Drawbacks of HDB using STIR benchmark of 30% to assess affordability

[temasekreview]

In a letter published on the Straits Times Forum on 31 August 2009, HDB’s deputy director Mr Ignatius Lourdesamy wrote that HDB flats remain affordable to eligible first-time households as they use between 21 to 25 per cent of their monthly income to service their loans on new and resale HDB flats which are well below the international affordability benchmark of 30 per cent. (read letter here)

Though he did not state it explicitly, he is likely to be referring to the average shelter-cost-to-income ratio (STIR) or the proportion of total before-tax household income spent on shelter. The shelter-cost-to-income ratio is calculated for each household individually by dividing its total annual shelter cost by its total annual income. A STIR higher than 30 per cent is conventionally taken as indicating a serious housing affordability.

Besides the STIR, there are other benchmarks such as the price-to-income ratio, affordability index and Median Multiple (used by the World Bank and UN) used to assess housing affordability. It is not known why HDB uses STIR over the others.

Being an international index which does not take into considerations the unique social and economic circumstances of individual countries, HDB should use STIR as a guideline in determining the prices of HDB flats instead of using its benchmark of 30 percent as an absolute figure across the board.

The STIR has four major drawbacks which I shall elucidate more on below.

Read rest of article here:

http://temasekreview.com/?p=12832

 

[ChaoPappyPoodle]

You forgot to look into the load period. Many singaporeans loan for at least 20 years. The median could be 25 years. I doubt that foreign countries take cuh long term loans. Please look into the loan period as this is very crucial.

Many singaporeans are indeed paying about 30% of income (disposable income?) but for a much longer period than their overseas counterpart.

Good mention on the fact that we are buying 99-year lease versus true ownership overseas.

Look into -
1) duration of home loans
2) definition of income (disposal, gross etc)

 

[hockbeng]

You forgot to look into the load period. Many singaporeans loan for at least 20 years. The median could be 25 years. I doubt that foreign countries take cuh long term loans. Please look into the loan period as this is very crucial.

Many singaporeans are indeed paying about 30% of income (disposable income?) but for a much longer period than their overseas counterpart.

Good mention on the fact that we are buying 99-year lease versus true ownership overseas.

Look into -
1) duration of home loans
2) definition of income (disposal, gross etc)

Just vote out the PAP and everything will be solved