Analysing The Gap Between New Condos And Household Income (All 28 Districts): Which Are Still Affordable To Singaporeans?

There’s a list of “coffee shop complaints” that we hear all the time, from the rising cost of food, to whether PSLE is a terrible idea. A perennial favourite on the list is the issue of housing affordability, especially in the private market. Of late, there have been worries about a growing gap between income and private home prices; a recent Business Times report mentions these are at a 10-year high.

However, we felt it would be more useful to break it down to specific districts to get a clearer outlook:

How is the affordability ratio determined?

There are variations on how affordability is determined, but the one used in the above-linked article compares median property prices across Singapore (regardless of lease status, district, and excluding Executive Condominiums), against median household income.

Obviously, the bigger the gap between median home prices and median income, the less affordable our private housing is. For the year 2020, the gap for new launch condos was at 12.1. According to the aforementioned news report, this was the highest over the past decade – the last peak was 14.8 in 2010.

(For resale condos, the gap has been the same since 2018, at 4.6.)

That said, note that the price-to-income ratio involves subtleties that shouldn’t be overlooked. For example, our ability to use ECs or subsidised flats as a stepping stone to private homes (asset progression) means Singapore’s private property market may be more affordable than the ratio suggests. In addition, the median price is determined on a per square foot basis – there are condo units that have a high price per square foot, but lower total price (The M is a leading example).

Perhaps most importantly, looking at prices island-wide is less useful to home buyers. Those of you eyeing properties in District 18, for instance, are less likely to find affordability issues than those wanting to buy in District 4.

So to add specificity, we compared median price to income across different districts instead.

To compile the following, we used the median household income as shown by the Department of Statistics Singapore. We then found the price-to-income gap for each district, using the same general method above. 

Median Household Income

For starters, let’s take a look at where the affordability gap is growing the fastest:

Many of the districts here are what you might call the usual suspects. We doubt anyone is shocked that places like Queenstown, Marine Parade, Bishan, and Bukit Timah haven seen widening price-to-income ratios; these districts have maintained their momentum since 2016, when the market had adapted to cooling measures. 

However, the presence of District 17, 19, and 23 may surprise some.

District 19 may not top the list, but it has seen the biggest shake-up over the past few years. This district used to consist of low-priced housing, with few new launches over the years. Then in 2017, District 19 suddenly saw an explosion of strong new launches – Sengkang Grand Residences, The Florence Residences, Affinity at Serangoon, etc.

New launches are always priced higher than resale counterparts, so a surge of new launch condos can cause sharp spikes in pricing. Many of these new launches also boast proximity to amenities that didn’t exist before (e.g. NEX and Waterway Point), thus justifying an even steeper price difference from older, less-well-located resale condos. 

District 17 has seen a somewhat similar phenomenon; private home prices have risen on the back of new launches, after a prolonged period of silence. When The Jovell launched in Flora Drive in 2018, for instance, it was the first new condo in the area in over five years. 

District 23, on the other hand, has seen rising prices as the market learns to look beyond the Hillview area (back in 2010 and before, the only “high-end property” associated with District 23 was mainly its landed enclave). But the development of the Rail Corridor, along with the launch of Skywoods, Le Quest, and Wandervale, have gradually seen rising interest – and prices – throughout District 23 as a whole. 

We feel it was mostly Sol Acres (a 1,300+ unit mega development and EC) that got the ball rolling in 2015. The success of this project seems to have given other developers more confidence in the Choa Chu Kang area. 

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Are there any districts that became more affordable?

The price gap has narrowed in many prime districts, where prices have always been high. Since the last peak in 2013, a combination of repeated cooling measures, along with tighter loan curbs and a softening rental market, have put significant downward pressure on prime region properties. 

Note that District 9 has seen prices fall to the point where District 7 has overtaken it, for the first time ever. For 2020, District 7 was actually a bit less affordable than the famed Orchard area homes.

District 8 is technically seeing better affordability; but at less than one per cent, we doubt buyers will feel the change. 

The surprise here is District 28, especially given the high-cost landed developments we’ve seen here. Luxus Hills and Belgravia Villas are far from the cheapest homes; and although High Park Residences was competitively priced, such a large (1,390 units) new launch should still have pulled up overall prices in the area. Perhaps it’s time for bargain hunters to scrutinise District 28 more closely.

Here are the top 5 most and least affordable districts, based on available data:

Most affordable:

Least affordable:

Note that data for some districts, such as district 4, is not available because of the lack of new launches in 2020. As such, there may be districts less affordable than these five.

Bear in mind that we are using home prices on a psf basis (in terms of absolute quantum, it’s likely that Orchard properties still top the chart). 

That said, it might be interesting to buyers to see that Tampines, despite being a regional hub of the east, is more affordable than most might assume (except for the Tampines Central area, where prices will be higher than the norm). 

It’s also a sign that District 7 bears watching, and that the city centre is gradually expanding to the Bugis area. The ongoing development of the Ophir-Rochor corridor can sustain this movement for some time to come. 

This aside, we shouldn’t forget that 2020 was an unusual year

2020 was an especially difficult year, due to Covid-19. We already knew, in the first half of 2020, that wages were likely to decrease, even more so than employment. Given these circumstances, it’s unsurprising if some detect a growing disparity between home prices and our income. 

For the individual home buyer however, we would suggest you treat all this as an abstraction.