rising resale prices and high demand are bringing strain
Despite Singapore’s credentials as a free-market entrepot, more than three-quarters of its citizen and permanent resident population live in 1.1million government-built flats, bought at subsidised rates.
it also raised questions about whether the model is still fit for purpose.
Rising property costs, notably in the resale market, have sparked concern over affordability, while the lottery system for allocating flats, which favours traditional nuclear families, is being tested by changing social norms. Over the longer term, property values are also being eaten away by the 99-year leases on which they are sold. The main thing that worries me is that . . . as the lease clock ticks down and as the stock ages, housing equity drops to zero, Singapore’s public housing system is now facing problems that were not considered when it was kick-started six decades ago with the launch of the Housing and Development Board (HDB), the idea was to provide reasonable subsidised housing for young citizens making their first step on to the property ladder. It looks as if this was a system that was very well thought out from the beginning — but this is not the result of a grand vision.
Singapore’s public housing resale prices have risen since the Covid-19 pandemic.
Resale price index (Q1 2009 = 100.0)
Resale price index (Q1 2020 = 131.5)(Covid-19 outbreak)
Resale price index (Q1 2022 = 159.5)
Resale price index (Q1 2023 = 173.6)
Resale price index (Q1 2024 = 183.7)
Resale price index (Q1 2025 = 201.0)
Resale price index (Q4 2025 = 203.6)
Source: HDB
Many of the developments were painted in pastel colours to reflect traditional Malay culture.
When Singapore introduced national service after gaining independence in 1965, home ownership was also encouraged as an incentive for conscripts to fight for their country. Today, more than 90 per cent of Singaporeans live in an owner-occupied home — among the highest rates in the world.
Properties are allocated to would-be buyers via a lottery system to applicants who are typically required to be married, engaged or older than 35 years-old.
Prices are eased through a raft of government subsidies based on personal circumstances. Singaporeans can also dip into their mandated savings and pension plans (CPF) and obtain mortgages and loans from the HDB directly.
The lottery system is unfair to singles and non-traditional families, for whom it is harder to get a flat. Singapore’s marriage rate has been steadily falling in recent decades, dropping from 57 per 1,000 unmarried males in 1994 to 42 in 2024.
The HDB system has also been used by Singapore’s government to promote multicultural integration by setting limits on the proportion of different ethnic groups in the same estate. However, this policy has caused problems for some in the resale market by restricting potential buyers.
The system has also come under recent strain. Construction ground to a halt during the Covid-19 pandemic, resulting in delays to new HDBs coming on to the market. Wait times to move into a property rose from three years to as many as six.
As a result, more buyers turned to the resae market, where HDB owners can sell properties after five years of occupancy. This led to a sharp rise in resale prices, especially in more desirable estates.
The number of HDB flats that sold on the secondary market for more than S$1mn (US$789,000) has steadily climbed in recent years, from 82 in 2020 to 1,035 in 2024 and 1,594 last year, according to analysis of official data.
Rising prices have become a charged political issue in Singapore, where cost of living concerns dominated last year’s general election. The government has pledged to build more than 50,000 new flats between 2025 and 2027, many with waiting times of less than three years. It has also offered more subsidies to lower-income groups and middle-income buyers.
High-priced public housing resales are increasing in Singapore
Number of public housing flats resold for more than S$1million per unit.
Year 2017 ~ 46 units
Year 2018 ~ 71 units
Year 2019 ~ 64 units
Year 2020 ~ 82 units
Year 2021 ~ 259 units
Year 2022 ~ 369 units
Year 2023 ~ 469 units
Year 2024 ~ 1035 units
Year 2025 ~ 1594 units
Year 2026 ~ (postulated to above 2000 units)
HDB flats are still considerably more affordable than private-sector housing. The average HDB was 4.3 times the median worker’s salary in 2024 — one of the lowest rates in major Asian cities, according to the Urban Living Institute. By comparison, the cost of the average private home was 16.9 times higher.
But as Singaporeans deploy savings ( CPF) to fund HDB purchases and resale values rise, the properties have increasingly come to be viewed as an investment asset and a retirement nest egg.
The asset accumulation idea is very much entrenched. The system has concentrated people’s personal balance sheets in their housing equity and fosters this notion that property is a pathway towards increased wealth.
One threat to that model is the 99-year lease terms, after which properties are to be returned to the government. As the oldest HDB units enter their final three decades, that approaching deadline is eroding their value.
What will happen at that point? That is a big political issue.
In reality, flats dwellers are merely leaseholders who must respect that at the end of 99 years, the flat goes back to the government.
Today's public housing has become a kind of business venture, rather than actually solving the housing needs. Thhe implication may not be very good for the economic development of Singapore.
The prospect of lease reclamation by the Singaporean government is likely an issue that could really shake up the country’s politics.
There was one critical mistake - taking a subsidized / rationed housing model and letting its price float with the “free” market. Once commercial land prices were imputed, this model went off the rails. And now that such prices have been paid for 3-4 decades, they cannot unwind the situation.
All the rest citizens - singles, gays et al not being able to buy - may be problems but are much smaller in magnitude compared to the vast population whose expectations of property as a nest egg are unsustainable in the long-run.
The old model of essentially selling a lease with no land price imputed would have made it possible to control things as the HDB pleased.
If you are lucky enough to have been able to buy in one of the desirable locations/blocks and are relatively well off, what happens is you sell after the minimum occupation period and use the profit, which can be substantial as the deposit on a freehold non HDB property. The key is to sell as early as possible, when the lease is still relatively long. This is the lottery that Singaporeans are trying to win.
Overall the system mostly works and Singapore is probably the only SEA city that manages to provide decent housing to all its inhabitants.
Hawaii has an extensive lease hold system as well. A US Supreme Court ruling forced the state to turn title of single family homes to a fee simple ownership. Condos were exempt. Since the lease holder is the Singapore government, there should be a way to transfer title to either the unit owners or to the building association to avert the pending crisis.
The problem is that many existing owners of older flats already have their defined contribution pension plan monies tied up in their homes, and if these homes go to zero or very low in value? The new generation buying now will make plans accordingly, but the previous one simply assumed the government would give them a new one at subsidised rates when their exiting one got too old.
biggest mistake in the world is for homes to be treated as wealth
Singaporeans didn’t treat homes as wealth before 1990. Things changed a lot after the Asian financial crisis in 1997, and that opened Pandora’s box. A lot of problems today can be traced back to the policies in response to that financial crisis.
HDB flat is ownership of a lease, not a property
One minor anecdote: I have friends who have been in tenuous relationships but continue to remain in them, as they entered the housing lottery system as a couple. If they broke up, as a single person, they would only be eligible for the lottery at 35 years old.
Singles can only apply for 1bedroom flats...
Type 1: Approximately 36 to 38 square meters
Type 2: Approximately 45 to 48 square meters
Then you are locked in for 5 years.
Just to ensure their singles, stay single...
Talk about adding salt in the wound lol.
No comments:
Post a Comment