灰色地带

是对是错, 是黑是白, 是好是坏. 都没有答案, 只有灰色的无奈...

Sunday, October 29, 2006

Housing a home, now and then

In 1980, my parents bought our first and current 4-room HDB flat. It costs $27000 then. After down payment, they took a 15-year loan for the remaining $18000 with monthly installments at about $120. Dad's salary then was about $800 per month. In those days, total monthly CPF contributions (employee + employer) was about 40 to 50%. So I figured that, after monthly installments, there was still about $300 going towards Dad's Ordinary Account (OA).

Fast forward to present 2006. My colleague was describing to me the situation of his brother-in-law (let's call him 'X'). X and his wife's monthly take-home is about $2000. 3 years ago, X was looking at getting a HDB flat. Then, a new 4-room flat costs $110K-140K. If they took a loan of $100K, over 25 years, monthly installments would take off almost 70% of their monthly CPF contribution, leaving something like $200 per month to grow their OA from zero. Not very comforting.

As a very very very rough estimate, with an average of 1.5% yearly inflation rate, $800 in 1980 has the same buying power as $1200 in 2006. $300 in 1980 is worth maybe $440 today. So, dollar-for-dollar, X's income of $2000 today give him more purchasing power than my Dad in his days. However, if X has taken up the flat, he actually has less to save in his OA than my dad did. And this means X's CPF will grow slower than people of 26 years ago, and X will have to work more years before he can think of retirement.

I know my calculations are not accurate but I don't think they over-estimated the actual situation. If Singapore has progressed over the past 26 years, and if by progress, it meant changing for the better, then how come last time my poorer parents can afford a flat whereas a family today with seemingly stronger purchasing power cannot? Or reluctant?

I know, last time policemen wear shorts. Admit it, you want to tell me that.

Update [2006-10-30 11pm]
Prompted by Gecko, I looked up Singapore's historical trend in Consumer Price Index between 1980 and 2005 (available here). It was 65.7 in 1980 vs 100.4 in 2005, a 52%-increase. If I used the CPI as my indicator of purchasing power, the $800 in 1980 is roughly equivalent to $1600 by 2006.