Another graph from the Minister for National Development to show that house prices have not outstripped income growth. Another careful selection of base year. This time it is 1995. The graph is presented despite the absence of 1996 income data, resulting in an incomplete and rather odd looking chart. [ Cannot find another appropriate base year is it? ]
Sigh. I could of course as someone suggested show the charts of all the different base years, most of which would show the Resale Price Index (RPI) increasing more than the median household income(MHI) , but I fear that would make me appear rather juvenile. Many netizens already know the truth. As others have already pointed out, using all the others years from 2000 to 2008 as base years would show RPI increasing faster than MHI. This can be easily proven if challenged.
And, judging from the fact that the chart presented by M for ND is a since-1995-but-minus-data-for-1996-due-to-lack-of-info chart, I will hazard a guess that using 1998 and 1997 as base years would similarly show RPI outstripping MHI. Reasonable guess you think?
And for those who clamour for longer years of data, Lucky Tan has a chart going back to 1990.
But enough of charts. My intention when I blogged about the misleading chart was to show that there are many ways of interpreting and presenting statistics. Charts for 2000, 2001 and 2006 were chosen as examples to illustrate that point, not to advocate them as suitable base years. We need to look at data more holistically. Statistics should be used to understand, not to justify.
In fact, there are more problems with the comparison of RPI vs MHI apart from the base year:
1) Other netizens have pointed out that the RPI does not take into account the differences in sizes of the same flat type over the years. As flats get smaller over the years, the price in terms of per-square-foot (psf) basis increases by more than that indicated by the RPI.
2) According to the Department of Statistics:
“Household income from work refers to the sum of income received by all working members of the household from employment and business but excludes the income of domestic helpers. For statistical purpose, a household refers to a group of persons living in the same dwelling unit and sharing common living arrangements. A household may comprise related or unrelated members. Resident households are households headed by Singapore citizens or Permanent Residents. This category includes employed households and households with no working person.”
This would mean that household income would increase without any increase in individual wage levels under the following circumstances:
a) More households with both husband and wife working
b) More working children staying with parents for longer periods due to later marriages or no homes of their own
c) Later retirement
d) Relatives without homes of their own moving in
e) Renting out of rooms to other working adults. The incomes of the tenants are included in the household income as well according to the above definition.
All of these make it difficult to understand the people’s pain if we merely look at RPI vs MHI. In fact, this creates a vicious cycle whereby if prices increase, making homes more unaffordable, we will have more people crammed in each household therefore pushing up the household income, which then seemingly justify the higher prices!
Hopefully DOS will start to release / collect data on median income for individuals and use that for comparison instead. DOS currently publishes data on average income of individuals, but average values can be skewed by extremes and hence would not be ideal.
I am happy to read that HDB will be looking at shortening the waiting time for new flats by moving away from the BTO scheme. Much of the frustrations of home buyers arose from the fact that waiting time for new flats is too long and prices of resale flats are too high, making them feel sandwiched between a rock and a hard place. The long waiting time also channels demand towards resale flats, applying upward pressure on prices. If this can be done, it will make the lives of many young couples easier.