Instead of addressing the concerns of Singaporeans that they are being squeezed out of the housing market by rising prices of HDB flats, HDB has struck back to correct public perception through its officers and a deluge of letters from ghost writers.
2 comments:
HDB strikes back with ghost writers
The Temasek Review
26 September 2009
Instead of addressing the concerns of Singaporeans that they are being squeezed out of the housing market by rising prices of HDB flats, HDB has struck back to correct public perception through its officers and a deluge of letters from ghost writers.
In a letter published in TODAY yesterday, HDB Deputy Director Ignatius Lourdesamy wrote that HDB incurred an average deficit of $1,045 million a year in its home ownership programme in the last three years. (read letter here)
However, he did not provide exact figures of the land and construction costs to corroborate his claims. Neither did he reveal the amount of money earned by the Singapore Land Authority which is a government-linked company.
Mr. Ignatius parroted his earlier stance that HDB flats remain affordable because first-time flat buyers use 17 to 29 per cent of household income for their loans, below the international benchmark of 30 per cent.
Again, he did not address the primary concerns of Singaporeans that they may not have enough savings left for their retirement if they have to use the bulk of their savings to pay for these highly priced flats.
Coincidentally, a letter was published in the Straits Times today by a Miss Mabel Tan in an obvious attempt to defend the high cost of public housing with the standard official propaganda that rising prices of HDB flats help to create wealth for Singaporeans. (read letter here)
Mabel wrote that “unlike other countries, Singapore has a unique public housing policy where the Government not only helps most of us buy our first home, but also ensures that the increasing value of our property will enable us to upgrade to the next level when we are ready.”
This simplistic argument omits the crucial fact that unless one emigrates, it is impossible to unlock the capital value of one’s flats because in such an inflationary market, one will have to take out a higher bank loan to finance flats at exorbitant prices.
A recent study done by two NUS professors Abeysinghe and Gu Jiaying showed clearly that “higher property prices, instead of creating a wealth effect, exert a significant and negative “price effect” on consumption expenditures leading to a fall in the average propensity to consume.” (read article here)
As house prices go up, the increase in the value of housing assets is accompanied by a concurrent rise in the financial liabilities of households, in the form of higher downpayments for purchase of residential properties and burgeoning housing loans.
It is a common perception that Singaporeans living in HDB flats are leaving “enhanced assets” to their children. This does not appear to hold true as HDB flats are 99 year old leasehold properties – their value will decline with time.
Regression estimates for HDB 4-room flats transacted between May and July 2008 show that a 10-year gap between two flats lead to about 12% price difference with the older one selling cheaper.
If the 99-year lease effect also comes into play, the prices may drop substantially, perhaps to the discounted present value of the remaining stream of rental incomes, and such properties may not generate much bequest value to children.
Not only will “asset inflation” not generate wealth for Singaporeans, it will lead to a vicious cycle, plunging more and more people into lifelong debts.
In the first place, the government should not be involved directly in the public housing market at all. HDB should act merely as a regulatory authority and allow a few private developers to build the flats to be sold within a certain price range.
Prices will inevitably come down with competition. As HDB enjoys a complete monopoly over the market right now, it has no incentive or pressure to bring down the prices.
Mabel ended her one-sided letter by mocking young couples:
“A word of advice to these young couples who plan to start their own families and move on to the next stage of their adult life: Instead of blaming others for not being able to own their own place (with the size and location they want), perhaps they should be more mature and realistic in their expectations. In life, we must learn to adapt and not just live within our means, but also make the most of what we have.”
How can one be expected to adapt and live within their means when they have no choice at all but to purchase their flats either from HDB directly or the resale market?
HDB has failed completely in its mission to provide cheap and affordable public housing to Singaporeans. Public housing must not only be affordable, but “easily” affordable as well.
In the context of Singapore where there is no social safety net to speak of, it becomes imperative that public housing is priced at an affordable range which will ensure Singaporeans will have sufficient savings left for their retirement.
What’s the use of having a roof over one’s head in one’s twilight years when one has to continue working far beyond the retirement age in order to finance the mortage loan or worst still, to feed oneself? Is this the kind of scenario that Miss Mabel foresee for herself and her friends?
Furthermore, there is no guarantee that one will be earning the same amount of money now or even more for the rest of their lives. They can be retrenched or fall sick which will affect their ability to pay for the housing loan.
Affordability based on today’s benchmark does not equate to the ability to repay the loan for the next thirty years. Most Singaporeans are now living on credit and they risk plunging themselves into greater debt by being forced to purchase HDB flats at such astronomical prices.
Post a Comment