How affordable are our homes?

A 2019 international housing affordability survey of 309 metropolitan markets in eight countries ranked Singapore as the ninth most unaffordable out of largest housing markets and classified it as “Seriously Unaffordable”. The report, which was published by urban planning policy consultancy Demographia, had calculated housing affordability with a Median Multiple, the median house price divided by median annual gross income. This formula was also one of the indicators the World Bank recommended.

Figure: Demographia (2019)

Housing affordability ratings by nation: Major housing markets (1 million+ population)

Table: Christalle Tay/ Data source: Demographia (2019)

While more affordable than Hong Kong (20.9), Sydney (11.7) and Los Angeles (9.2), Singapore (4.6) was overall still more expensive than Canada and the U.S.

However, as outlined in the chart below, the Median Multiple has fallen since Singapore was first included in the survey in 2013, indicating affordability has improved.

Figure: Christalle Tay/ Data source: Demographia (2013 – 2019)

Applicants aged 25 and younger made up about a third of BTO applicants between 2011 and 2016, reported a 2017 Straits Times article, suggesting young people are financially-capable of paying for new homes. For reference, the average age of first-time homebuyers in London in 2018 is 34.5. Homeownership rates for private and public housing paint a bright picture, having risen since the housing crisis of the late 2000’s. The value was last recorded in 2018 as 91 per cent.

Figure: Christalle Tay/ Data source: Department of Statistics Singapore

The recent traces of improved affordability could be due to the steadier supply of public housing and increased subsidies for buyers in the form of grants. For government subsidies, first- and second-time homebuyers are entitled to CPF Housing Grants to offset the cost of their home, albeit with limitations. The grants are credited directly to your CPF Ordinary Account where it can be used to offset the purchase price or to reduce the mortgage loan. It’s not free cash and cannot be used for monthly mortgage payments. You can read about the different grants here.