It's all about Amelioration

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The HDB Conundrum II

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I once blogged on the HDB conundrum issue [link], but a recent report that stated resale prices rising 3.8% for last quarter triggered me to re-explore this issue again.

Our town planning for public housing has been a model for many countries and it’s something that Singaporeans should all be proud of. The fact that they can incorporate facilities, transport infrastructure and beautiful landscapes into fairly affordable shelter for the masses in the past must be applauded. However, somewhere along the way, the balance was altered.

Before I carry on, I’d like to clarify that in any market, there are 2 types of inflation.Healthy inflation, where it shows that the economy is growing and all sectors are moving at a pace consistent with the fundamentals like unemployment rate, foreign direct investment etc. And then there’s artificial inflation, where prices are held up not by fundamentals but by sentiment or a short-term change in conditions. Our current situation fits the latter. A grossly under supply of HDB units coupled with opening the immigration floodgates. [link] It ain’t rocket science isn’t it?

I don’t think that our public housing is in a bubble that could burst overnight because firstly, we have sound stringent lending criteria in banks, secondly most home owners pay via CPF which is sort of  forced savings and more importantly, real demand due to our lax immigration policies. But the big question is, what will happen if this real demand dries up when we hit our population target of 6.5mil in the near future? Will a fall in prices be imminent?

photo by yeowatzup

There are two camps when it comes to HDB issue currently. On one side, we have new purchasers, owners and investors who want prices to rise indefinitely, and on the other hand we have aspiring new owners  and up-graders who want prices to fall. It’s like the bulls and bears fighting it out in a stock market. Except that for this case, its supposedly for public housing. Either way, the failure or the lack of foresight of our Men in White (MIW)  polices has seriously caused a conundrum. Nobody knows the percentage of one camp from another, but one thing the MIW is doing is playing its cards right, spreading the usual fear mongering  rhetoric about a collapse in values of HDB flats should they lose their constituencies and vote. Hence a blatant ranking exercise of the cleanest meanest coolest HDB estates which was released not too long ago. [link]. Plus a new take on retirement planning after the CPF model was proved inadequate by doing a so-called reverse mortgage of your HDB flat to provide annuities as another form of passive income for the future. Wow, how gracious… more wealth created by our MIW especially for us!

One caveat which they failed to mention is an assumption and a big IF, that our public housing prices will continue rising indefinitely so that our $400k flat we purchased today will be worth close to $1mil by the time we retire.  And even if the prices do rise, we are making another assumption and a big IF that we have fully paid off our flat at retirement and can reap the full monetized value. Here’s a reality check, how many of our parents have actually fully paid off that HDB loan today even though prices were more affordable back then? Also considering depressed level of wages relative to GDP growth for the past decade.  Now, all these assumptions plus the fact that we have not even factored in inflation of 3%  to 5% which we all know erodes purchasing power. With 2 big IFs and inflation, that’s cutting a very thin line when it comes to retirement planning doesn’t it? Of course the young educated ones will not leave their retirement planning solely on their HDB flats, but for the ruling party to blatantly spread such flawed concepts to cover up their policies inadequacies is simply irresponsible.

Something’s got to give in the near future. Never will I thought I ‘ll see the day where our public housing will hit $1million.  But with the recent $900k hurdle cleared for a Bishan flat, I’m not holding my breath anymore. Am I the only one who sees that the current prices of so-called “public housing” is unsustainable? One thing I am sure is the prices will keep trekking up till elections. The Built to Order (BTO) system which restricts supply to cushion prices will be our ruling party’s tactic to win voters cum this election. As I mentioned earlier, voters who are existing or new flat owners who coincidentally make up a bulk of new citizens will definitely favor the current ruling party to maintain the value of their flats.  After all, it is them that gave these new citizens an opportunity to make a living here.

A lot of young couples in  my age group view that BTO flats are the way to go, a common demographic of tertiary educated, a fairly decent combined income of $5k, paying around $200k for a flat is decent. But, looking beyond ourselves, isn’t such BTO flats the only option left for the lower-income/needy group as well? Even if they were to stretch their loan to 30years, the long-term financial implications will not be healthy.

It is fairly easy, especially if you are the majority  to overlook socioeconomic factors that plague the growth potential of the younger generation of the minority groups, but yes it does exist, contrary to the meritocratic ideology that people down there deserve to be there. It also begs the question of what kind of society are we cultivating? Don’t forget the potential negative long-term societal impact of a widening income gap as well.

At the end of the day,  a government’s responsibility is to ensure every citizen must be catered for. Not spoon-feeding, so as to spur ambition but as much as possible provide a level playing field for every individual to embrace the true essence of meritocracy. Well, either you can do that or marginalize the lower-income group by diluting their impact. It seems that our ruling party has chosen the latter with a mere 4% of the national budget  dedicated to the Ministry of Community Development Youth and Sports (MCYS) in our 2010 budget. [link][link]. Mind you, around half of that 4% will be dedicated to sports development which leaves very little for the needy in Singapore.

I am not sure how I deviated from HDB issues to social assistance, but public housing is one of the basic need any government should provide for its citizens. Purchasing a house is also one of the biggest financial decisions for the majority. Hence it is paramount that this illusion of affordable housing must be addressed. There are various solutions proposed by bloggers and opposition parties which make good sense. They range from re introducing the Build to Sell (BTS) system to dividing the public housing into cost-plus models for long-term occupants to market subsidy models for investors.  But whatever it is,  the very immediate challenge is the need for the current ruling party to see the problem, admit the policy flaws and address them. However,  I  really wonder if they are up to it anymore. After all, these are the same leaders that in one week, glorify themselves, heaping praises for the recent strong GDP figures, but on another week defending their pride with infamous “caught off-guard” response to the recent flooding. Gees.


Written by Nabs

July 5, 2010 at 12:20 am

Posted in MIND, Politics

4 Responses

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  1. you want the govt to admit it has been wrong? are you mad?! admitting it’s wrong immediately takes away its moral right to rule, whatever ‘moral’ right means. if it admits it is wrong on one thing, it opens the door to people accusing them of being wrong on other things. as for addressing policy flaws, how can they when they simply can’t see anything is wrong, and when they don’t know how. we wouldn’t be having all the problems we have now if they can see things are wrong and if they knew wat to do, would we? doesn’t say much either for the meritocracy practised here does it?


    July 7, 2010 at 1:11 am

    • I agree with you. That’s why I don’t expect much anymore from this set of so called leaders. It’s more a case of “don’t care” rather than “don’t know” I reckon. These people aren’t dumb. They have the same online resources as you and I, surely they can sense the sentiment.

      But what I think is happening is the phenomena of “groupthink”. Everybody at the top is happy with their monthly fat pay cheques and status quo and as long as that balance is not shaken, they would just run on auto pilot mode.


      July 8, 2010 at 9:29 am

  2. This government has not no empathy, no sympathy, no compassion, no sense of pride, and absolutely no clue to govern Singapore!


    July 7, 2010 at 1:56 pm

  3. […] “Here’s a reality check, how many of our parents have actually fully paid off that HDB loan today even though prices were more affordable back then?” Nabs […]

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