HOUSING MATTERS
The Real Reason For The Hike Of HDB Flat Prices
It is very common to hear that people are mentioning that the price of HDB flats are absurd and super pricey. That is a fact and it is frightening towards the younger generation who has yet to buy a home.
As of now, it is a 6-digit figure; the fear of it eventually reaching a million dollar property might come true in the future. That sometimes make people rush to HDB to quickly secure a BTO and maybe even secure a good reasonable price.
We will share with you some factors why the prices of the HDB flats are increasing and that may shed some light on why it is happening.
Inflation
This word is used so ever frequently till a point that not everyone really understands the true meaning of it. It is the price increase of goods and services over time and that simultaneously affects the spending power of the consumer.
The question would actually be; “What causes inflation?” There is a lot but what would relate to Singapore might only be a few.
As you might know, Singapore is a small country and the land is scarce. The land is a real asset and investors would pay a huge amount of money to build a real estate or even an office building. Our countries had then spent a huge amount of money and supply us with the housing that we do need
In that sense, when there is a new BTO rising up every now and then, that take a huge amount of land to be utilized, therefore there is a lot of money involved as well.
As a result, the money spent has to come from somewhere and that would be us, the consumers. Indirectly, that does factor into why HDB prices are increasing.
The use of the CPF
Many people do not know, back in the days we actually were not allowed to use our CPF monies to pay for our home. Only in 1968, the Public Housing Scheme was introduced. It enabled Singaporeans to use their CPF monies to pay for their flat.
The Central Provident Fund (CPF) board helped Singaporeans to own their own home. Probably there will be a debate about the 99 years lease but let’s not discuss that here.
Nevertheless, we are fortunate enough to buy instead of renting a place to live in. We have a high percentage amongst the population that owns a property. In other countries, the majority has to rent, as their finances simply do not allow them to do purchase one.
Coming back to the topic, the concept is simple; it is called give and take. If someone gives you something good, you have to give something good in return. You would also have to sacrifice as well in order to get that something good in the first place.
In this situation, you are allowed to use the CPF monies and given risk-free interest annually and in return, you have to pay a good sum when buying your home.
Fair enough? It is up to you decide.
Demand
Demand and supply. Almost all of us briefly understand this analogy. To link with this topic, it will take some explaining to do.
Normally if one end is more than the other, it will create some unequal terms to the table. Say, for example, if the demand for apples is high, maybe 1000 people requested for apples but only 500 apples are available, that will mean that the other half of the people will not get the apple.
Therefore, the supplier has the power to control the price of the apples, as he knows that no matter what, his apples will still be sold as it is in demand. Being in a business, and wanting to make a good profit, he has every right to sell the apples at any price he wants.
Linking back to this article, have you ever heard that your friends or families did not get a slot or even was not selected to get a BTO? That means that are more demand than supply. Thus, you can link back to the apple example above.
We still need a home at the end of the day
That might shed some light on the reason why the prices are getting higher. Nonetheless, being in a small country, having four walls around you when you are sleeping at night is simply good enough.
We do need a place to call home and fortunately we are given options on how to achieve that. Buying a home might be easy but sustaining it, that will be another adventure altogether
Always think long-term when it comes to financing because you will never when is the next hurdle in life. Be prepared and jump over those hurdles like a hurdler.
That is the end of the article and hope the information is useful. Do share it with your friends and families. Till next time.
Disclaimer
I am a financial adviser but I am not your financial adviser. Therefore, what is posted on this website, are my opinions and NOT to be taken as financial advice. Information provided might be relevant at this period of time but may be irrelevant due to alterations to rules, regulations or policies. The information provided is true to the best of my knowledge, but there maybe omissions, errors or mistakes.
