Will private property become the remit of the wealthier and older generation at the rate housing prices have gone up over the long term?
J is a 21-year-old student who lives with her parents – a professional in the shipping sector and a housewife – in a condominium in Bishan. Each time the topic of housing prices comes up, she gets agitated. “I am always very shocked by the prices of new developments (for condominiums and resale flats),” she says.
“I’m surprised that even flats in non-mature estates like Punggol and Sengkang are commanding quite high prices like $900,000 for five-room flats on the resale market. If there are such prices on the market and buyers who are willing to pay, then more sellers would continue to sell at this price.”
Her mother tells me: “Both my kids have a concern – whether they can live near me, given that this area is getting more expensive. I think we may need to help them.”
All over Singapore, many parents are coming to the same conclusion that they need to give their children a leg up the housing ladder.
Middle-income families in Singapore may help their kids with deposits for a Build-To-Order flat or a resale Housing Board flat. Higher-income couples might additionally support mortgage payments for a private property, or even outright gift their offspring one.
As property prices rise, young people are finding it harder to buy their own homes, let alone afford homes comparable in size or quality to those their parents raised them in.
Housing struggles around the world
This is by no means unique to Singapore. Across Asia, young people are struggling to buy their own home, as a Straits Times special indicated.
In the United Kingdom, the Financial Times ran an article with the title “How London’s property market became an inheritocracy” in late January.
It recounted how house prices in London have risen sharply in the last 30 years, so that young Londoners can’t afford a home there, and are renting, or moving farther out of the city and enduring long commutes. Those lucky enough to be able to buy one, often get help from the “Bank of Mum and Dad”.
Since the article was published on Jan 27, it has drawn over 1,000 comments, many from young Londoners recounting their frustration with trying to buy a home in the city they work in.
In London’s case, rising prices are a function of a growing population. Land is also restricted, thanks to zoning rules maintaining a green belt around London that prevents the city from sprawling outwards.
In Australia, a similar worry is developing over housing prices becoming unaffordable to the young. The Conversation website ran a feature on this issue on March 2 under the provocative headline, “How policies favouring rich older people make young Australians Generation F-d”.
Australia had an active government policy promoting home ownership with cheap loans and government-built housing. This boosted home ownership to over 70 per cent by the late 1960s.
It then passed construction of public housing to the private sector, and introduced tax laws encouraging property investing. Interest on mortgage payments for investment properties is tax-deductible. Investors can even claim a tax deduction if their rental income is less than the property’s expenses, and offset this against their other income, like wages.
The result: the rise of an investor class, and surging house prices. The article concluded that the high prices in Australia were created by “false scarcity” – artificially limiting supply of housing units – and unnecessary tax concessions.
To be fair, the Australian government does give first-time house buyers grants of about A$10,000 (S$8,950) to A$15,000 – but a study showed this went mainly to higher-income households, since they are the ones who can afford the A$120,000 deposit for a median unit in the bigger cities.
Lessons for Singapore
The quick survey of external developments is instructive for the local experience.
Here, as in London, private property prices are moving out of the reach of young buyers. Private property prices are about 15 times median annual incomes, making a condo or landed house unaffordable to young buyers except those earning high incomes or who have other financial help.
But in Singapore, housing remains affordable to the masses, thanks to the Government’s HDB programme.
Unlike Australia, which handed over public housing construction to the private sector, or London, which has not updated its zoning restrictions to allow a larger supply of housing to cater to a growing population, in Singapore, the HDB ensures a steady supply of affordable public housing each year.
New flats are priced to ensure affordability, by increasing market subsidies to keep the selling prices low and giving home buyers additional housing grants pegged to income.
Many complaints about housing today stem from a short-term supply shortage that has driven up prices and created longer queues. The Government is tackling this by ramping up the building of new flats (100,000 from this year to 2025), while dampening demand by tweaking application rules.
As J, the student quoted at the start of this article, notes: “Although BTO (Build-To-Order) flats are still affordable, the wait time is very long. My friend even calculated the ‘deadline’ to get a boyfriend if she wants to move into a BTO flat by the age of 30. She said she only has two to three years left although we are only 21 years old now!”
She concludes: “I think we can still afford housing, but we have to compromise on other aspects such as location, size, floor level.”
But is it enough that young couples can afford BTO flats? What if young people’s aspirations are higher, and their parents’ hopes for them too?
Some of the angst over housing prices stems not only from affordability issues but from concerns over housing mobility and intergenerational equity.
Affordability is a measure in time – capturing whether young home buyers can afford the deposits and mortgages needed to pay for their homes. Housing mobility looks at housing conditions over a period of time – whether home buyers can expect to improve their housing in their lifetime, and also measures whether home owners’ children can expect to do better than their parents.
On this measure, there are grounds for concern in Singapore. Can HDB home owners “upgrade” to private housing? This has long been a prize held out to enterprising working-class Singaporeans.
As Leader of the Opposition Pritam Singh noted in Parliament recently, there is a risk of two Singapores emerging, one where a high-income, well-connected group operates, and the other where the majority of Singaporeans live, where there are perceptions of slowing social mobility, connected to the reality of high housing prices.
“Today, the prospect of upgrading to a condominium or a landed property, unlike in decades past, is not as realistic for HDB home owners,” he said.
Changing aspirations
Can parents today expect their children to live in better homes than the ones the kids grew up in?
The logic of social and housing mobility is straightforward. If you started off working class, you aspire to become middle class. If you grew up in a rental HDB flat, a five-room flat is a massive upgrade. If you were an HDB heartlander all your life, any move to private property smacks of achievement.
But what if you already started high? What if you raised your children in comfortable landed housing or luxury condominiums or large HDB flats? What can they afford, now that they have come of age, in an era of high housing prices? Is the only way down?
At the heart of the issue is a fear and heartache faced by middle-aged parents that the next generation will not be better off than them as they contemplate their adult children’s lives.
It is the disappointment felt by millennials and Gen Z as they worry they cannot afford the lifestyles they grew up with in their parents’ homes. As I wrote earlier this month, there is a sense of the so-called Singapore dream turning sour.
To be sure, the fact that older people, as a group, are wealthier than young ones is natural – the former have worked hard for decades and accumulated assets and savings. The young ones looking on should be able to hope their own lot will become easier as they advance in their work years. Such expectations fuel hard work and ambition.
But the system creates intergenerational friction, if the wealthy old hold on to their multimillion-dollar properties and hoard them for their own families, while other young ones struggling with mortgage payments worry they can’t make enough to raise a family, let alone save for their own retirement needs.
Some young people may cope by resolving to work harder to improve their lives to improve housing mobility.
Others may adjust their aspirations so they don’t hanker after a bigger, more expensive home, while building purpose-built lives around work, family life and community bonds.
Parents – some who understand that housing and social mobility tend to slow as average households attain better lives – may encourage their children to pursue a less materialistic-driven lifestyle.
Other parents with means may help their children to buy their own property. Such moves entrench inequality, as wealthy parents pass on their financial capital to offspring.
Among my generation (born in the 1950s and 1960s), many who could afford private housing went for freehold landed homes, or at least freehold condominiums, rather than 99-year-lease condominiums, as freehold homes keep their value over generations.
While this is good for preserving wealth within families, it is bad for social mobility, as the limited stock of freehold housing, especially landed housing, becomes more tightly held within the already wealthy group, and today’s upwardly mobile young couples are priced out of this market.
This worsens wealth inequality, with lower-wealth households trapped clustered at the bottom where they cannot help their children get a foothold on the property ladder.
Among HDB households, families already fortunate to be living in mature estates can help their children get flats in such estates via proximity benefits. When these parents cash out of their flats, they will have a tidy sum to retire with and can move in with their children, who in turn stand to reap large capital gains from their centrally located flats if they sell their homes.
Those in non-mature estates, meanwhile, are less able to capitalise their flats. Such a disparity could worsen inequality in housing access among HDB households into the next generation.
Widening inequalities, in income, wealth or occupational status, are bad for social cohesion, creating a society where the masses look on enviously at the privileged groups. Outsiders sometimes feel they have no chance of becoming the in-group no matter how hard they work.
Dealing with housing aspirations is difficult politically. The Government has spent much effort – in substantive policy improvements and in communications – to assuage concerns over housing affordability for first-time home buyers. But there are underlying concerns about housing mobility, and intergenerational equity, that have not been clearly articulated, let alone addressed.
When looking at these issues, however, a broad perspective that examines developments in other countries helps one understand that while most Singaporeans are fortunate to be able to afford their first home, we are not alone in confronting the uncomfortable realities about slowing housing mobility.
“Source:[Housing may be affordable – but is housing mobility slowing?] © Singapore Press Holdings Limited. Permission required for reproduction”
