I REFER to the letter “It’s a question of supply” (Nov 24), where the Reform Party’s Hazel Poa questioned the use of two internationally accepted measures — the housing-price-to-income ratio (HPI) and debt-serviceratio (DSR) — to assess housing affordability.

First, the Reform Party rejects the two measures because they contradict the party’s assertion that flats are out of reach for most Singaporeans.

What other objective and widely used measures of affordability does the Reform Party propose?

Second, Ms Poa questioned the affordability of HDB flats.

The primary basis to assess affordability should be new and not resale flats. 

 HDB offers new flats every year, priced at a discount to comparable resale flat prices. HDB is building more new flats than before, in a variety of sizes and locations to meet demand from households with different budgets.

As for resale flat prices, Ms Poa argued that they had increased faster than incomes from 1990 to 2009.

But why 1990?

There was a steep jump in resale flat prices in 1993, when HDB began offering loans based on market valuation. If we consider other reasonably long time periods after 1993, like 1995 to 2009 or 2000 to 2009, housing prices have in fact moved in step with incomes.

Ms Poa has also ignored the CPF Housing Grant and Additional Housing Grant, which make resale flats more affordable to first-timers, especially applicants with lower incomes.

The Reform Party has suggested controlling resale flat prices. An HDB flat is a home and asset belonging to citizens, who hope that its value will appreciate with the country’s growth. As such, resale prices move based on market forces, while the Government keeps watch for excessive exuberance.

Resale prices have appreciated over the years because Singapore has prospered, infrastructure has been improved, and flats have been regularly upgraded along with their surroundings.

If instead the economy were to decline, jobs were lost, or housing estates allowed to run down, flat prices would surely fall. The Reform Party’s formula to control resale flat prices would make them worth far less than their value today.

How would this benefit the many hundreds of thousands of existing homeowners?

Third, Ms Poa criticised the DSR because it only measures affordability for people who buy flats.

But in Singapore today, eight in 10 Singaporeans have bought and live in HDB flats, with over 90 per cent owning their flats.

On average, 15,000 first-timers buy HDB flats and join the ranks of homeowners every year. This high ownership rate is the best proof that HDB flats are affordable.

Today, young couples in Singapore can reasonably aspire to buy a new BTO flat after working for about two years.

No other major city or country does this for its young people.