The Straits Times
Published on Dec 12, 2012

Peg income ceiling to price


MANY newlyweds face a common predicament when buying their matrimonial home: Their combined income is above the $10,000 ceiling for Build-to-Order (BTO) flats but below the $12,000 ceiling for executive condominiums (ECs). These couples see themselves as belonging to the "sandwiched" class.

With the new BTO ceiling, many newlyweds who do not qualify are "forced" to turn to more expensive housing options. Many would prefer not to because of the high cost of living in Singapore.

Many couples are anxious about saving enough, especially if they are thinking of having children and providing for their future needs, while being able to set aside sufficient funds for retirement and other expenses.

This would contribute to the falling birth rate as couples may decide that they cannot afford to fully provide for their children and also maintain a certain standard of living.

The Government has urged citizens to spend within their means when buying a flat, but this sandwiched class does not have many options.

One way to ease their financial burden is to peg income ceilings to a price range of flats instead of to the category of flats.

For example, regardless of whether they are BTO or EC, new flats with a price tag of $300,000 to $400,000 could have an income ceiling of $12,000; and for flats costing $400,001 to $500,000, the income ceiling could be $14,000.

Doing so would ensure young couples do not have to wipe out their savings or take a big housing loan to finance their purchase. This would leave them in a better financial state to start a family, and ensure a more equitable distribution of flats to buyers of different economic statuses.

Edwin Lim