayments more manageable.
Back in the 1970s and 80s, however, interest rates were much higher — around 6.25%. We can’t ignore this because it means that even though flat prices were lower back then, home owners had to fork out a much bigger portion of their income on interest payments. In other words, buyers today may be paying more for the flat itself, but they enjoy far cheaper financing compared to previous generations.
For example, a $200,000 loan at 6.25% over 25 years would mean a monthly repayment of about $1,320. The same loan at 2.6% works out to roughly $900 a month. That’s more than $400 saved every month, or nearly $120,000 less in total interest over the lifetime of the loan.
In other words, buyers today may be paying more for the flat itself, but they enjoy far cheaper financing compared to previous generations.
Source: SMU
Greater Utilisation Of CPF Savings
One key difference today is that we can use a significant portion of our CPF savings to service our home loan. This wasn’t always the case. Between 1968 and 1981, CPF savings could only be withdrawn for limited housing-related uses such as the downpayment, stamp duties, mortgage instalments and interest for public housing. In fact, older generations had to rely much more on their take-home cash to pay off their flats.
Over time, the rules were loosened. In 1981, CPF usage was extended to private housing mortgages, and from 1984 onwards, CPF withdrawals were gradually allowed for medical, education, insurance and even investments. For today’s buyers, being able to use CPF for monthly mortgage repayments makes a huge difference, since it effectively reduces the amount of cash we need to fork out each month.
So while CPF is still our own savings, the ability to tap it for housing means current buyers enjoy a flexibility and buffer that previous generations didn’t have.
Home Ownership Then vs Now: A Different Starting Point
My final point, and really the most important one I want to stress, is that we need to remember the context of what homeownership meant for earlier generations.
Many home buyers in the 1970s and 80s, including my parents, were not just first-time buyers. They were also the first in their family ever to own a home. For them, moving into that first HDB flat meant that the entire family finally transitioned from kampongs or rental units into proper home ownership. In that sense, it’s reasonable that flats were priced lower then, because they were building the foundation of home ownership in Singapore from scratch.
Today, the situation is very different. Most of us grew up in a family that already owns a home, even if it’s just a modest HDB flat. For younger buyers, the question isn’t whether they will ever have a roof over their head — they often already do. The decision now is whether to move out and buy a place of their own. It’s still a big step, but unlike the first generation who bought out of necessity, today’s buyers see home ownership less as a roof over their heads and more as a reflection of their expectations and aspirations.
Top Image Credit: DollarsAndSense/Raymond Quek
