It is well known that the majority of Singaporeans live in public housing (that is, housing provided by the Housing and Development Board, or HDB). However, what you may not know is that the majority of residents obtain their housing through a model that shares some high-level similarities with the way we deliver new condominiums in Toronto.

In 2001, the HDB introduced a program known as Build-to-Order (BTO). The way it works is fairly straightforward: the HDB announces a new project, prospective buyers apply and are assigned a queue number, and then, if they're selected, they get to buy. Once a sufficient number of "pre-sales" have been obtained, the project begins construction, and buyers get a brand-new, subsidized apartment in 3 to 5 years.

Singapore also mandates that the apartments must be owner-occupied and so, in this carefully controlled delivery model, supply very closely mirrors demand. This is different from traditional condominium pre-sales where some buyers might be end users, some might be planning to rent out the home, and some might want to sell immediately upon completion. In those markets, the risk of overbuilding and speculative volatility is greater.

HDB classifies the apartments themselves into three groups: Standard, Plus, and Prime. This classification is meant to reflect the locational value of certain projects; but importantly, the intent is that they're all equally attainable to citizens. The difference is that "choicer" locations (their vocabulary — now you have a new Scrabble word) require greater subsidies to make them affordable, and so they come with additional obligations.

For example, in the case of Prime flats, there is a subsidy recovery upon any future sale (I'm told it's between 6-9% of the first resale price), the minimum occupation period (MOP) is 10 years (versus 5 for the Standard class), and you can never ever rent out the whole home, even once the MOP has lapsed. Once again, this is about strictly matching new supply to end-user demand.

It's a lot of rules. But in Singapore, the majority of people accept them in exchange for affordability.

Cover photo: Tengah, Singapore via Monocle

Chart: Housing and Development Board

After this post, I promise to stop continually plugging the work and writing of Aziz Sunderji — at least for a few days. Over the weekend, I wrote about his recent post on happiness in America. Today, his latest post is about what happens to home prices after a particular grocery store opens. And for this, he looked at 32,000 store openings dating back to the mid-1970s and then compared them to ZIP-code-level home price data.

Here's what he found:

The average Walmart neighbourhood in this study has a median household income of $49,000, a college degree attainment rate of 23%, and a median home price of $144,000. And when a new Walmart opens, home prices have tended to underperform the national average by about 4% in the three years that follow.

On the flip side, the average Trader Joe's neighbourhood has a median household income of $82,000, a college degree attainment rate of 52%, and a median home value of $425,000.

Importantly, though, Trader Joe's isn't just picking neighbourhoods with obviously favourable demographics (retail is a lagging indicator — it generally comes once the demand is already there). It seems to be picking neighbourhoods that, in the words of Aziz, have "room to keep running." In the three years that follow a new Trader Joe's opening, homes in those ZIP codes have tended to outperform the national average by 6%!

One of the fascinating things about this finding is that it seems to perfectly support the company's target market. It has been said that Joe Coulombe (founder of the company) used to describe his target customer as "overeducated and underpaid." In other words, he actively targeted university graduates.

But being underpaid only lasts so long. We know that educational attainment is typically the single best predictor of household income. So, if you target this group, chances are that they'll eventually become fairly paid or maybe even overpaid. And when this happens, I guess it shows up in area home prices.

Cover photo by Karolina Bobek on Unsplash

Chart from Home Economics

It is well known that the majority of Singaporeans live in public housing (that is, housing provided by the Housing and Development Board, or HDB). However, what you may not know is that the majority of residents obtain their housing through a model that shares some high-level similarities with the way we deliver new condominiums in Toronto.

In 2001, the HDB introduced a program known as Build-to-Order (BTO). The way it works is fairly straightforward: the HDB announces a new project, prospective buyers apply and are assigned a queue number, and then, if they're selected, they get to buy. Once a sufficient number of "pre-sales" have been obtained, the project begins construction, and buyers get a brand-new, subsidized apartment in 3 to 5 years.

Singapore also mandates that the apartments must be owner-occupied and so, in this carefully controlled delivery model, supply very closely mirrors demand. This is different from traditional condominium pre-sales where some buyers might be end users, some might be planning to rent out the home, and some might want to sell immediately upon completion. In those markets, the risk of overbuilding and speculative volatility is greater.

HDB classifies the apartments themselves into three groups: Standard, Plus, and Prime. This classification is meant to reflect the locational value of certain projects; but importantly, the intent is that they're all equally attainable to citizens. The difference is that "choicer" locations (their vocabulary — now you have a new Scrabble word) require greater subsidies to make them affordable, and so they come with additional obligations.

For example, in the case of Prime flats, there is a subsidy recovery upon any future sale (I'm told it's between 6-9% of the first resale price), the minimum occupation period (MOP) is 10 years (versus 5 for the Standard class), and you can never ever rent out the whole home, even once the MOP has lapsed. Once again, this is about strictly matching new supply to end-user demand.

It's a lot of rules. But in Singapore, the majority of people accept them in exchange for affordability.

Cover photo: Tengah, Singapore via Monocle

Chart: Housing and Development Board

After this post, I promise to stop continually plugging the work and writing of Aziz Sunderji — at least for a few days. Over the weekend, I wrote about his recent post on happiness in America. Today, his latest post is about what happens to home prices after a particular grocery store opens. And for this, he looked at 32,000 store openings dating back to the mid-1970s and then compared them to ZIP-code-level home price data.

Here's what he found:

The average Walmart neighbourhood in this study has a median household income of $49,000, a college degree attainment rate of 23%, and a median home price of $144,000. And when a new Walmart opens, home prices have tended to underperform the national average by about 4% in the three years that follow.

On the flip side, the average Trader Joe's neighbourhood has a median household income of $82,000, a college degree attainment rate of 52%, and a median home value of $425,000.

Importantly, though, Trader Joe's isn't just picking neighbourhoods with obviously favourable demographics (retail is a lagging indicator — it generally comes once the demand is already there). It seems to be picking neighbourhoods that, in the words of Aziz, have "room to keep running." In the three years that follow a new Trader Joe's opening, homes in those ZIP codes have tended to outperform the national average by 6%!

One of the fascinating things about this finding is that it seems to perfectly support the company's target market. It has been said that Joe Coulombe (founder of the company) used to describe his target customer as "overeducated and underpaid." In other words, he actively targeted university graduates.

But being underpaid only lasts so long. We know that educational attainment is typically the single best predictor of household income. So, if you target this group, chances are that they'll eventually become fairly paid or maybe even overpaid. And when this happens, I guess it shows up in area home prices.

Cover photo by Karolina Bobek on Unsplash

Chart from Home Economics