Tuesday, June 7, 2011

Private Housing in Singapore: Choice Between Luxury or Squalor?

Singapore is bursting at the seams from population growth, but much of the growth has been in the population of foreigners (permanent residents and nonresidents), particularly the category known as non-residents, who are temporary workers. The foreigner population increased from 1.1 million in the 2004 census to 1.8 million in the 2009 census (out of a total population of about 5 million). Of this increase of almost 700,000 people, 500,000 were non-residents, who are legally excluded from public housing. Roughly 85% of Singaporeans live in public housing, a necessity in a city-state with a shortage of land and housing.

Whereas most developed countries have a full continuum of housing options for almost every socioeconomic level, Singapore seems to have distinct and discontinuous categories of housing, which are:

1. Upscale housing for foreigners and wealthy Singaporeans. About 16% of owners in this category are foreigners, and half of foreign buyers are from China or Indonesia.

2. Public housing for middle class and lower class citizens, which is generally of a higher quality than public housing in other developed countries.
3. Substandard housing for low-wage nonresident workers.

The vast majority of housing consists of “non-landed” homes, or apartments and condominiums, as land is scarce.

The income ceiling for public housing eligibility is a maximum of 12,000 Singapore dollars (SGD) per month ($9768 USD), depending upon family size. Thus it is conceivable for an extended family earning $100,000 per year to live in public housing, much of which is nicer in quality than that of other developed countries. Median household income was 60,000 SGD last year, or $48,840 USD, very similar to the United States.

The median private home price is estimated to be about 850,000 SGD, or $692,000 USD, although actual sales prices are kept confidential and Singapore’s Urban Redevelopment Authority only publishes price per square foot. Even “non-prime” private homes are selling for an average 1043 SGD ($850 USD per square foot), while luxury homes have recently sold for up to 3277 SGD, or $2667 USD per square foot. The reason why such high prices are possible is because of Singapore's amazingly low mortgage interest rates, which can be as low as 1% per annum. This leaves the private housing market vulnerable in the case of an increase in interest rates, although there are a fair number of cash buyers of private homes, particularly Chinese buyers.

Despite new government policies intended to slow the rise in private property prices, such imposing as a stamp duty of 16% on homes owned for less than one year and lowering the allowable loan-to-value ratio to 60% for borrowers who already have other mortgage debt, the median home price increased by 17.6% last year and increased another 2.2% in the first quarter of 2011. The number of wealthy Chinese buyers is increasing.

Low income housing

Unlike Los Angeles, where immigrant workers arrive individually and find affordable housing options on their own, Singapore employers and staffing agencies recruit migrant workers in large numbers and then create makeshift dormitories for these workers. Crowding can be intense.

Income disparities are high in Singapore, which leads the world in percentage of millionaire households (15.5%) but lacks a minimum wage, thus allowing significant importation of cheap labor. For instance, I met a group of 3 Filipino workers who told me that they were living 4 to a bedroom and earning a salary of 500 Singapore dollars per month (about $400 USD) working at local Burger Kings. Burger King, as well as many other Singapore employers, subcontracts recruitment to staffing agencies, who in turn find the workers in the Philippines, China, India, Bangladesh, Sri Lanka or Thailand and transport them to Singapore and provide free housing and utilities, as any worker earning only $400 per month would not be able to find affordable housing on his or her own. The shortage of labor in Singapore (with an unemployment rate of about 2%) and the lack of desire of Singaporeans to perform menial jobs has made it necessary for employers to import labor, and the shortage of housing makes it necessary to provide free housing for the imported labor.

Although Singapore has standards of habitability for residential occupancy, the shortage of affordable housing has created a class of illegal and substandard housing, including the following examples:

1. Industrial space illegally converted to residential space. The photo below is from a raid on an illegal dormitory for temporary construction workers. Notice the corrugated metal walls and ceiling. There seems to be no evidence of HVAC and limited ventilation, something needed in Singapore’s equatorial climate.

Photo of a dormitory on Tagore Industrial Avenue. Credit: Asia One News

2. An underutilized "gay sauna" in Chinatown rented a block of private rooms to nonresident workers.

3. Truck containers, 18 men per container.
Photo credit: The Online Citizen

4. Basements.
Photo credit: The Online Citizen

Issues about housing affordability and the crowding caused by immigrants were hotly debated in the campaign leading up to the May 7th parliamentary elections. The ruling party, the PAP, nevertheless held on to its parliamentary majority, losing only one out of 82 contested seats. Nevertheless, it only won 60% of the vote, the lowest percentage since the founding of the Singaporean state in 1965. This is considered to reflect growing discontment among citizens about the growing number of foreigners, who cause congeston and take jobs, the growing wealth disparity between the haves and have-nots, and the inability of young citizens to afford housing nowadays.
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