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Is Public Housing Still Affordable For The Average Singaporean Couple?

profileJustin Oh

As a millennial looking to BTO myself, the big question that plagues my mind ever so often is the question of affordability.

And no, I’m not one of those guys who calls himself broke while living in a private property.

Source: Giphy

One might argue that housing was way more affordable for our parents.

After all, HDBs were much cheaper.

Then again, incomes were also lower and the effects of inflation were not as prominent as they are now.

On the other hand, you have people who just love to complain and say that HDBs are simply “unaffordable”.

But when you ask them why, they are actually going for huge 5-room flats which far exceed what they can afford to pay.

This brings us to the question: Is public housing still affordable for the average Singaporean couple?

Let’s take a look at the numbers to find out the truth!


TL;DR: Is Public Housing Still Affordable For The Average Singaporean Couple?

  • Despite what many seem to claim, the affordability of public housing has been fluctuating without a significant upwards or downwards trend over the past two decades as seen in our findings.
  • BTOs are still affordable for the average Singaporean whereas resale flats are still affordable but may soon be out of reach should the resale market continue ballooning.

Things to Note

Before we delve into the nitty-gritty, it is important to remember that Singapore is a land-scarce country.

Thus, it would be inappropriate to compare with past generations when the population density was not as high as in the past two decades.

Common sense would dictate that the higher the population (hence higher number of households), the more expensive residential properties would be.

Most importantly, we are looking at affordability objectively (with numbers) rather than subjectively.

Determining Housing Affordability

While housing affordability can sometimes be evaluated simply by comparing house prices, this does not take into account the income of the average Singaporean.

Thus a more accurate way to measure is to take housing prices in relation to the median income of Singaporeans.

There are several ways to do this and with that comes a lot of arguments among Singaporeans over which is a better measure.

BTO Flats

First, let’s take a look at the affordability of BTO flats.

Increase in Housing Prices versus Income Growth

Some may argue that housing is becoming less affordable due to the increase in housing prices outpacing that of income growth.

According to the Department of Statistics, the median monthly household income from work (including employer CPF contributions) has risen from $4,716 in 2001 to $9,189 in 2020.

Meanwhile, the average BTO flat price for 4-room and 5-room units has increased from $208,250 to $496,760 within the same period, according to CNA.

After calculating the compound annual growth rate (CAGR), we can see that the CAGR of median household income of 3.39 per cent is indeed lower than that of the CAGR of average BTO prices of 4.44 per cent.

However, I’d argue that there are more things to consider such as the real value of our houses which takes into account inflation, so we can see the bigger and clearer picture.

Price to Income Ratio (PIR)

Another way to measure housing affordability is the Price to Income Ratio (PIR).

Price to Income Ratio = Housing Price / Annnual Income

Using statistics from 2001 to 2020, Singapore’s average PIR ratio for 4- to 5-room BTO flats is 4.1, which is within a reasonable range of affordability.

This ratio is even lower if you were to include housing grants for first-time homeowners.

On the flip side, do note that PIR will be higher when considering mature estates and larger homes.

The 3-3-5 Rule

A more conservative way to measure housing affordability is the 3-3-5 rule.

Source: CPF

So let’s see if this checks out:

Rule  Criteria Met?
3: 30% of property priceInitial capital required: $149,028
3: 1/3 of monthly salary1/3 of median household income: $3,063Mortgage payment for average 4-, 5- room unit price with HDB loan: $2,028.28Yes
5: 5 times of annual income5 times of median household annual income: $551,340Average 4-, 5-room unit price: $496,760Yes

Since savings depends on whether you have enough, the figures indicate that BTO housing is indeed affordable for the average Singaporean couple.

The Resale Market

While both PIR and the 3-3-5 rule indicate that BTO housing is affordable for the average Singaporean couple, we know that the larger issue here is so much about affording a BTO.

Rather, it is one of time (and luck).

Even if you’re lucky enough to secure a BTO unit, you’ll need to wait four to five years before your home is completed.

For the average Singaporean, you could be close to or well over 30 years old.

This brings us to the only other option when it comes to public housing: a resale flat.

Source: HDB

From the resale price index, we can see that the prices of resale flats has definitely increased over the years and is currently peaking.

Taking Q4 median resale price index of each year to plot against median household income over the years with 2001 as the base, we can see that the increase in wages has largely kept up with increasing house prices.

Source: HDB, MOM

With the latest resale statistics from Q1 2022, we found that the average price of a 3-,4-, and 5-room flat is about $533,090.

Price to Income Ratio (PIR)

Using just the data from Q1 2022, the PIR for resale flats is 4.8, making it much less affordable than a BTO.

Like BTOs, some Singaporeans may also be eligible for grants which will bring that ratio down a bit more.

The 3-3-5 Rule

Rule  Criteria Met?
3: 30% of property priceInitial capital required: $159,927
3: 1/3 of monthly salary1/3 of median household income: $3,063Mortgage payment for average 3-, 4-, 5- room unit price with HDB loan: $2,176.62Yes
5: 5 times of annual income5 times of median household annual income: $551,340Average 3-, 4-, 5-room unit price: $533,090Yes

Based on the data, the average Singaporean is still able to afford the average resale flat in Q1 2022.

The Bigger Picture

Other sources such as the Demographia International Housing Affordability Survey paint a very different picture when it comes to housing affordability.

According to the survey, they use the “median multiple”, a price-to-income ratio of the median house price divided by the gross median household income.

Housing Affordability RatingMedian Multiple
Affordable3.0 & Under
Moderately Unaffordable3.1 to 4.0
Seriously Unaffordable4.1 to 5.0
Severely Unaffordable5.1 & Over

Singapore has a 5.8 median multiple in 2021, which is classified as severely unaffordable.

Year/QuarterMedian Multiple
2013/Q35.1
2014/Q35.0
2015/Q35.0
2016/Q34.8
2017/Q34.8
2018/Q34.6
2019/Q34.6
2020/Q34.7
2021/Q35.8

Dramatic increase in 2021’s median multiple due to the pandemic.

Of course, we have to take this with a pinch of salt as it also takes into account other housing markets aside from public housing.

For context, here are the median multiples for other countries:

Country/CityMedian Multiple
Australia8.0
Canada6.0
Hong Kong23.2
Ireland5.7
New Zealand11.2
UK5.1
US5.0

Is Public Housing Still Affordable For The Average Singaporean?

Despite what many seem to claim, the affordability of public housing has been fluctuating without a significant upwards or downwards trend over the past two decades as seen in our findings.

BTOs are still affordable for the average Singaporean whereas resale flats are still affordable but may soon be out of reach should the resale market continue ballooning.

From here on out, whether public housing remains affordable depends on a number of factors.

On the bright side, the government has cooling measures and grants in place to ensure that we Singaporeans are cared for.

However, although we are shielded from the impacts of what is happening around the world, Singapore can only do so much to mitigate the negative effects of supply chain disruptions, an international war and inflation, which ultimately increases the cost price of building properties.

Moreover, population density is ultimately what affects public housing prices the most.

Singapore has been doing well so far and in the end, it is up to our government to ensure that we don’t end up like Hong Kong.

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About Justin Oh
Your average Zillennial who is obsessed with anime, games, movies and of course, personal finance. Join me as I break down personal finance into easily digestible and fun bits!
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