The Real Singapore published a ‘Dollars and Sense’ article “Is our CPF system really that bad?” by Marcus Chua. What’s really really incredible is the author’s out-of-the-world assumptions:
25-year old individual.
Monthly salary of S$ 3,000 for 30 years.
NO increase in salary and NO bonus.
Purchase a 5-room HDB worth S$358,000.
Services the monthly mortgage with 50% cash and 50% from CPF.
Has a spouse who is of the same age, and draws the same monthly salary with NO increase in salary and likewise, NO bonus.
1 – How many 25 year old male Singaporeans have bought a 5-rm flat costing $358,000? The answer is probably a handful in the whole of Singapore. Ordinary Singaporeans with diploma and below qualifications who have served NS, would have probably started working at 22. How many citizens who have worked only 3 years are able to afford the down payment, 10k to 20k for really basic renovation and furnishing? Without parental support, the answer is probably NONE.
2 & 3 – The monthly salary of $3000 for 30 years is really a stretch of the imagination for ordinary Singaporeans whose starting salaries range from $1500 to $2000. If the average salary is achievable for 30 years, would anyone be complaining?
4 – HDB statistics should confirm almost NO couple could afford a $358,000 5-rm HDB flat at age 25.
5 – After down payment of 10%, couple will need to take 90% HDB loan of $320,000. Mortgage installments work out to $1451 per month for a 25-year loan. In order to pay 50% in CPF and 50% in cash, combined income of couple would need to be $6308 per month. Ordinary Singaporean couples are not earning $6308 per month at age 25 or even 30. Perhaps the author is surrounded by wealthy individuals, mistaking them for ordinary citizens.
Author is highly imaginative and appears to be divorced from the reality if very high public housing cost and super low CPF returns. In the real world, this is what happens:
– Starting salaries of ordinary Singaporeans are probably between $1500 to $2000. In the initial years, the disposable income does not permit any cash payment of mortgage because public housing prices are simply too high, no thanks to the PAP.
– A 5-rm flat is simply out of reach for 99% of ordinary Singaporean couples at age 25. Male Singaporean graduate would probably be about 25/26 and buying a 5-rm flat is the last thing on the mind.
– The reality, not imagination, is most couples intending to have children will max out the CPF for housing installments. For the first 20 years or so, there is therefore hardly any retirement savings. What is the point of talking about compound interest when there is nothing to compound in the CPF? Is there a secret to compounding a CPF account with ZERO balance?
– It is foolish for a couple to make a huge commitment to a 5-rm flat at 25. The reality is it doesn’t happen. Even if there are one or two cases, what are the couple expected to live on when junior arrives? Eat grass at Hong Lim Park? No need to buy pampers and milk powder? When mum goes back to work after maternity leave, no need to employ helper?
Author has made too many ridiculous assumptions from the start. It’s like saying we can afford to buy a Rolls Royce with a 100-year loan. ‘Dollars and Sense’ is not serious about writing based on “research” because there appears to be none. Maybe should be renamed “Dollars and NonSense”
Thanks for the joke.
Stanley Sandosham
TRS Contributor