IMPACT OF COOLING MEASURES ON PUBLIC HOUSING AFFORDABILITY FOR NEWLYWEDS IN SINGAPORE

Abstract

In the past 15 years, public housing affordability has been a major concern for Singapore. Increasing demand has resulted in rising housing prices, and many newlyweds found HDB flats increasingly unaffordable. Newlyweds, in this case, are first-time homebuyers defined by marital status who are between 25 to 34 years old. In 2013, HDB cooling measures were implemented to curb the rise in prices of HDB units. This study thus aims to examine the impact of these measures on the affordability of HDB units from 2002 to 2016 for newlyweds (degree and diploma holders). Housing affordability is measured through Debt Service Ratio (DSR) and Housing Price-to-Income (HPI) Ratio models. The first part of the study analyses the impact of cooling measures on affordability as well as the disparity of affordability between degree and diploma newlyweds, and between different housing types. It was found that in 2016, HDB units are more affordable for both degree and diploma newlyweds as a result of the 2013 measures, however they are less affordable than 2002. Also, resale HDB units remained unaffordable for diploma newlyweds in 2016 in comparison to degree newlyweds, who can afford both resale and new HDB units. Underlying reasons for the above trend of affordability is examined in the second part of this study, and also include its implications. This current trend is a result of many multi-dimensional factors which include internal and external factors, as well as demand and supply factors. For instance, an external factor is economic growth which will affect income growth, which in turn affects the purchasing power of the home buyer. With regards to this trend, it was discovered that after 2013, the number of marriages of degree holders increase as DSR decrease. Recommendations to improve housing affordability for newlyweds include providing a tiered version of loan tenure for different income groups, and reserving new HDB units for lower income newlyweds.