article title: Housing prices: Worry over impact on retirement savings
source from : http://www.straitstimes.com/STForum/OnlineStory/STIStory_483959.html
author: Kang Choon Tian
date of article: Jan 30, 2010
WITH prices of new three- and four-room flats reaching between $250,000 and $330,000 in some areas, I wonder how much a buyer will have in his CPF retirement account after paying for the flat in 20 to 30 years.
I took a loan of $80,000 some 20 years back and the interest came up to $70,000 when I had finished paying for my flat.
The Government should look into this or Singapore may end up with many retirees with little in their CPF account, assuming an average household income of $3,000 to $4,000. Since HDB flat buyers may use 30 per cent of household income, they may be able to service their loans, but little is left for retirement. Besides, along the way, husband or wife may lose their jobs.
Buyers are allowed to take up to a 30-year loan. By then, their earning power may also diminish when they reach 60, assuming they bought their flat in the early 30s.
Since there are many in this income bracket, I hope some financial experts will be able give their take on this important issue or Singapore may end up with many retirees with little to live on. Many buyers are not aware of the final price of their flat, including the interest over 30 years.
Own view
I REFER to the Sunday forum ‘Housing prices: Worry over impact on retirement savings ’.
The author complained about the high prices of flats and showed his worry about the Central Provident Fund after when citizens retired from their work.
His analyze sounds quite logic and reasonable. However, I cannot completely agree with him. According to the data he shows at the beginning, each flat worth about $300,000 dollars on average. To tell the truth, it is quite cheap to a person work in Singapore , comparing to a person who work in china and wants to buy a flat in big cities like Shanghai or Beijing. Let us take an example, here in Singapore, I got to know that undergraduates can get a monthly salary of $3000. While in Beijing ,a postgraduate may get 5000 yuan for a month, and every the flat will cost absolutely over a million yuan. By the way , a undergraduate cannot find a job there. So life is not so simple ,not only in Singapore but everywhere
I could not make a good estimation about how much a couple will spend on their life and how much they will save in their CDF. The author said that the interest almost reach the amount of the loan when he finished his paying. But as far as I know, in the CPF, Singapore government contributes an amount of 14.5% of the citizen’s salary while the citizen himself contributes 20%. If the author think that citizens take the specific 20% to pay for his flat. Can we think that the specific 14.5% from the government just makes up for the cost on flats? And the high loans will be used as banks’ investment on urban construction in Singapore. Those HDBs are built by the government. It charges for the flats and pays for the CPFs. I think the government aims to make a balance between the struggle for life and social welfare.
We should see the positive side that government pays much for your retired life, rather than complain that they cannot accumulate CPF because of the expensive flats.
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First, I agree with Wendy that Singaporeans should be more positive towards the housing price’s impact on their retirement savings. It is true that the situation is far more serious in China than in Singapore, especially for the big city dwellers, and it is natural for us to compare the housing price and citizens’ salary in China with that in Singapore. However, Singaporeans will not always compare their housing problem with people in other countries. When people all over the world are expecting the better living condition, they do not look back on the worse condition to make them mentally satisfied. Besides, as we know, retirees in Singapore receive a relatively small retirement pension and they often have to work in old age. Thus, they are worrying and asking for improvement for a reason.
ReplyDeleteZhang Ningxin (Joy)
When I read the original letter, I found I cannot totally agree with it. After reading Wendy's reflection, reading her analysis and statistics, I really stand on the opposite side of the writer. The price of flats in Singapore is not so expensive and the government also give some privileges for local people. I think the writer should stop complaining and appreciate the government's effort.
ReplyDelete--By Jason