Just recently someone made a comment and asked for the HDB income ceiling to be revised again.
There may be merits to the case but I feel that the HDB income ceiling should not be revised for the following reasons:
- Developers of Executive Condominiums (ECs) benefit
By increasing the income ceiling, developers benefit as the pool of prospective buyers is enlarged. Prices in the property market now are constrained by many factors notably the Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR). Even with the MSR, prices of ECs can theoretically be priced at $1,000 psf if there are buyers (see my earlier post in October 2014 -
How High can EC Prices Go?). If the income ceiling is raised, it means that more of the household income can go towards housing and gives the developers more room to raise EC prices when the market is buoyant. For the buyers, it is back to square one again as they will be squeezed by the higher housing loan.
- Housing is a personal lifestyle choice
Let's face it. Housing is a personal lifestyle choice. Similarly for cars. There are many people who aspire to own a private condominium or EC. I have seen many people with a household income of $6,000 to $8,000/month applying for an EC. And they apply for the largest or best (ie. top level or best view) unit they like. These units cost between $1 and $1.3 million. Some of these people own a car and maybe have a domestic helper to help. This group of people are likely to stretch their spending to the max and complain that the cost of living is very high. I shudder at the thought of what will happen to their family when there is a loss of income.
- The beneficiaries are a small pool of people
By raising the income ceiling, you are benefiting a small group of people. Worse still, you allow the higher income people to compete for public housing. The increased demand for public housing will put a strain on public resources which can be better channelled towards social spending.
- Contrary to some Government policies
The Government is encouraging people to get married earlier and has been controlling the housing prices to lower the stress on families. Couples who apply for a HDB flat before age 30 need only put a downpayment of 5% for their flat. By increasing the income ceiling, couples may put off their wedding to a later date since there is more room for their income to rise. Getting married later will affect the chances of conceiving although having a baby or babies are personal choices. So it is not in line with other Government policies.
- Repercussions on Government subsidies
Many if not most of Government subsidies are based on income for example housing grant, childcare etc. With the revision in income ceiling, should all the income ranges for these subsidies be revised as well? If yes, where will the money for these expenditures come from? More taxes - direct and indirect?
- Upsetting the balance in the property market
While the group of beneficiaries from a revised income ceiling is small, it can upset the balance in the property market. More people will try to apply for a BTO flat instead of buying from the HDB resale market, EC or private market. Some sellers of HDB resale flats might have to reduce their asking prices to sell. If HDB resale prices weaken further, existing owners will not be happy and this affects their ability to upgrade. The other spectrum of the property market like EC or private property gets affected as well. It will further affect the weak property market.
The revision in income ceiling can be a vicious circle. It may increase property prices, put a strain on public resources and possibly upset the balance in the property market. It should not be done and I hope the Minister for National Development does not consider it.
